An expert has warned that airfares will likely rise as Rex gets set to enter administration and possibly become the latest airline to collapse after Bonza.
Ernst & Young will be announced as administrators for Rex by Wednesday, the Bloomberg financial news service claimed, and that spells bad news for travellers.
Monash University professor and ‘Up in the Air’ author Greg Bamber said it would ‘reduce competition’ and encourage Virgin and Qantas, ‘who form an oligopoly’ in the market, to increase their prices.
‘That’s what generally happens when there’s less competition – the dominant players put up their prices,’ he told Daily Mail Australia.
Prof Bamber said that when Bonza collapsed at the start of July, ‘Virgin and Qantas both offered passengers free tickets on the routes that they were flying’.
‘But the challenge for customers of Bonza and Rex is that they flew routes typically which were regional routes, which in most cases were not being flown by Qantas or Virgin,’ he said.
‘So it didn’t always work. That sort of offer didn’t help most of the passengers in practice.’
If Rex goes down, it could be a long time before another airline emerges in Australia to challenge the dominance of Qantas and Virgin.
With regional airline Rex set to plunge into administration and Bonza collapsing earlier this month, Qantas and Virgin Australia are likely to take advantage and send flight prices soaring. Bonza staff pictured
‘Australia has seen several examples over the years of new entrant airlines collapsing, not only Bonza and Rex, but going back further we saw the collapse of Ansett (in 2002), which wasn’t a new entrant,’ Prof Bamber said.
‘The problem is that we have got an oligopoly (in Australia) with one very strong player – a quasi-monopolist – Qantas, which has too much market power.
‘The regulators have not reined in the dominant player that is Qantas. I think we deserve to see a higher degree of regulation in Australia which would rein in the great market dominance that Qantas has.’
Prof Bamber said a strong and competitive airline industry is vital to Australia’s wellbeing.
‘This is a huge country with vast distances between our major centres of population,’ he said.
‘We don’t have an alternative way of travelling between centres in so far as there’s no high speed rail system and the roads are not of world class standards between the major cities, which are widely separated.
‘So aviation is an essential industry in Australia.’
Amid the potential collapse of a second airline within a month, Prime Minister Anthony Albanese said he was ‘concerned about Rex.
‘It’s an important regional airline. What we will do, though, is examine any proposals (for keeping it flying).’
He added that ‘Rex, as a regional airline, of course, provides important links with regional communities – and particularly between capital cities and regional communities – it is important for those local economies.
‘So we want to see the aviation industry in Australia continue to be one that provides those services and that access.’
Opposition front bencher Simon Birmingham said on Tuesday that the Government ‘needs to act with urgency, but they also need to be very clear-headed about how they act’.
Mr Birmingham told Sky News that Labor needs to get its priorities right.
‘The government has responsibilities to taxpayers and to travellers, not to shareholders. That was certainly the approach (the Coalition) took in relation to the difficulties with Virgin (in 2020).
‘There are ways in which government can support and maintain routes which are essential for the travelling public, particularly in regional areas.
‘And there are ways that they can act to ensure that the travelling public is protected.
‘But they also must act in a way that is responsible for taxpayers and not underwriting shareholders, or creating an environment where taxpayers face the potential of significant losses.’
If Rex goes down, it could be a long time before another airline emerges in Australia to challenge the dominance of Qantas and Virgin
Will my Rex flight go ahead?
As of Tuesday afternoon, Rex’s website was not taking bookings for its services between capital cities such as Sydney, Melbourne and Brisbane.
Regional services, many of which are only served by Rex, could still be booked.
Unlike Bonza, Rex owns its own planes, so this makes it more likely, but not certain, that flight obligations will be met while the company goes through administration.
Further details are expected later today or on Wednesday morning.
If you have a flight booked in the coming days or weeks, check directly with the airline or your travel agent to make sure your flight is still happening.
How do I get a refund if Rex goes under?
On April 30, when it was obvious that Bonza was on the brink of collapse, customers got text messages saying they’d get their money back within three weeks so long as they filled out an online form within 24 hours.
But that promise proved to be a false dawn and the administrators from Hall Chadwick had other ideas.
Unlike Bonza, Rex (plane pictured) owns its own planes, so this makes it more likely, but not certain, that flight obligations will be met while the company goes through administration
On May 1, they announced that processing refunds for customers was not a priority.
Those with flights booked were to be considered unsecured creditors while the administrators figured out what to do with the business.
Unsecured creditors are usually the last people to get their money back, while secured creditors such as banks, are first in line for whatever money is left.
The situation with Rex, if it collapses completely, is likely to be very similar to what happened with Bonza – the customers will be at the back of the queue for refunds.
