Air T deal puts taxpayer cash injections at risk
Industry experts fear a more than $130 million taxpayer cash injection into failing regional airline Rex is at risk after executives said a deal to save the airline would wipe out its shareholders.
The government loaned Rex $80 million to keep the company flying its planes after it collapsed in July 2024, and bought $50 million from another creditor, but the return of the money is uncertain after administrators EY said Rex would be sold to US aerospace company Air T.
Rex will be acquired by the US company Air T.Credit: Getty Images
UNSW aviation school honorary senior lecturer Ian Douglas said the government had made it clear it did not want to take over the airline and was left with little option after being forced to support the airline to keep regional routes open.
“I don’t think anyone will ever get the money back from Rex,” Douglas said. “And if this [deal] Even if I didn’t continue, I still don’t think there would be an outcome that says ‘here’s some money back’.”
Shareholders who invested in Rex will get nothing from the proposed deal, while creditors including staff, suppliers, airports and lenders (including the government) have not been told what they will get.
Rex, founded in 2002 as a regional carrier, collapsed after trying to compete with Qantas and Virgin on capital routes as the country recovered from the pandemic. The airline also suffered a serious split on its board of directors.
The airline was responsible for around 5 per cent of Australia’s domestic seats before its collapse, largely serving regional towns with little or no other flight options. But it has never made major profits and its fleet of aircraft is decades old. Management continued this way for months, with EY initially predicting it would take just 12 weeks to find a new buyer and revive Rex.
“According to me [the government] In that case, it would be happy to see a talented operator — which is what it is — take over Rex, even if it meant wiping out the $130 million they had there, Douglas said.
He said Rex’s minimal property holdings and aging fleet meant it had no assets to sell to repay creditors, who would likely be unhappy with the outcome but wouldn’t be surprised.
