The Deputy Chairman of Rex Airlines and former Australian Federal Transport Minister, John Sharp, has hit back at comments made earlier this week by Qantas CEO Alan Joyce. On Wednesday, Mr Joyce told an online forum that he doubted the Australian domestic market could sustain three individual major operators. But John Sharp has since gone on commercial radio in Melbourne to refute that suggestion.
John Sharp responds to Alan Joyce
As Simple Flying has reported, Rex Airlines is about to make the leap from a regional turboprop airline to being a competitor on Australia’s busiest and richest east coast trunk routes. In March, Rex will join the Qantas Group and Virgin Australia operating jets between Sydney and Melbourne and Sydney and Brisbane. Mid-week, Alan Joyce told an online forum organized by Reuters;
“My personal view is that this market has never sustained three airline groups, and it probably won’t into the future.
You can be guaranteed that Qantas will be one of them. It’s who else is going to be in the market place post this and into the future is going to be interesting.”
Speaking to Melbourne’s Radio 3AW on Thursday, Rex’s John Sharp poured cold water on Alan Joyce’s prediction.
“We’re a pretty strong operator, we are a good operator, we know what we’re doing. We think we can survive in a domestic market with three players, and that’s why we’re going into this.
“Alan has been making a lot of predictions over the last few months, and none of them have come to fruition.”
John Sharp criticizes Qantas’ market share ambitions
Mr Sharp also criticized Qantas’ ambition to tie up 70% of the Australian domestic market. When Virgin Australia was in a stronger position, Qantas cruised along with around a 60% market share before the travel downturn.
“If Alan gets his way, then it’s going to be very hard for two airlines to survive on the (remaining) 30%, but that’s assuming he can grow his market share from 60% to 70%.
“As Australians, we have to ask ourselves, is it a good thing to have one really dominant domestic operator with 70% of the market?”
Rex knows how to scratch out a profit – it’s all about doing the small things well
John Sharp raises a valid point about the problems a single dominant airline in any airline market can pose. But as he notes, profits aren’t necessarily aligned with a big slice of the market.
“Virgin Australia had nearly 35% of the market pre-COVID, and they lost money every year.
“What makes you profitable is doing 1,000 things right and making a profit with 10% of the market. You can only make a profit if you focus on all the little things. Running an airline is a very complex business. There’s no one thing you have to do well to make it succeed. You have to do 1,000 things well, and that’s what Rex has been doing all these years.”
In the Australian financial year ending June 30, 2020, Rex reported a statutory loss after tax of AU$19.4 (US$15.08) million on turnover of AU$321.8 (US$250.22) million that past year. The previous financial year, Rex made a statutory profit after tax of AU$17.5 (US$13.61) million.
As John Sharp points out, Rex has been around one way or the other for nearly 70 years. In the last 20 years, the airline has weathered SARS and the GFC. Mr Sharp now thinks his airline can handle whatever Alan Joyce and 2021 throws at it.