Rex Calls on Government to Keep Lid on Airline Charges
Friday, 28 April 2006

Soaring fuel prices and the resultant hefty fuel surcharges announced by the major airlines are once again putting pressure on the price of air tickets for regional travellers.

While little can be done about the price of fuel, Rex has called on the Federal Government to ensure that essential service providers like CASA, Airservices Australia and privatised airports maintain or lower their charges to reduce the cost pressures on air travellers, particularly on vulnerable and essential regional routes.

Rex’s Managing Director Geoff Breust said that airlines are facing the double whammy of runaway fuel costs and huge increases in charges paid to monopoly infrastructure and service providers that are as high as 30%.

“Organisations like Airservices Australia continue their cost plus approach whereby they charge the airlines their cost with a margin added on for profit and a return to the Government. This is a blank cheque for them to pass on all their inefficiencies and wastages to the airlines and ultimately to air passengers.”

“Rex calls on the government to set the example by imposing on these organisations clear productivity benchmarks. Under this arrangement Airservices, CASA and the airports would have to lower their cost bases by at least 5 percent a year for the next three years and pass on the savings to air travellers via the airlines. Only where external costs increase by more than 5 percent would they be allowed to increase charges.”

“These days all airlines have had to reduce their cost base significantly or go out of business. Rex, for example, has an average all-inclusive fare across its entire network that is 20 percent below what it was three years ago even after including the $22 fuel surcharge. It is simply ridiculous to be faced with unbridled increases from monopoly service providers which hold the airlines and air travellers to ransom while making guaranteed high returns."

Mr Breust urged the Federal Government to extend the Productivity Commission’s current examination of the practices of the major airports to that of CASA and Airservices with a view to setting productivity targets and guidelines on price increases.

He also called on the government to put pressure on the monopoly airports serving regional communities to reduce or at least maintain charges.

“If the Government does not act soon, the cost of air travel will soon escalate to the point where air services to many regional communities will simply not be viable. This would have a devastating effect on regional economies and the communities of many thousands of families in the bush."

Mr Breust said the airline industry was not seeking handouts.

“We are calling on all Governments to recognise that they too are part of the air service industry and they too should take full responsibility for ensuring we have the least costly and the most efficient infrastructure and regulatory service providers. We are in this together as a partnership. At the moment only airlines like Rex are meeting their obligations to the travelling public.”

Mr Breust said that Rex was also obliged to increase its fuel surcharge like all the other airlines but would moderate the increases so that regional travellers would be partially sheltered from the full brunt of the fuel cost.

“Our Board has taken the decision to mitigate the increase so as to reduce the burden on regional travellers, many of whom are still facing hardships associated with the continued drought. Management has been instructed instead to further improve internal efficiencies to make up the shortfall. Our increased fuel levy will be capped at $5 compared to Qantaslink’s $7, although being unhedged we face a much bigger blow. We are also partially sheltering the majority of the lowest internet fares from the full $5 increase, thus minimising the full impact for the majority of our passengers.”

The new fuel surcharge will take effect for all new tickets for travel on Rex issued on or after 2 May.