WEBVTT - Is another Aussie airline about to fail?

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<v Speaker 1>Already and this is the daily This is the Daily OS. Oh,

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<v Speaker 1>now it makes sense.

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<v Speaker 2>Good morning and welcome to the Daily OS. It's Wednesday,

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<v Speaker 2>the thirty first of July.

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<v Speaker 1>I'm Zara, I'm emma.

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<v Speaker 2>Another Australian airline is now on the brink of going bust.

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<v Speaker 3>Well, we are concerned about Rex. It's an important regional airline.

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<v Speaker 2>There has to be an opening up of our airspace

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<v Speaker 2>so that we can have more than just two airlines

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<v Speaker 2>to choose from.

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<v Speaker 4>The Prime Minister has acknowledged his concerns about the future

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<v Speaker 4>of the airline Rex after it paused trading on the

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<v Speaker 4>Stock Exchange this week. The airline has also disabled some

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<v Speaker 4>online bookings. Now, this all comes after budget airline Bonza

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<v Speaker 4>entered voluntary administration earlier in the year. So is Australia

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<v Speaker 4>about to lose its only airline not owned by Virgin

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<v Speaker 4>or Quantis. In today's deep dive, we're going to unpack

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<v Speaker 4>what the latest news about Rex means, if the airline

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<v Speaker 4>is really going under, and what it says about how

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<v Speaker 4>the commercial domestic aviation industry is going in Australia. But first, Zara,

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<v Speaker 4>what's making headlines.

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<v Speaker 2>National rates of human trafficking and slavery increased by twelve

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<v Speaker 2>percent in the year to July. That's according to the

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<v Speaker 2>Australian Federal Police. The AFP said it received three hundred

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<v Speaker 2>and eighty two reports of crimes including people smuggling, forced

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<v Speaker 2>marriage and forced labor in the twenty three to twenty

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<v Speaker 2>four financial year. The AFP's Human Exploitation Commander Helen Schneider

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<v Speaker 2>said the statistics represent innocent lives and said police are

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<v Speaker 2>committed to ending trafficking and slavery.

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<v Speaker 4>The Department of Foreign Affairs and Trade that's DEFAT, has

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<v Speaker 4>reissued a warning to Australians, urging them not to travel

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<v Speaker 4>to Lebanon. It comes as tensions between Israel and hesbler

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<v Speaker 4>escalade after an attack that killed twelve children in the

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<v Speaker 4>Golden Heights.

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<v Speaker 1>Israel and the.

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<v Speaker 4>US have accused Hesbela of the strike, which Hezbela denies.

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<v Speaker 4>Defunct's Smart Traveler website warns the security situation could deteriorate rapidly.

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<v Speaker 4>The agency has urged Australians in Lebanon to leave the

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<v Speaker 4>region quote immediately while commercial flights remain available.

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<v Speaker 2>Police have arrested a seventeen year old boy in connection

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<v Speaker 2>to a stabbing attack on England's northwest coast that left

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<v Speaker 2>two children dead and another nine injured. So alleged the

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<v Speaker 2>teen attacked a group of children at a Taylor Swift

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<v Speaker 2>themed dance event in Southport. Police said several adults were

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<v Speaker 2>injured trying to protect the children. They've ruled out the

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<v Speaker 2>incident as being terror related.

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<v Speaker 4>And today's good news, American researchers have made a breakthrough

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<v Speaker 4>discovery that could prevent a global lithium shortage. The chemical

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<v Speaker 4>is found in almost everything from phones and laptops to

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<v Speaker 4>large scale energy storage systems, but it's fear that with

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<v Speaker 4>a forecasted boom and demand for lithium iine batteries, the

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<v Speaker 4>chemical could be in short supply. But a team at

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<v Speaker 4>Rice University in Texas have now found a fast and

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<v Speaker 4>environmentally friendly way to extract lithium from battery waste. The

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<v Speaker 4>new method can retrieve as much as fifty percent of

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<v Speaker 4>the lithium in used batteries in as little as thirty seconds.

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<v Speaker 2>Som earlier this week, we started to hear rumors about

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<v Speaker 2>Rex and I just want to put out there I

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<v Speaker 2>am such a REX loyalist. I am so sad to

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<v Speaker 2>have read headlines that suggests that Rex might be going

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<v Speaker 2>under Yep. I'm actually meant to be flying with them tomorrow.

