‘We’ll fly the coop’

Wednesday, 9th November, 2011

REJECTED: Regional Express have said higher taxes will have a significant impact on its local operation. REJECTED: Regional Express have said higher taxes will have a significant impact on its local operation.

Rex threatens to quit city

By Craig Brealey

 Regional Express airlines has threatened to reduce its flights or even quit the city if City Council insists on charging it a higher tax. 

Rex has rejected a five-year agreement proposed by Council that, the airline says, would cost it an extra $125,000 a year in head tax at the airport.

It also knocked back Council’s proposal for it to run direct flights to Melbourne. 

Council’s General Manager, Frank Zaknich, last week described the rejection as “unacceptable” to Council and said that it would invite other airlines to run flights to Melbourne because of the apparent demand for it. 

Yesterday Warrick Lodge, Rex’s General Manager of Network Strategy and Sales, Regional Express, said he wanted to “set the record straight”.

In a letter sent to Council which Mr Lodge also sent to the BDT, he said Rex had serviced the city for more than nine years “in an environment where eight regional airlines have collapsed.”

“Through significant investment Rex has increased flight frequency, transitioned from 19 seat to 34 seat aircraft and passenger numbers through Broken Hill airport have more than doubled from around 26,000 to 62,000 per year, Mr Lodge wrote. 

“We have also seen a corresponding increase in Rex generated airport head tax revenue collected by Council from around $260,000 to $490,000 per year, yet Council has decided to propose a new agreement which would represent a further 25 per cent increase (or $125,000) in annual airport head tax.” 

Regional aviation in general was already suffering the expense associated with the federal government’s removal of the enroute rebate scheme and would next year have to pay the carbon tax as well, Mr Lodge said.

Council’s proposal for the new agreement would “add to the already untenable burden that faces regional air services,” he said. 

“Rex cannot accept to work in partnership under such conditions and we have advised Council that the Broken Hill services will be under review and, depending on the economic conditions after July 1, 2012, the outcome could range from schedule reductions to complete termination.” 

Mr Lodge also said that Council’s intention to call for “expressions of interest” (EOI) for a Melbourne service was unnecessary. 

“For the public record, no airline needs this EOI to commence services on these routes. 

“When Rex recently decided to fly to Newcastle, it simply made plans and started operations without any need for overtures from the airport. 

“On the other hand Rex has been forced to turn down dozens of requests from various local councils to start new routes simply because it is not commercially viable to do so. 

“Rex welcomes Council’s invitation to seek common ground and will be happy to revisit the issue when rationality and reality return to the table.” 

Mr Zaknich told the BDT yesterday that Council was quite willing to keep talking to Rex about the new agreement but that Council also had to cover its rising costs.

He said Council had to pay for the maintenance of the airport and the resealing of the runway which was due to begin this week.

The increase in Rex’s patronage had also been achieved with the help of Council under the previous agreement between it and the airline, Mr Zaknich said.

“We’re happy to continue working to find common ground,” he said.

“Council is mindful of its own operating costs. Obviously they are increasing, as Rex’s are.

“The door is still open to finding an agreement. We also want to move forward in a rational way.”