Delta Teams Up With Tiny Regional Australian Airline Rex

(Bloomberg) -- Delta Air Lines Inc. and Australian regional carrier Rex are teaming up to access each other's networks, a partnership coup for the diminutive Sydney-based carrier as it tries to establish itself as a rival to Qantas Airways Ltd.

Rex's passengers across Australia will be able to connect to Delta's network in a single booking by joining the U.S. carrier's Sydney-Los Angeles services, Rex Deputy Chairman John Sharp said in an interview. Delta's flights to Sydney can connect to more than 60 Rex routes in Australia.

Rex customers will also be eligible for preferential rates with Delta, Sharp said. Rex plans to soon introduce a loyalty program that will link with the U.S. carrier's one. Ultimately, Rex's frequent fliers should be able to access Delta's U.S. lounges and use air miles to buy Delta flights, he said.

The unlikely partnership brings together one of the world's biggest airlines with one of the smallest. Regional Express Holdings Ltd., as Rex is formally known, has a market value of just $97 million. A tie up with Delta, which is worth $28 billion, gives branding muscle to Rex's new strategy of flying busy Australian routes dominated by Qantas.

Rex shares climbed as much as 4.1% in Sydney before trading up 2.9% at 10:13 a.m. local time.

The agreement means Rex will soon have access to an overseas network, lounges in Australia's biggest airports and its own loyalty program, Sharp said. “By the time you cover those things, you offer our domestic customers the full suite of services they're looking for,” he said.

Services between Delta and Rex are due to start in the third quarter this year. Virgin Australia Holdings Ltd. ended its more than 10-year partnership with Delta in December, opting for United Airlines Holdings Inc. instead.

By the end of the year, Delta will bring about 500 passengers a day into Sydney, Sharp said. A fifth of them might then take a Rex flight, he said.

Rex is best known in Australia for serving rural towns with propeller planes on routes where there is little competition. Last year, it started flying popular legs including Melbourne-Sydney and Melbourne-Adelaide with Boeing Co. 737 jets. Its business has been impacted by Covid-19 travel restrictions, as well as a price war with Qantas, its low-cost arm Jetstar, and Virgin Australia.

“We've been through what I would say is the worst,” Sharp said. Passenger volumes on the 737 flights are now “very strong,” he said, declining to give specific numbers.

Rex swung to a loss of A$36.7 million ($26.2 million) in the last six months of 2021 from a profit of A$9.9 million a year earlier.

The airline plans to expand its fleet of six 737s to as many as 30 by adding a plane every two to three months. Sharp said two more jets will arrive “fairly shortly,” and a full network connecting Australia's major state capitals might be completed in 2023.