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<v Speaker 2>Don't know what's meant to happen, don't know if I

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<v Speaker 2>should book another flight. But I've got you here to

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<v Speaker 2>explain everything, So that's okay. Starting at the beginning, can

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<v Speaker 2>you just break down the headlines that people might have

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<v Speaker 2>been seeing and reading and hearing about Rex?

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<v Speaker 4>Yep, and I back the devotion to Rex. I think

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<v Speaker 4>there's probably a lot of people listening who are concerned.

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<v Speaker 4>Maybe you've pivoted to towards Rex because.

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<v Speaker 2>I've been laid down by other players.

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<v Speaker 4>Because You've been let down by the players, and you

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<v Speaker 4>might have been frustrated with delays, cancelations, etc. We will

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<v Speaker 4>get to all of that, but Zara, I have to

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<v Speaker 4>be honest with you up front. It's not looking great.

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<v Speaker 4>We heard from a range of concerned stakeholders yesterday, including

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<v Speaker 4>Anthony Albanzi, about the future of Rex. And this all

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<v Speaker 4>started on Monday afternoon, so that's when we found out

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<v Speaker 4>about an ASX trade pause. That's the Australian Securities Exchange

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<v Speaker 4>and Rex is a publicly listed company on the ASX.

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<v Speaker 4>It announced a temporary freeze on anyone buying or selling

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<v Speaker 4>its shares. So that announcement was made ahead of markets

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<v Speaker 4>opening on Tuesday and was set to last two days,

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<v Speaker 4>so Tuesday and Wednesday. But before it ends, we're expecting

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<v Speaker 4>to hear from the airline again about the future of Rex,

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<v Speaker 4>and that's when the full scope of its troubles are

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<v Speaker 4>probably going to become much clearer.

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<v Speaker 2>Okay, So just to clarify, the first sense that we've

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<v Speaker 2>got that something was wrong with Rex was that they

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<v Speaker 2>announced a trade pause, which basically just meant no one

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<v Speaker 2>could buy and sell their shares in Rex at this time,

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<v Speaker 2>and that was an indication to the market and to

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<v Speaker 2>Australia that something is up. What we don't know, but

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<v Speaker 2>something is up. If we zoom out a bit to

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<v Speaker 2>understand Rex's place in the sector, what does that look like?

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<v Speaker 4>So for those people who aren't REX loyalists like us,

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<v Speaker 4>Rex launched after two regional airlines merged in two thousand

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<v Speaker 4>and two. Those airlines were called Hazelton and Kendall and

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<v Speaker 4>it became a publicly listed company on the ASX three

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<v Speaker 4>years later.

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<v Speaker 2>That's quite surprising to me. I thought Rex was a

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<v Speaker 2>fairly new company.

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<v Speaker 4>Yes, so it's a firm player in the domestic aviation space.

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<v Speaker 4>But it had really carved out this identity around a

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<v Speaker 4>core belief that quote, the Bush needs and deserves an

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<v Speaker 4>air service of quality to connect.

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<v Speaker 1>Regional communities and bigger cities.

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<v Speaker 4>So Rex's ethos as a carrier had always been about

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<v Speaker 4>servicing remote and regional parts of Australia. It's operated as

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<v Speaker 4>this standalone carrier in you know, really remote parts of

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<v Speaker 4>the country or operating services that other carriers don't. It

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<v Speaker 4>did expand in the last couple of years. So in

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<v Speaker 4>June twenty twenty, Rex announced plans for the airline to

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<v Speaker 4>expand its domestic routes from March twenty twenty one, and

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<v Speaker 4>that's when it added a bunch more services, including capital

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<v Speaker 4>city services. Sydney to Melbourne, for example, is the Rex

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<v Speaker 4>route that I think you and I have flown on

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<v Speaker 4>more recently. And that's around the time when you know,

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<v Speaker 4>people in the cities started paying more attention to REXIT.

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<v Speaker 4>Really emerged as this reliable player in a post COVID

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<v Speaker 4>setting where as we know a lot of turbulence for

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<v Speaker 4>lack of a better word, has bemoaned the industry cancelations,

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<v Speaker 4>airfare issues, lost baggage, all the rest of it. Rex

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<v Speaker 4>has kind of emerged as the underdog and the surprise

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<v Speaker 4>in that market. As I mentioned at the top, it's

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<v Speaker 4>the only commercial airline here not owned by Quantus or

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<v Speaker 4>Virgin because Jetstar, the budget airline, is owned by Quantus.

