SYDNEY (Feb 28): Regional Express Holdings Ltd (Rex) has said on Monday it would start flights to Adelaide and Australia's Gold Coast by April 1 as it begins to challenge Qantas Airways Ltd and Virgin Australia on the country's big-city routes.

The airline's first Melbourne-Sydney flights are planned for Monday morning, at a time when domestic air traffic remains low due to the pandemic.

Rex had previously planned to launch Sydney-Brisbane flights next to add a second route highly popular with business travellers, but it said it would instead launch the more leisure-oriented Melbourne-Adelaide, Sydney-Gold Coast, and Melbourne-Gold Coast routes in time for the Easter long weekend in early April.

Rex, which until now operated only ageing 30- to 36-seat turboprops on routes like Sydney-Wagga Wagga, is using six leased Boeing Co 737s that used to fly with Virgin to take on the incumbent players.

Rex took advantage of the downturn to sign cut-rate leases and cheaper staff contracts than its rivals.

It raised up to A$150 million (US$120 million) from PAG Asia Capital to launch the operations, which Rex said if successful could expand to other routes and as many as 40 planes by 2022.

Before the pandemic, Qantas' Sydney-Melbourne route was the second-biggest revenue generator for any airline globally, contributing US$861 million in 2018.

However, off-and-on state border closures due to the pandemic have dented traffic demand and passenger confidence.

Rex has already cancelled some of its initial flight frequencies despite having offered one-way economy class tickets from just A$49, in a deal that Qantas then undercut with A$29 fares on budget airline Jetstar.

Rex said on Friday its big-city operations were not expected to be profitable in the financial year ending June 30, though they could be in the following year if the domestic recovery is strong.