This op-ed was originally published in the Australian Financial Review on Thursday 22 April 2021 in response to an opinion piece from Rex Airlines Deputy Chairman John Sharp.
In business, credibility is everything. Your customers, investors and the market need to know they can believe what you’re saying. So do regulators.
How, then, should Rex be judged?
They are well known for throwing tantrums when things don’t go their way – like threatening to stop flying to certain regional towns but continuing to do so anyway. They’ve used this “or else” strategy eight times in the past 12 months alone, with communities from Armidale to Kangaroo Island finding out from media reports that a critical air link might (but probably won’t) disappear.
Last December, they were sanctioned by ASIC for not following basic rules on continuous disclosure.
In January, Rex accused Qantas of trying to shatter confidence in their viability by making the basic observation that Australia’s domestic market has never been able to sustain a third carrier. Then it was revealed that their own prospectus, chasing $200 million from investors, said the same thing, but predicted that Rex would emerge as one of two remaining carriers with a market share of almost 40 per cent.
In March, its Deputy Chair John Sharp told media that passenger numbers on their new jet services are “better than expected” but declined to give any detail. When confronted with figures showing aircraft were only 20 per cent full, he said competitors were spying. Not that the figures were wrong – but that people were daring to look.
He mustn’t have seen the pictures that lonely customers were posting on social media of empty REX cabins.
And then there are the most recent claims from Mr Sharp about Qantas finances (AFR, 21 April 2021).
Perhaps if you’re used to running a small company, the accounts of a large company can be confusing. Otherwise, it begs the question whether Mr Sharp is trying to mislead the market about Qantas’ financial position.
Suffice to say, if Mr Sharp’s outlandish claims were true, or his reading of our accounts correct, Qantas would not be one of the few airlines in the world to retain an investment grade credit rating through the pandemic. Or have a total market capitalisation similar to what it was pre-COVID. Before this, we were posting strong profits as well as investing over $1 billion a year in new aircraft.
The frequency with which Rex makes baseless criticisms of Qantas points to it being a key part of their strategy. That strategy is driven by John Sharp, who left politics under a cloud and has shown an approach to corporate communications that seems to confuse it for parliamentary privilege.
There are now so many ridiculous claims from Mr Sharp and Rex, we have started a new page on our website to debunk them.
Rex likes to say that they are the most profitable airline in Australia, adjusted for size. That’s a dubious distinction when you have failed to invest in your fleet and propellers are literally falling off. What will Rex do in the coming years when its SAAB fleet reaches the end of its functional life?
It’s a well known fact in the industry that Rex has now chalked up another dubious honour. They have presided over the worst launch of a new jet airline in Australia’s aviation history, with empty aircraft and announced routes never flown. This despite them insisting now was the perfect time for such a venture and – like the knight from Monty Python – that any setback is just a flesh wound.
All of this poses serious questions for Rex’s customers, employees and Singaporean investors. Will they get credible answers? Or will the response to scrutiny be greeted with more baseless criticism of Qantas in the hope of diverting attention? We’ve all seen this movie before.
For our part, we are focused on recovering from the COVID crisis and bringing more of our people back to work. We’ll continue to be upfront about what’s going well and what isn’t. And we’ll compete fair and square with all comers to win the right to be people’s first choice when they fly.