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<v Speaker 4>And this is a point you're probably going to hear

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<v Speaker 4>more and more about with the conversation around you know,

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<v Speaker 4>market competition, dominance, whether or not there is a fair

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<v Speaker 4>and regulated enough sector at play for Australian consumers.

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<v Speaker 2>Well, I mean that does make me think about a

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<v Speaker 2>conversation that we've already had this year, Like we've already

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<v Speaker 2>had this conversation, but it was in regards to another airline.

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<v Speaker 2>It was in regards to Bonsa, which launched fairly recently

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<v Speaker 2>but has already gone under. There seems to be a

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<v Speaker 2>conversation that keeps happening.

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<v Speaker 4>Yeah, if this sort of language is sounding familiar, it's

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<v Speaker 4>because it is. Rex is not the first casualty of

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<v Speaker 4>the domestic aviation industry of late. As you mentioned, Bonsa

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<v Speaker 4>went into liquidation. It entered voluntary administration, announced that in April.

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<v Speaker 4>And for some context about where Bonsa came from It

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<v Speaker 4>was Australia's first low cost independent airline to launch here

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<v Speaker 4>in fifteen years Wow when its services began in January

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<v Speaker 4>twenty twenty three, but less than a year after launching,

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<v Speaker 4>it was never really able to compete with Jetstar and

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<v Speaker 4>the others, and it cut a bunch of its services

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<v Speaker 4>within that first year. Then last month confirmed that over

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<v Speaker 4>three hundred employees' contracts were terminated. It had failed to

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<v Speaker 4>find a buyer to potentially bail out the airline and

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<v Speaker 4>we said farewell to Bonza.

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<v Speaker 2>And now the same could be true of Rex. Has

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<v Speaker 2>this news come out of the blue? People that are

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<v Speaker 2>I guess more keenly watching this sector, have they anticipated

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<v Speaker 2>that this could happen to Rex as well as BONSA.

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<v Speaker 4>Yeah, so sadly there were some warning signs. We know

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<v Speaker 4>that Rex has been struggling to recover from disruptions caused

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<v Speaker 4>by the pandemic, and in the twenty twenty two twenty

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<v Speaker 4>three financial year, Rex reported thirty million dollars in losses.

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<v Speaker 4>Some other early signs of trouble came in September last year,

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<v Speaker 4>when Rex cut a bunch of services. It said that

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<v Speaker 4>they were set to resume in March, but then extended

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<v Speaker 4>that pause on those services till October. So REX hasn't

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<v Speaker 4>been operating at that full capacity to which it extended

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<v Speaker 4>in twenty twenty one since September last year. This year,

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<v Speaker 4>its board has undergone major reshuffles. We saw its executive

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<v Speaker 4>chairman resigned. Several REX directors have also resigned, and that

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<v Speaker 4>brings us to this week when Rex's ASX share price

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<v Speaker 4>dropped to its lowest value since the start of the pandemic.

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<v Speaker 1>So that's really significant.

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<v Speaker 4>And then on Monday, we of course had the announcement

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<v Speaker 4>of that trade pause that ends today.

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<v Speaker 2>And what has the response been like to the news

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<v Speaker 2>You know, I know that around the newsroom we've had

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<v Speaker 2>very strong reactions, but what's kind of the political or

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<v Speaker 2>commercial response to this.

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<v Speaker 4>Yeah, we heard from the PM Anthony Alberanezi yesterday he

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<v Speaker 4>acknowledged his concerns about the future of REX during a

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<v Speaker 4>press conference.

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<v Speaker 1>Here's a little bit of what he had to say.

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<v Speaker 3>REX as a regional airline, of course, provides important links

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<v Speaker 3>with regional communities, is important for those local economies. So

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<v Speaker 3>we want to see the aviation industry in Australia continue

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<v Speaker 3>to be one that provides that service and that access.

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<v Speaker 2>Now, obviously this has created uncertainty for flyers, and we

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<v Speaker 2>should know more later today when we hear that announcement.

