Regional Express and Qantas are scrambling to increase their Wagga flights in a show of one-upmanship which could cost taxpayers millions of dollars.
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Rex has declared it will soon run eight flights out of Wagga as a form of retaliation against Qantas, which will be tripling its weekly Sydney to Wagga services from two to six.
Rex Chief Operating Officer Neville Howell said the demand for air travel did not justify the added services, warning that both airlines would suffer "heavy losses" from this war of attrition.
Both of the airlines are currently propped up with taxpayer money, with the federal government pouring over a billion taxpayer dollars into the airline industry in a bid to keep companies such as Rex afloat.
Deputy Prime Minister Michael McCormack defended his decision to extend even more support to the airlines, saying it was a "wise use of taxpayers' money" even in light of the added services.
"We're not just necessarily propping up airlines... we are actually protecting regional communities and Australians by this minimum network extension, domestically and regionally," Mr McCormack said.
Wagga City Council had waived its fees and charges to support Rex in its hour of financial need, even though council expects to lose millions of ratepayer dollars through Wagga Airport.
Councillor Conkey said council would still be willing to support regional airlines, saying they were crucial to the prosperity of Wagga.
"We totally understand that all airlines are doing it tough at the moment and we are helping any way we can," Cr Conkey said.
"It is vital we have a service."
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Rex's Neville Howard slammed Qantas for what he called "anti-competitive conduct", saying that the move "does not make economic sense".
"QantasLink's aggressive new published schedule for July ... compels us to match this move so as not to be squeezed out of the market," Mr Howell said.
"The outcome may result in both carriers doubling or tripling their losses on these routes given the expected load factors of 30 per cent or less."
Mr Howell even threatened to start running services in towns where Qantas had a monopoly, even if it did not make economic sense to do so.
"Rex can ill-afford to sustain prolonged periods of heavy losses on these competitive routes, however Rex has no choice but to stand its ground," Mr Howell said.
"Rex does not have the deep pockets of the Qantas Group but our resolve will not be found wanting and will prevail."
A Qantas spokeswoman said they would keep a close eye on the level of demand and adjust their services accordingly.
The spokeswoman went on to add that the extra services would bring some much-needed visitors to regional town such as Wagga, where the travel restrictions had hit particularly hard.
"We have no intention of flying half empty planes but we also want to make sure people have the opportunity to travel as travel restrictions lift," she said.
"Normally, we plan our capacity months in advance, but in the current climate we need to be flexible to respond to changing restrictions and demand levels."
Both airlines have indicated that more Wagga flights could be in the pipeline, especially as demand for air travel begins to increase