* First Sydney-Melbourne flights began Monday
* Will fly to Adelaide, Gold Coast by April 1
* Domestic traffic remains below pre-pandemic levels (Recasts, adds comments from deputy chairman)
By Jamie Freed
SYDNEY, March 1 (Reuters) - Regional Express Holdings Ltd (Rex) REX.AX will switch some of its marketing emphasis to the leisure market rather than business travel as it adds new destinations to challenge Qantas Airways QAN.AX and Virgin Australia, its deputy chairman said.
Rex celebrated its first Melbourne-Sydney flight on Monday and said it would start flights from Melbourne to Adelaide and Melbourne and Sydney to Queensland's Gold Coast by April 1, rather than Sydney-Brisbane as it had previously planned.
"Certainly leisure is booming at the moment and business is not so busy," Rex Deputy Chairman John Sharp told Reuters in an interview at Sydney Airport.
He added that generous but undisclosed financial incentives from the Gold Coast airport, around 66 km (41 miles) south of Brisbane, had also factored in its decision.
Rex, which until now operated only ageing 30- to 36-seat turboprops on routes like Sydney-Wagga Wagga, is using six leased Boeing (NYSE:BA) Co BA.N 737s that used to fly with Virgin to take on the incumbent players.
Four more could be added by the end of the year, Sharp said.
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 ($120 million) from PAG Asia Capital to launch the operations.
Before the pandemic, Qantas's Sydney-Melbourne route was the second-biggest revenue generator for any airline globally, contributing $861 million in 2018. off-and-on state border closures due to the pandemic have dented traffic demand and passenger confidence, and Qantas is raising capacity at budget airline Jetstar more quickly than its main brand due to higher leisure demand.
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 Jetstar undercut with A$29 fares.
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. ($1 = 1.2697 Australian dollars)