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<v Speaker 2>But the other very important part of this is about

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<v Speaker 2>the workers, the people who work for REX, who operate

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<v Speaker 2>and you fly the planes and everything else. Are we

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<v Speaker 2>expecting job losses?

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<v Speaker 4>Concern around this exact issue has been floated by the

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<v Speaker 4>Transport Workers Union. They've been really vocal in the last

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<v Speaker 4>day or two now. That's the union that represents workers

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<v Speaker 4>in the airline industry, and it's said thousands of workers

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<v Speaker 4>have been thrown into limbo by this uncertainty surrounding REX.

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<v Speaker 4>It estimates some three thousand jobs could be on the

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<v Speaker 4>line here if X can't pull through. But the TWU

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<v Speaker 4>said it would support efforts to save REX. The national

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<v Speaker 4>secretary of that union, Michael Caine, described REX as quote

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<v Speaker 4>another victim of an unregulated industry. So that obviously is

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<v Speaker 4>referencing what happened to Bonza and more broadly kind of

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<v Speaker 4>the market of domestic aviation.

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<v Speaker 2>So when we think about some of the responses or

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<v Speaker 2>the solutions to this problem, like what are those solutions?

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<v Speaker 2>What is available to REX in order to keep them afloat.

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<v Speaker 4>To answer that question, we can look to the response

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<v Speaker 4>for other airlines that have been in trouble in recent

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<v Speaker 4>years and it could kind of go one of two ways. Virgin,

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<v Speaker 4>Australia's second biggest carrier, faced an entire restructure after the

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<v Speaker 4>airline collapse AAPS at the start of the pandemic. So

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<v Speaker 4>at the very first wobble, Virgin did collapse, but was

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<v Speaker 4>saved when administrators from Deloitte were tasked with rescuing it.

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<v Speaker 4>They got it off the ground, sold it to a

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<v Speaker 4>US investment firm and that saved the airline essentially. So

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<v Speaker 4>voluntary administration is one kind of path that Rex could

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<v Speaker 4>go down. Otherwise there could be government intervention and what

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<v Speaker 4>would that look like. You might remember that in the

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<v Speaker 4>wake of the early pandemic, the national carrier Quantus, did

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<v Speaker 4>actually receive this kind of funding, more than two point

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<v Speaker 4>seven billion dollars in government assistance after it faced uncertainty

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<v Speaker 4>during the pandemic, and it's famously faced a lot of

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<v Speaker 4>criticism in the years since Quantus surrounding its market dominance

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<v Speaker 4>given the scale.

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<v Speaker 1>Of that bailout as it was described.

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<v Speaker 4>Anthony Albanesi hasn't ruled out a bailout option for REX,

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<v Speaker 4>where the government would provide it with extra funding to

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<v Speaker 4>keep it afloat. And I think what's really important to

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<v Speaker 4>bear in mind here is the role that REX plays

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<v Speaker 4>as a regional carrier.

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<v Speaker 2>We're not just talking about like an economic value here.

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<v Speaker 2>It's also of course that it connects regional and rural

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<v Speaker 2>populations with the rest.

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<v Speaker 4>Of Australia exactly, and so I think that makes it

0:13:14.640 --> 0:13:19.280
<v Speaker 4>a unique case and I would suggest that there will

0:13:19.320 --> 0:13:22.760
<v Speaker 4>be some pretty heavy hitters in government arguing a case

0:13:22.880 --> 0:13:25.800
<v Speaker 4>for saving it on those grounds. In terms of where

0:13:25.800 --> 0:13:28.960
<v Speaker 4>the opposition is on this one, Shadow Transport Minister Bridget

0:13:29.040 --> 0:13:33.080
<v Speaker 4>McKenzie urged the government to quote not allow a repeat

0:13:33.120 --> 0:13:34.079
<v Speaker 4>of BONSA.

0:13:34.400 --> 0:13:37.480
<v Speaker 2>And the thing that I just can't quite get my

0:13:37.520 --> 0:13:40.200
<v Speaker 2>head around, and I made a joke in the office

0:13:40.200 --> 0:13:42.480
<v Speaker 2>the other day that the two industries you seemingly don't

0:13:42.480 --> 0:13:46.280
<v Speaker 2>want to own a business in Australia are media and aviation.

