In a battle for the Canberra dollar, Qantas and Virgin Australia have slashed their fares to Melbourne the day after Rex Airlines disrupted the market by offering $69 tickets.
On June 10, the day the Rex cut-price fare schedule starts, Qantas is now offering one-way tickets to the Victorian capital for $99 compared with $218 on the same day the previous week.
Virgin is matching Rex's $69 ticket. On June 9, the day before the Rex entry into the market for the route, Virgin Australia's cheapest ticket to Melbourne cost $185.
The competitors' response comes a day after Rex's announcement of its intention to shake-up travel between Canberra and Melbourne, following its similar promise of cheap flights to Sydney.
Rex deputy chairman John Sharp flew into Canberra on Tuesday and went for what he termed "price-gouging Qantas". "We are sure that both Qantas and Virgin Australia will immediately match our fares as they have done every time," he said.
His prediction appears to have been borne out.
On Wednesday, Qantas responded in a statement:
"Unlike Rex, we welcome competition on the routes we fly. There is already strong competition on the Melbourne-Canberra route, and our fares reflect this.
"Rex has once again shown they're unable to use a calculator with Qantas return fares for the June long weekend available from less than half of the price they've quoted.
"Customers know what they're getting with Qantas - multiple direct services per day, inclusions with every fare including luggage and complimentary meals and drinks, Australia's most popular frequent flyer program and access to lounges in Melbourne and Canberra.
"Just as we have done for decades, we will continue providing a high quality and reliable service with regular flights available throughout the day between Melbourne and Canberra for government, corporate and leisure travellers."
Virgin Australia said: "We're all about providing travellers with some of the most competitive airfares in the market, alongside premium touches they've come to expect such as baggage, seat selection, Velocity points and status benefits."
Qantas is still charging more for a flight to Melbourne but pitches itself as a brand with a long-history of quality. It has a loyal following.
As Executive Traveller magazine puts it:" Qantas generally positions itself at a premium and can also make the case that its inflight WiFi and business class lounges - to which Platinum-grade flyers in economy have access - will be sufficient to keep most rusted-on Roo followers in its camp."
And Virgin Australia "plays up the advantage of its Velocity Frequent Flyer program as one factor to tilt the scales in its favour; the superior quality of its Melbourne and Canberra lounges would be another."
The Rex price also undercuts bus travel. The overnight Canberra to Melbourne Greyhound costs $99, arriving at 5.30 in the morning.
One of Rex's pitches is that low air fares are good for the Canberra economy by saving money for Canberrans and by making interstate tourism to Canberra cheaper (though they also make tourism by Canberrans to Melbourne and Sydney cheaper, too).
"We estimate that Rex's entry will save Canberrans over $150 million a year in lower fares once travel returns to pre-COVID levels," Mr Sharp said.
He noted that the public service had an obligation to choose the cheapest fare. "Rex is going to be the best fare of the day so we expect to get a lot of government business."
Rex reckons that a million passengers would travel between Canberra and Melbourne before Covid.
Apart from the price war, Rex intensified its war of words on Tuesday.
"What Qantas has been doing is ripping off the people of Canberra," Mr Sharp said.
"Qantas has perfected the art of price gouging, ripping off passengers with sky-high fares on a route with only a weak competitor to keep it honest."
Rex had already taken aim at Qantas by selling Canberra to Sydney tickets for $99. It's also muscling into Qantas territory by offering Sydney to Melbourne at $49.
Mr Sharp said that people stuck with a particular airline like they stuck loyally with an Aussie rules football team.
"The prices are designed to break that habit," he said.
The Boeing 737 on the Canberra-Melbourne route has 170 seats. Eight would be business class at a higher price. All the other 162 seats, Rex said, would be at the $69 price apart from 12 extra leg-room seats which would be $15 more.
The ACT Chief Minister Andrew Barr said, "The ACT government warmly welcomes Rex Airlines investment in the Canberra-Melbourne route.
"This is a major boost to competition on one of the city's busiest aviation routes. It will make it easier, and significantly cheaper, for people to visit Canberra.
"It is a further vote of confidence in Canberra's tourism and hospitality industry."
Rex is the latest smaller airline to expand to Canberra. Three others - Pelican, Alliance and Link - fly to Hobart, Cairns, Port Macquarie, the Sunshine and Gold coasts and Newcastle.
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