‘Cheaper than the bus’: Rex, Virgin and Jetstar kick off a price war over Melbourne to Sydney flights, with fares as low as $39

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  • Australia’s airlines have sparked a price war on flights between Sydney and Melbourne in a bid to reignite domestic travel spending.
  • Rex announced on Monday it would release a $39 ticket for the route, a move that was quickly matched by Virgin and Jetstar.
  • Rex deputy chairman John Sharp said he hoped the sale would reignite the domestic market, saying “stimulus programs from state and federal governments have not benefited Melbourne and Sydney.”
  • Visit Business Insider Australia’s homepage for more stories.

A price war erupted on Monday between Australia’s discount airlines, with flights from Melbourne to Sydney dropping to as low as $39 as the industry pushes for a resurgence of domestic tourism.

It began on Monday when Regional Express (Rex) revealed a cut-price Sydney-Melbourne flight, which it said it wanted to boost tourist numbers between the two major cities.

Qantas’ budget airlines Jetstar, Virgin Australia and Regional Express (Rex) followed with fares at comparable prices on the route, which is currently the seventh busiest in the world.

Rex’s offer is available until August 28, while Jetstar’s fares are also available until the end of August. Virgin said it will continue to offer the cheaper fares until December.

It comes as the domestic tourism sector continues to struggle with the absence of international tourists, which accounted for $44.6 billion in spending in 2019.

Rex deputy chairman John Sharp said he believed the sale would reignite the domestic market, adding he believed it was up to the airlines after government stimulus overlooked flights to capital cities.

“Peak tourism bodies reported yesterday that flagship stimulus programs from state and federal governments have not benefited Melbourne and Sydney,” Sharp said.

“This will now change as Rex’s ‘cheaper than the bus’ fares will see airfares between the two cities even lower than the federal government-sponsored Tourism Aviation Network Support program fare and will jump-start leisure and business travel,” he said.

Having launched the price war on Monday, he added he had expected his rivals in the industry – including Virgin Australia, Qantas and Jetstar – to follow suit.

“The resulting copycat moves from our competitors will mean that there will be hundreds of thousands of $39 fares available,” Sharp said.

“I believe this initiative will singlehandedly revive a moribund travel and hospitality industry in the two cities.”

In announcing the cheaper fares, Virgin said in a statement it would include baggage, seat selections and status points with the discounts.

“Virgin Australia is committed to providing travellers with some of the most competitive airfares in the market,” it said.

Sydney and Melbourne were both excluded from the government’s initiatives earlier in the year, including the release of discounted tickets intended to support international tourism destinations.

Since the pandemic hit, overnight trip expenditure has seen a loss of $27.1 billion, with major cities including Brisbane, Gold Coast, Melbourne, Sydney and Perth experiencing the most significant decline.

The government rolled out a raft of initiatives aimed at supporting the tourism sector, including cut-prices flights in early March.

As part of a $1.2 billion package, the government subsidised 800,000 domestic flights and offered cheap loans to small tourism operators.

Nevertheless, revenue for domestic airlines is forecast to decrease by 37% in the 2020-2021 financial year.

Similarly the 2018-2019, the domestic industry was worth about $14 billion, but will be worth around half that, $6.5 billion, this financial year.

After reporting losses of $11 billion in revenue last year and increasing its debt by $2.5 billion, Qantas said domestic business was generating a positive cashflow for the company.

It said domestic capacity had increased beyond previous estimates to reach 90% of pre-COVID levels, and Jetstar reported it would exceed 100% capacity thanks to strong demand thanks to domestic leisure travel.

A senior industry analyst at IBISWorld, Tom Youl, told Guardian Australia he expected the industry to see a strong recovery this year, projecting revenue would climb to $10 billion by the end of 2021, and to $11.3 billion in 2022.

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