0:13:46.640 --> 0:13:49.240
<v Speaker 2>Obviously I ignore my own rule for that first one, but

0:13:49.760 --> 0:13:53.079
<v Speaker 2>it just seems like it's really difficult for anyone that

0:13:53.200 --> 0:13:56.000
<v Speaker 2>is not virgin or quantas to survive in Australia. And

0:13:56.040 --> 0:13:59.200
<v Speaker 2>I mean even then Virgin struggled as well. Yeah, what

0:13:59.400 --> 0:14:01.600
<v Speaker 2>is the issue here? Why can't they survive?

0:14:02.160 --> 0:14:05.400
<v Speaker 4>So there are a few key reasons. Firstly, the A

0:14:05.600 --> 0:14:09.800
<v Speaker 4>Triple C broadly attributes a lack of government policy to

0:14:09.880 --> 0:14:14.240
<v Speaker 4>support these airlines to boost competition in domestic aviation. So overall,

0:14:14.280 --> 0:14:16.680
<v Speaker 4>they kind of say that there is a blanket need

0:14:16.720 --> 0:14:19.680
<v Speaker 4>for more regulation to help the little guys.

0:14:20.080 --> 0:14:23.160
<v Speaker 2>And we're talking there about regulation perhaps that would allow

0:14:23.200 --> 0:14:25.320
<v Speaker 2>for more competitive behavior. If we're talking about the A

0:14:25.400 --> 0:14:28.760
<v Speaker 2>Triple C. They focus on competition. We know that there's

0:14:28.880 --> 0:14:32.120
<v Speaker 2>this duopoly in Australia, so they're saying we need better

0:14:32.160 --> 0:14:33.760
<v Speaker 2>protections for the smaller guys.

0:14:33.880 --> 0:14:36.680
<v Speaker 4>Yeah, and one of those protections, or what it describes

0:14:36.720 --> 0:14:39.320
<v Speaker 4>as one of the most effective ways that the government

0:14:39.360 --> 0:14:42.920
<v Speaker 4>can promote better competition would be to quote help new

0:14:42.960 --> 0:14:47.400
<v Speaker 4>and existing airlines to better access takeoff and landing slots

0:14:47.520 --> 0:14:48.680
<v Speaker 4>at Sydney Airport.

0:14:49.000 --> 0:14:50.280
<v Speaker 1>Now, check me through this.

0:14:50.280 --> 0:14:52.760
<v Speaker 4>This might sound boring, but it comes up time and

0:14:52.760 --> 0:14:56.360
<v Speaker 4>time again as being really critical to driving competition or

0:14:56.400 --> 0:15:00.600
<v Speaker 4>seeing unfair competition. This is about slot hoarding. Now, that's

0:15:00.640 --> 0:15:04.160
<v Speaker 4>when major airlines book as many arrivals and departure spots

0:15:04.240 --> 0:15:09.000
<v Speaker 4>at popular airports as possible to maintain priority runway access.

0:15:09.240 --> 0:15:12.160
<v Speaker 4>So it's kind of about politicking between the airlines and

0:15:12.200 --> 0:15:15.360
<v Speaker 4>the airports. But the problem with slot hoarding that the

0:15:15.400 --> 0:15:18.080
<v Speaker 4>A Triple C found and that has been responded to

0:15:18.200 --> 0:15:20.240
<v Speaker 4>by the government with some reforms that we'll get to,

0:15:20.880 --> 0:15:23.960
<v Speaker 4>is that that removes the opportunity for new players to

0:15:24.040 --> 0:15:28.160
<v Speaker 4>get runway space during peak times in busy places, so

0:15:28.280 --> 0:15:31.560
<v Speaker 4>you know, a new airline can't then schedule flights to

0:15:31.720 --> 0:15:34.560
<v Speaker 4>in demand places at in demand times. And that there's

0:15:34.600 --> 0:15:37.560
<v Speaker 4>also evidence that the A Triple C detailed about the

0:15:37.560 --> 0:15:41.680
<v Speaker 4>bigger airlines using these slots or booking these slots up

0:15:41.800 --> 0:15:46.080
<v Speaker 4>and then canceling flights, so hoarding them for preserving that

0:15:46.160 --> 0:15:49.480
<v Speaker 4>priority access with no intention of running all of those services.

0:15:49.960 --> 0:15:52.360
<v Speaker 4>So we have seen a little bit of reform here.

