Dynamics shift in regional Australia with Rex's first loss, JetGo expansion and arrival of Airly

Australia's regional aviation market is undergoing adjustment as Virgin Australia gently withdraws from its high stakes bet on the resources market; Jetgo Australia carves a valuable niche in long, thin flying; and Australia's first all-you-can-fly operator Airly plans its entry. Meanwhile, Regional Express' streak of profitability ends with its first-ever loss in 1HFY2016. Rex has not experienced passenger growth since 2009 and while its network has grown, ASKs are down, profits continue to fall and load factors have only recently stabilised. With a slowing resources sector and weak domestic business demand, Rex expects flat profit growth heading through to FY2016.

JetGo has been the standout in the regional market - defying expectations to carve a relatively successful niche of long, thin city pairs. Its success has been largely in connecting frustrated regional markets with major cities using regional jets. After a patchy start - none of its original routes remain operating - the airline has expanded further up the East Coast as its previous core of resources FIFO work has diminished.

Virgin Australia's move into regional Australia was always ambitious, and the acquisition of Skywest even more so. Its big bet on resources traffic has failed to pay off as mineral prices have fallen and the industry broadly has shifted from construction to production, but a partnership with Alliance and an improving freight business provide some bright spots in a muddy outlook.