There’s always an undercurrent of tension between unions and businesses, a trend exemplified between the Australian Federation of Air Pilots (AFAP) and Rex Airlines (ASX: REX).
Following correspondence the Federation circulated to its members, the Airline has released a statement calling the AFAP’s actions out as “malicious, misleading and deceptive”. The correspondence, which we haven’t been able to obtain a copy of ties into a bigger story.
Rex claims that the AFAP manipulated information that they were privy to thanks to ongoing enterprise agreement negotiations, “to achieve its aims.” The Airline also alluded to an ongoing saga between themselves and Qantas, highlighting the link by drawing attention to the fact that the president of the AFAP, Louise Pole, is a pilot for QantasLink, the regional arm of Rex’s competitor, and seemingly sworn nemesis- Qantas (ASX: QAN).
The longstanding row has seen both airlines launch services previously exclusive to each other. In February 2021 Rex accused Qantas of launching rival services on a variety of routes. Rex responded by entering major capital city routes to which Qantas retaliated, launching services between Sydney and Broken Hill, a route monopolised by Rex for the past 18 years.
Recently, Rex adjusted their regional routes, withdrawing services from Bathurst, Grafton, Lismore, Kangaroo Island and Ballina, claiming it was forced to stop servicing certain areas due to increased competition from Qantas.
Earlier in May, Rex pulled out of the Melbourne to Albury route, despite operating it exclusively for almost 40 years, citing Qantas’ commencement of the service in February 2021 as the reason behind the decision. In the last two years, Qantas has “targeted” ten Rex routes, however Qantas denies any wrongdoing, with a statement saying: “Rex operates more than forty per cent more seats between Melbourne and Albury than Qantas, so we are hardly flooding the market.”
The ACCC agreed, ruling that Rex’s allegations of Qantas’ anti competitive behaviour were moot, following thorough investigation in 2021.
Rex maintains that their business is being hurt by Qantas’ “predatory conduct” having now withdrawn from a total of seven routes “because Rex could no longer afford to subsidise these marginal routes during these challenging times.” Qantas has labelled Rex’s displeasure with their plans as “a classic Rex tantrum”, saying “Rex’s idea of competition is that it’s something that happens to other people, because they believe they have an enshrined right to be the only carrier on some regional routes.”
The mud slinging fest has all played out in the public realm, with Qantas CEO Alan Joyce, and Rex Deputy Chairman John Sharp even going head to head, publishing slanderous columns about each other in popular media masthead, the AFR.
Yet, Rex is flying at 90% of pre-COVID levels, and all things considered, is on the upswing, while Qantas lags at approx 85% of pre-COVID levels. Is the big airline just trying to recoup some of their astronomical losses by expanding routes? Or is it genuinely the anti-competitive and targeted behaviour that Rex claims it to be?
Either way, the AFAP’s mystery message to its members has certainly rattled Rex with the Company vehemently denying the Federation’s assertion, saying it was surprised at the approach “given the significant efforts made by Rex to preserve the jobs of pilots during the pandemic when other airlines were terminating so many of their pilots.”
But, the AFAP would disagree with that statement based on the case study they presented to the senate during an inquiry into the government’s pandemic response, arguing the legitimacy of airline stand-downs during the pandemic. The AFAP flagged Rex’s standing down of staff as a business move for which the airline should be held responsible, rather than a necessity due to the pandemic. “…Management have decided to retain personnel in view of expanding the business post-COVID-19 as its competitors suffer heavier losses. Airline ‘A’ has, in any event, stood its workforce down to an average 30 per cent workload in order to generate sufficient cash reserves for potential expansion,” the submission says. AFAP claimed that the business decision to stand so many pilots down was unfair given that the Airline still operated a number of intra and inter state flights.
The controversy goes even further back when in 2015 the AFAP came after Rex when a letter to new cadets surfaced. The letter instructed cadets to “acknowledge the privilege” and “commit to paying back to the company by being fiercely loyal and company-minded and by going above and beyond the call of duty especially in times of need by the company”. The AFAP argued that this was “coercion and misrepresentation under the Fair Work Act, and should be retracted with Rex ordered to pay civil penalties.” The matter eventually found its way into the High Court where the judge ruled in favour of Rex, saying the “emphasis on integrity was unexceptional given the cost of pilot training.”
The correspondence from the AFAP and rivalry with Qantas is certainly adding drag to Rex’s share price, having fallen 5% in the last five days.
Rex narrowed operating losses to $18.4 million (underlying, before tax) for FY21. Qantas posted an underlying loss before tax of $1.83 billion for the same year.