0:15:52.400 --> 0:15:56.160
<v Speaker 4>In February, the government announced plans to improve how slots

0:15:56.160 --> 0:15:59.120
<v Speaker 4>are managed at Sydney Airport in response to those calls

0:15:59.160 --> 0:16:01.800
<v Speaker 4>from the A TRIBLEC. This is Sydney Airport, the biggest,

0:16:02.040 --> 0:16:05.480
<v Speaker 4>most busy airport, and the concerns around slot hoarding have

0:16:05.520 --> 0:16:09.560
<v Speaker 4>been echoed within the aviation industry from experts themselves. So

0:16:09.600 --> 0:16:13.000
<v Speaker 4>someone like Professor Ian Douglas. He's from the unsw School

0:16:13.040 --> 0:16:16.360
<v Speaker 4>of Aviation. He's argued that the practice of slot hoarding

0:16:16.440 --> 0:16:20.560
<v Speaker 4>stops smaller airlines like Bonser and Rex from scheduling more flights,

0:16:20.880 --> 0:16:23.400
<v Speaker 4>and he told TDA earlier this year that the practice

0:16:23.480 --> 0:16:28.160
<v Speaker 4>has resulted directly in less competition in domestic aviation and

0:16:28.200 --> 0:16:32.280
<v Speaker 4>that that also drives up higher airfares for customers. As

0:16:32.320 --> 0:16:35.040
<v Speaker 4>I mentioned, the A Triple C has broadly called for

0:16:35.080 --> 0:16:39.280
<v Speaker 4>more regulation in the industry, and some of that involves

0:16:39.320 --> 0:16:44.040
<v Speaker 4>facilitating negotiations between airports and airlines. So what we kind

0:16:44.080 --> 0:16:46.520
<v Speaker 4>of touched on there with the politics between airports and

0:16:46.560 --> 0:16:50.160
<v Speaker 4>airlines that an imbalance exists at the moment and that

0:16:50.240 --> 0:16:53.160
<v Speaker 4>if the government regulated that space a little bit more,

0:16:53.360 --> 0:16:56.040
<v Speaker 4>it would give smaller airlines and up and comers a

0:16:56.040 --> 0:16:58.800
<v Speaker 4>bit of a leg up. Obviously, those are just some

0:16:58.880 --> 0:17:02.120
<v Speaker 4>of the issues play when people are talking about concern

0:17:02.120 --> 0:17:06.359
<v Speaker 4>around competition in the domestic aviation space. Back to Rex, though,

0:17:06.440 --> 0:17:09.000
<v Speaker 4>we will be waiting today for that announcement later on

0:17:09.160 --> 0:17:11.520
<v Speaker 4>and we will keep you across it on the Daily OS.

0:17:11.960 --> 0:17:12.960
<v Speaker 1>So stay tuned.

0:17:13.680 --> 0:17:16.240
<v Speaker 2>Thanks so much for listening to today's episode of The

0:17:16.320 --> 0:17:18.439
<v Speaker 2>Daily OS. You might even be listening to us on

0:17:18.480 --> 0:17:21.040
<v Speaker 2>a REX flight right now. Who knows. If you enjoyed

0:17:21.040 --> 0:17:24.040
<v Speaker 2>this episode, make sure you review it on whatever platform

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<v Speaker 2>you're listening on, and if you're watching us on YouTube,

0:17:26.520 --> 0:17:29.879
<v Speaker 2>hello and hit subscribe. We'll be back again tomorrow, but

0:17:30.000 --> 0:17:34.880
<v Speaker 2>until then, have a great day. My name is Lily

0:17:34.920 --> 0:17:38.320
<v Speaker 2>Madden and I'm a proud Dunda Bungelung Kalkutin woman from

0:17:38.359 --> 0:17:39.240
<v Speaker 2>Gadigol Country.

0:17:40.080 --> 0:17:43.200
<v Speaker 3>The Daily oz acknowledges that this podcast is recorded on

0:17:43.240 --> 0:17:45.720
<v Speaker 3>the lands of the Gadighl people and pays respect to

0:17:45.800 --> 0:17:49.120
<v Speaker 3>all Aboriginal and Torres Strait island and nations. We pay

0:17:49.160 --> 0:17:52.080
<v Speaker 3>our respects to the first peoples of these countries, both

0:17:52.119 --> 0:17:53.040
<v Speaker 3>past and present,