A price war on the Sydney-Melbourne route has kicked off with airlines claiming "unprecedented" low fares.
Rex, which started flights on the route in March, fired the first shot soon after 5am on Monday by announcing $39 one-way fares between the two cities, claiming they were the lowest fares ever for a full-service airline on the route.
Before midday, Virgin Australia had responded by matching the $39 fare. Qantas and Jetstar have not yet responded with their own sales.
Rex's fares are on offer for travel up to August 28, with Virgin offering travel dates up to December 15.
Prior to COVID-19, Sydney-Melbourne was the second-busiest air route in the world and, after disappearing from the rankings during last year's lockdowns, it recently climbed back into the top 10 following a rebound in travel between the two cities.
Despite this, while regional tourism has experienced a boom in recent months, cities have struggled to attract visitors, with many hotels suffering low occupancy. New figures show Victorian hotels have lost $1.7 billion in room revenue, the brunt borne by Melbourne properties.
John Sharp, deputy chairman of Rex, said the fares were cheaper than anything on offer through the federal government's half-price fares scheme, which is aimed at reviving tourism but is limited to just 14 destinations around the country.
"Peak tourism bodies reported yesterday that flagship stimulus programs from state and federal governments have not benefited Melbourne and Sydney," he said.
"I believe this initiative will single-handedly revive a moribund travel and hospitality industry in the two cities. The resulting copycat moves from our competitors will mean that there will be hundreds of thousands of $39 fares available."
While both airlines claim the fares are at record lows on the route for full-service carriers, budget carriers Jetstar and the now-defunct Tigerair offered one-way fares as low as $1 during Tigerair's launch 13 years ago. Virgin Australia is arguably no longer a full-service airline, since it now charges for food in economy class.
Rex, which is using some of Virgin Australia's former 737 aircraft after VA reduced the size of its fleet last year, has made forays into several city routes in recent months.
After Sydney-Melbourne, Rex added flights to the Gold Coast from both Sydney and Melbourne, along with launching a Melbourne-Adelaide route at the end of March. Last month it launched Sydney-Canberra flights.
Rex recently accused both Qantas and Virgin of dumping capacity on domestic routes in order to stymie its efforts to break into major metropolitan markets. It has appealed to the Australian Competition and Consumer Commission to intervene.