The recovery of ACT's tourism sector is set for a boost as Rex Airlines prepares to bring an influx of domestic visitors with 160,000 extra seats per year for the Canberra-Sydney route.
The regional airline will begin the new service on April 19 with seven return flights per day and fares from $99 each.
The airline's deputy chairman John Sharp said they were confident of growing the Canberra travel market with the extra seats to help the territory's tourism recovery.
"We believe our new, affordable flights will be the catalyst for many more people to visit the national capital and stimulate even greater demand from leisure travellers," Mr Sharp said.
"One of the things that Rex's entry into the Canberra-Sydney market represents is a boost to tourism not just in the capital but also outer regions like Yass, Braidwood, Cooma and the Snowy Mountains."
Mr Sharp told tourism leaders at a special briefing in Canberra last week that competition would not only save travellers up to $100 million a year through cheaper fares, but it would see even more people visiting friends and families.
He said the initiative had been "in our minds for a long time".
"The departure of Virgin from that route was catalyst for us looking at filling that gap," he said.
"It was magnified when we realised Qantas had the monopoly of that route. Competition is good for consumer.
"The extra seats will be a boon for the tourism industry."
Between June 2019 and December 2020, domestic visitors dropped from 5.9 million to 4.75 million, ACT Government data shows.
Domestic visitor spending also dropped from $2.25b to $1.72b in the same period.
Chief Minister Andrew Barr said the ACT Government welcomed Rex's arrival on the route.
"Competition in aviation is very important for consumers. Growing aviation links remains a key priority for the ACT Government and the additional seats are much welcomed by our tourism sector," Mr Barr said.
"Higher frequency of services will make the route more competitive providing a great option for the Canberra community to travel to Sydney as well as supporting growth of the leisure and business market into Canberra."
Canberra Airport's head of aviation Michael Thomson said they were "excited by this tremendous new opportunity and choice for the people of Canberra and Sydney with this new service".
"We've seen in the past that cheaper fares can stimulate an entirely new market of travellers," he said.
"When TigerAir launched a Canberra to Melbourne service in 2019 with $89 fares, a new market of leisure travellers was created that had not existed before.
"The advent of a new entrant grew the total market rather than resulting in substitution from existing carriers."
On April 9, the ACCC found in favour of a partnership between Virgin Australia and Alliance Airlines that would give both airlines the ability to explore options in relation to several regional routes, including Canberra to Sydney.