Government extends subsidy on Qantas, Virgin Australia, Rex flights

Qantas, Virgin Australia, Rex and other domestic airlines will continue to have a series of core domestic routes paid for by the federal government over the coming months, while also seeing an extension to the waiver of a raft of aviation fees.

The Domestic Aviation Network Support program, launched on April 17 to establish a 'minimum domestic network' of Qantas and Virgin Australia flights to all capital cities and 36 larger regional centres across all states and territories, will now be extended past its original June 7 cut-off date to September 30.

The first eight-week DANS package was costed at $165 million, although with both Qantas and Virgin already moving to increase domestic flights ahead of an expected uptick on demand as travel restrictions ease, the 15-week coverage and cost of DANS 2.0 has yet to be determined.

Although the government funding will ensure that certain routes don’t operate at a loss, the airlines aren't intended to mark up a profit from DANS , which is positioned as a break-even affair offering surety to airlines.

The companion Regional Airline Network Support program will now run through December 31 to ensure regional communities continue to receive essential air services.

A statement issued on behalf of Michael McCormack – Minister for Infrastructure, Transport and Regional Development, Deputy Prime Minister and leader of The Nationals – said "the Government will continue to cover operating shortfalls for a limited number of services on regional routes flown prior to the COVID-19 crisis."

“The Australian Government is doing everything possible to ensure the aviation industry is sustained throughout the pandemic so that it can rebound on the other side,”McCormack said. “We have kept the aviation sector going by funding minimum networks to get essential personnel and critical supplies to where they may be needed."

"The measures announced today will help ensure Australian airlines and operators can maintain essential air services as we map out our economic recovery."

The government will also extend fee waivers and refunds to airlines on a range of government charges covering operations, security and fuel excise, and allow claims under the $100 million Regional Airlines Funding Assistance program to continue until December 31 "or until allocated funds are exhausted, whichever comes first, to support regional airlines to continue operating."

Airlines rebuild their domestic networks

Qantas Group CEO Alan Joyce last week announced plans to triple the current number of Qantas and Jetstar flights by the end of June, increasing capacity from 5% of pre-pandemic levels to 15% – equivalent to some 300 return flights per week – with scope to take this to 40% by the end of July based on demand.

“We know there is a lot of pent up demand for air travel and we are already seeing a big increase in customers booking and planning flights in the weeks and months ahead,” Joyce said.

“We are gradually adding flights in June as demand levels increase (and) we can quickly ramp up flying in time for the July school holidays if border restrictions have eased more by then."

The beefed-up schedule boosts flights on the Sydney-Melbourne-Brisbane 'golden boomerang' corridor from 31 flights per week connecting the east coast capitals to 116, while there are also increased intra-state flights within New South Wales, Queensland, South Australia and Western Australia.

Read more: Qantas, Jetstar set to ramp up domestic flights

Virgin Australia will continue flying through its own turbulent times, with the airline hopeful of soaring out of administration by the end of August with a new owner – either Boston's Bain Capital or New York's Cyrus Capital – behind the stick.

Virgin Australia Group Chief Commercial Officer John MacLeod said the extension of the underwritten schedule "will provide more options and flexibility for travellers and cargo customers alike, and despite several travel restrictions still being in place, the services will be a welcomed boost to local and state economies."

Rex eyes more than just regional flights

Regional Express (Rex) will see the lion's share of regional funding, with the airline earlier this week confirming that "Rex as the operator of the largest number of regional routes is naturally allocated its proportionate share of assistance. "

"The Federal Government has justifiably placed regional aviation as a national priority and has provided appropriate assistance to ensure that regional communities will retain their vital air services after the COVID-19 crisis is over."

Rex is also exploring launching flights between Australia's capital cities by March 2021, taking on Qantas and Virgin to create what it calls "a three-airline market."

The ambitious project would see Rex carve out a share of the highly-profitable east coast corridor as well as the coast-to-coast transcontinental route, using a leased fleet of 10 single-aisle jets, either in the Airbus A320 or Boeing 737 series backed by a $200m war-chest courtesy of deep-pocketed investors.

Read more: Rex to challenge Qantas, Virgin Australia on capital city routes

David Flynn

David Flynn is the Editor-in-Chief of Executive Traveller and a bit of a travel tragic with a weakness for good coffee, shopping and lychee martinis.