The expansion of Rex’s services into major trunk routes between major cities has seen costs rise and profits fall. Photo: Rex.
The trading of shares of regional airline Rex has been halted pending the release of a report into the future viability of the airline.
Rex’s troubles closely follow the June failure of start-up airline Bonza with the loss of 300 jobs.
On Monday, the Australian Securities Exchange (ASX) announced trading in Rex shares had been suspended for 48 hours at the airline’s request.
In a letter to the ASX dated 29 July, Rex company secretary Richard Kwan said, “In accordance with trading rule 17.1, Regional Express Holdings Limited requests the securities of the company be placed in an immediate trading halt pending a material announcement.
“Rex advises the trading halt is to last until the commencement of trade on Wednesday, 31 July 2024, or until the announcement mentioned above has been made.”
The Wednesday announcement is expected to be the release of the result of a report conducted by EY into the airline’s future. It is expected to recommend the airline either be restructured or placed into voluntary administration.
The airline is majority owned by Singapore-based Lim Kim Hai. On 12 July, Mr Lim requested a shareholder meeting and called for the removal of several directors of the airline, including chairman John Sharp, non-executive director Lee Thian Soo, and directors Ron Bartsch and Jim Davis.
Regional Express Holdings Limited, or Rex for short, flies to 56 destinations throughout Australia, most of which connect major cities with regional centres flying an ageing fleet of 67 Saab 340A/B turboprops.
Regional services in NSW covered by Rex include flights between Sydney and Canberra, Albury, Wagga Wagga, Narrandera-Leeton, Griffith, Orange, Parkes, Moruya and Merimbula. It also has an extensive network throughout regional Queensland, flying from Brisbane, Townsville and Cairns. It also covers centres in northern Tasmania, regional South Australia and southwest Western Australia.
At the height of the pandemic in 2020, it announced the launch of domestic trunk route services between Australia’s major cities and now flies Boeing 737s between Sydney, Canberra, Melbourne, Brisbane, Cairns, Hobart, Adelaide and Perth.
However, some analysts have suggested that it is these domestic services that pitted the airline against incumbents Qantas and Virgin Australia, which has been Rex’s undoing. The airline borrowed $150 million to lease nine 737s but has been unable to turn a profit on these trunk routes.
Despite beating both Qantas and Virgin on a couple of on-time performance results in recent months, Rex’s small fleet of essentially identical aircraft to those operated by its competitors doesn’t offer a significant point of difference nor an ability to increase service frequencies.
Rex runs a fleet of more than 60 ageing Saab 340A/Bs. Photo: Rex.
In an interview on Monday afternoon (29 July), Prime Minister Anthony Albanese said aviation is a tough industry, recalling his six years as transport and shadow transport minister.
“One of the things that we need to do is to make sure that we have a viable and ongoing Australian aviation industry,” he said.
“I’ll always stand up for Australian airlines. It is important that we do that.
“It’s a very competitive industry globally and every single year there wouldn’t be a week go past where an airline somewhere in the world doesn’t get into trouble. I’m very hopeful that they’ll see their way through.”
Mr Albanese said the the Federal Minister for Infrastructure, Transport, Regional Development and Local Government Minister Catherine King had been in contact with the airline and had briefed him and that the government will continue to monitor the situation.
“Rex is particularly important for regional communities, and there are a range of communities in NSW, in Queensland, in South Australia and right around the country that rely upon Rex, where Rex is the only airline to go to some of those destinations, so it’s important,” he said.
“They’ve come through Covid and received substantial government support.
“And we will remain, of course, vigilant when it comes to this airline and continue to work with them because we want to see not just those jobs maintained, but we also want to see those communities continue to have access to aviation, that’s so important for their economy and for their way of life.”
Speaking on ABC News Breakfast on Tuesday morning, Ms King expressed her concern at what the trading halt might mean for the future of the airline but, like the Prime Minister, stopped short of committing to any government intervention in order to preserve the airline’s vital regional services.
Shadow Minister for Infrastructure, Transport and Regional Development and Opposition Senate Leader Bridget McKenzie said the government needs to pull “its head out of the sand and start pulling on the levers to foster more competition, better reliability and more affordable airfares in Australia”.
“Two aviation companies control more than 93 per cent of the domestic space, and companies like Rex create more competition, which means cheaper airfares across the board.”
In addition to the airline, the Rex Group also comprises freight and aeromedical operator Pel-Air Aviation, the Australian Airline Pilot Academy in Wagga Wagga and Ballarat, and has a 50 per cent share in charter operator National Jet Systems.
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