No one seems to be winning the airline wars in South Auz. History repeating itself, again.
Rex cuts services to Mt Gambier, Pt Lincoln on rising costs, competition
Regional Express will cut some of its regional services in SA.
Source: Herald Sun
STIFF competition and increased charges have clipped the wings of flight operator Regional Express in South Australia.
The airline will offer 24,000 fewer seats on its Adelaide-Mt Gambier route from September 1 and 38,000 fewer seats on its Port Lincoln-Adelaide route from August 23.
Rex Airlines network strategy general manager Warwick Lodge blames "unilateral decisions" by Mt Gambier airport operator District Council of Grant for the 15 per cent scaleback in its operations on that circuit.
"We had a clear plan to increase flights on this route because of the positive numbers we were seeing," Mr Lodge says. "We had budgeted the move, but the council's decision to raise airport tax by close to 50 per cent will raise our costs substantially."
The Council voted to increase airport tax by $3 to $9.50, excluding GST, from September 1.
This hike would increase Rex's costs by $300,000 a year.
"We had no option," Mr Lodge says.
The airline carried 97,000 passengers on nearly 4500 flights to and from Mt Gambier airport in the past financial year.
Services on the Port Lincoln-Adelaide route were being cut due to poor performance and growing competition from QantasLink.
"It was a disappointing turn of events after seven years of hard work, but the market is not growing to support the existence of two air carriers," Mr Lodge says. Both QantasLink and Rex are struggling to fill seats, "averaging less than 50 per cent load factor".
The airline carried 150,000 passengers on this route last year.
Rex's other routes to Broken Hill, Ceduna and Kangaroo Island are all showing "good signs of growth", Mr Lodge says.
Rex is Australia's largest independent regional airline, providing about 55,000 annual flights to 35 destinations throughout New South Wales, Victoria, Tasmania, South Australia and Queensland.
And this.
Rex to cut flights
BILLIE HARRISON
28 Jul, 2010 11:30 PM
REGIONAL Express will cut the number of flights between Port Lincoln and Adelaide next month because it cannot sustain operating with passenger numbers below 50 per cent of its capacity.
While passenger numbers overall into Port Lincoln have continued to increase, the introduction of QantasLink services has increased the number of seats available by 170,000 a year so load factors have dropped to below 50 per cent for both airlines.
Rex network strategy and sales manager Warrick Lodge said neither airline was making a profit on the route and they were both subsidising services.
Mr Lodge told the Port Lincoln Times yesterday Rex would cut 38,000 seats a year, an 18 per cent reduction in capacity, with the worst performing flights to be cut from August 23.
This will result in six or seven return Rex flights a day rather than the current eight or nine.
"The convenience of having flight frequency spread evenly throughout the entire day will be lost and unfortunately it is the frequency and the subsequent schedule convenience that is the most significant catalyst of regional passenger growth," Mr Lodge said.
QantasLink will maintain its current schedule and senior corporate communication advisor Kristy McSweeney said passenger loads were well above expectations.
"QantasLink is fully committed to our operations in Port Lincoln."
The load factor for the route, including both airlines, was 47.8 per cent for May and Mr Lodge said passenger numbers fell by another 2 per cent in June.
It is once again expected that the total market will not achieve an average load factor that exceeds 50 per cent."
Load factors averaging less than 50 per cent provide enough revenue to cover Rex's operating costs but not overheads and Mr Lodge said he believed QantasLink would be in a worse situation than Rex.
"We believe the situation is much worse for our competitor as its aircraft asset cost is some 10 times higher, its pilots are paid much more and it does not have the efficiency of an extensive South Australian network to support its solitary aircraft."
However Ms McSweeney said the current level of capacity performed well commercially for QantasLink and was well supported by the community.
Mr Lodge said airfares would not fall below those experienced during early promotional periods because it would mean even bigger losses in an environment of unsustainable low load factors.
"Port Lincoln was having arguably the best air service in the world for a city of its size.
"It is such a pity that in a moment of folly it is now on the start of a downward spiral that could do considerable harm to its social and economic fabric," he said.