Australia’s regional and domestic specialist Rex announced today it had finalized the purchase of National Jet Express, the regional services arm of Cobham Aviation Services Australia.
In July, Rex announced it had agreed to purchase National Jet Express (NJE) to expand its services into Australia’s fly-in fly-out (FIFO) segment. Most of the country’s significant resource and mining projects rely on FIFO workers, who use these services to make connections from remote sites to capital city airports.
Rex is ready for the FIFO market
Rex is looking to add two more Dash 8-Q400s to the eight in the existing National Jet Express fleet. Photo: Rex
As is the way with Rex, the airline immediately got on the front foot today, saying it had “bold plans to grow and transform its latest acquisition into Australia’s premier FIFO operator.” Executive Chairman Lim Kim Hai has previously confirmed that NJE will keep its branding and not fly under the Rex banner but run independently “as far as the customer-facing part is concerned.” The basis of the FIFO operation will be the eight Bombardier Q400 turboprops and six Embraer E190s currently in the NJE fleet. Lim said that,
“Resource companies all over Australia can now count on a modern, comfortable and environmentally-friendly fleet for their FIFO needs instead of relying on 30-year-old Fokker 100 aircraft used predominately by the other operators. In anticipation of the surge in demand for NJE’s services, we are looking to lease immediately another two De Havilland Canda Dash-8 NextGen aircraft to add to its fleet.
Without even a hint of subtlety, Lim was pointing toward the Alliance Airlines fleet, which according to ch-aviation.com, has 25 Fokker F100s with an average age of 31 years, along with 14 similarly aged Fokker F70s and four F50s.
The AU$40 million ($32.4 million) deal needed approval from the Foreign Investment Review Board and the Australian Competition and Consumer Commission (ACCC). The agreement with Cobham Aviation closed today, and Rex has entered the FIFO market via the 20% market share held by NJE. The leading players are Qantas, Alliance Airlines and Virgin Australia Regional Airlines. Qantas already owns close to 20% of Alliance Airlines and is waiting on ACCC approval to buy the balance, which, if approved, would give Qantas around a 70% share of the FIFO market.
No fear of fair competition
Rex has concerns about access to the Alliance Airlines Embraer E190 simulator after the Qantas takeover. Photo: Cobham Aviation
In a submission to the ACCC seen by Simple Flying, Rex said it does not believe the Qantas takeover of Alliance will significantly lessen competition. It adds that the existing market players, including VARA, have the capabilities to be able to compete vigorously for each new tender. However, it does express concern that if Qantas is unsuccessful in winning business, “it will resort to unfairly exercising its market power where it is not able to win based on its pricing and efficiency.”
Rex makes it clear that it is happy to have a thriving and competitive market and for all competitors to pursue opportunities. It does have specific concerns around access to Embraer E190 and Dash 8-400 simulators and E190 parts. Currently, Alliance owns the only E190 simulator in Australia, and Qantas owns the only Dash 8-400 simulator. If the ACCC allows Qantas to takeover Alliance, Rex is concerned that Qantas could restrict access to these simulators for competitors, severely hampering the operation of those aircraft.
Similarly, Alliance is the largest E190 operator in Australia and a local supplier of parts, particularly in emergency AOG situations. Rex expresses the same concern that Qantas could change that arrangement post-takeover and not supply E190 parts to its rivals, thereby using its market power to interfere with competition. Rex acknowledges that E190 operators can source their parts from overseas but requests that no restrictions are imposed on the sale of parts after the Alliance takeover.
Rex is going from strength to strength with its growing mainline domestic services, an outstanding record in regional and rural services, and now a presence in the FIFO market. How do you think Qantas will react?