Ever since Rex went into administration on Tuesday evening, everybody and their dog has been asking the same question – ‘what went wrong?’

Unlike failed airline Bonza which only commenced operations in January 2023, Rex was a staple of the Australian aviation industry with roots reaching back to 1953 (when Hazelton Airlines was set up).

With two Australian airlines going down this year already (and we’re only in August) others have started to speculate that the issue is not with the airlines but rather with the aviation industry itself.

So, the question has to be asked, can the failure of Rex be put down to the structural problems of the Australian aviation industry, or is the issue of Rex’s management?

Does the aviation industry need reform?

On Friday, the Australian Travel Industry Association (ATIA), called for a reform of the aviation industry, expressing support for the comments of former ACCC Commissioner Rod Sims.

It supported its argument with a stack of data highlighting that flights have been cancelled for commercial gain, which much of the cost of this falling to travel intermediaries.

Meanwhile slot hoarding – the practice of airlines buying slots they don’t use to hurt competition – has also come under the spotlight.

Labor has vowed to come down hard on anti-competitive behaviour so that it is easier for new airlines to have access to Australia’s top airports.

On Monday, Transport Minister Catherine King opened a competitive tender process to appoint a new manager of Sydney Airport’s lucrative timeslots, following recommendations from the Harris Review and the ACCC.

For those who missed it, the Albanese Government is reforming slots at Sydney Airport. We are doing what the Coalition failed to do.
We have been consulting since announcing changes in February and will be bringing legislation to parliament.

— Catherine King MP (@CatherineKingMP) July 31, 2024

Are macro issues to blame?

Aside from political issues, others have said that macro issues make it difficult to run an airline in Australia.

Following the collapse of budget airline Bonza, Qantas CEO Vanessa Hudson has said the aviation market in Australia is not set up to sustain more than three airlines.

Speaking at the launch of the airline’s new 17-hour flight from Perth to Paris, Hudson said the Australian aviation industry was different from other Western markets because of its low population and reliance on domestic travel.

“If you think about why three airlines really struggle, it’s a number of things – our population; the US has 250 million people, we have 26 million and spread between the economics of being a viable airline, it’s incredibly challenging because it’s capital intensive,” Hudson told Nine Newspapers.

“We are an island nation, our economy relies on domestic aviation and the role that we play as a national carrier. We want our airlines, and Virgin and Rex, we want them to be sustainable, and to be sustainable they’ve got to be making a certain amount of revenue to invest. We don’t want a weak aviation market,” she said.

Vanessa Hudson

Were the problems closer to home?

Still, despite a number of calls for change at an industry level it is impossible to ignore Rex’s own managerial issues.

The first red flag that all was not well at the airport came in early July when Singaporean businessman Lim Kim Hai pushed to get rid of the airline’s entire board just a month after being voted out of his role as executive chairman.

The only director Lim didn’t ask to be removed was the nominee of PAG Asia Capital – a private equity firm that has invested $150 million in the airline.

As highlighted by ABC’s chief business correspondent Ian Verrender, Lim Kim Hai’s previous position as both executive chairman (a position he held for 21 years) and CEO of Rex put the company at a disadvantage as it led to a breakdown in the reporting line. This also made the company unattractive to investors.

Lim Kim Hai

When you dig down further into the weeds, it becomes clear that a lack of slots was not actually an issue that Rex faced.

As reported by The Weekly Time, statistics on slot access at Sydney Airport showed that Rex had as many if not more slots at Sydney Airport than Virgin. Its share of peak versus off-peak slots was 60 per cent peak and 40 per cent off-peak.

Qantas’s peak versus off-peak split was 57 per cent to 43 per cent, while Jetstar’s slots were split 50-50 between peak and off-peak.

There was also a lack of efficiency when it came to Rex’s jets itself. Analysts have estimated that any buyer of Rex will need to invest around $300 million in capital expenditure to renew its ageing fleet of Saab-340s.

A lack of parts following Covid-19 has meant that 25 of Rex’s 57 Saab-340s are grounded across the country’s airports.

One of the most profitable routes in the world

Despite speculation about the profitability the Australian airline industry, Sydney to Melbourne is actually considered to be one of the most lucrative routes in the world.

In the first half of 2023, the route generated revenue of $US1.21 billion ($1.9 billion), more than that made between New York’s John F. Kennedy airport and London’s Heathrow.

Whilst Rex did eventually move into the intercity routes in 2020, this was largely done opportunistically in response to Virgin going into administration.

Melbourne

Rex invested considerable capital in leasing nine Boeing 737 jets and taking up intercity slots but faced headwinds as consumers were still nervous about flying in 2020.

Its attempt to grow its market share by cutting prices for popular roots has also been slammed by analysts who say it created a ‘race to the bottom’ and was unsustainable.

Rex’s expansion into the Golden Triangle – Brisbane, Melbourne and Sydney – also wasn’t publicised very well.

Just a couple of weeks ago the airline launched a bizarre advertising campaign called ‘An Airfare to Remember’ in reference to the 1957 movie, An Affair to Remember, starring Cary Grant and Deborah Kerr.

Much of the market – including Gen Z and Millenial travellers would have been unaware of the film.

New ad agency pitches 60-year-old movie in Rex digital campaign

A lack of diversity in leadership

The airline has also been accused of being out of touch with a leadership team that lacks diversity.

At a board level, all six board members are men. All 10 of the senior managers named on its website are also men.

The lack of diversity comes at a time when other airlines are increasingly improving the number of women in top roles. For example, the CEO of Virgin, Jayne Hrdlicka, and Qantas, Vanessa Hudson, are women.

Despite a diverse workforce, Rex’s senior leadership was dominated by men.

Travel Weekly take: Whilst there is no doubt that the airline industry is facing considerable headwinds at a macro level – including the rise in fuel costs – it is unfair to put the failure of Rex solely at the door of the airline industry as a whole.

On a number of occasions, it failed to adapt to a changing market and arguably was too slow with its diversification into intercity and more profitable routes.