“Rex Airlines rescue more a relief than cause for celebration
The theory suggests that, armed with spare parts, Rex could continue operating these aircraft for longer, thus extending the time required before investment in replacement aircraft would be necessary.
Loading
However, even if leased, the aircraft would eventually need to be replaced, which would be an expensive exercise. It may be difficult for Air T to overcome this obstacle in the future.
At the time of this writing, there was no official statement regarding Air T’s offer, so we don’t know how much of the $130 million the government gave to Rex will be recovered. But the government would be happy to take the airline out of business, so any deal would be cause for celebration.
What this means for the continuation of certain regional routes depends on the shape of the deal that needs to be struck between the federal government, Air T and Rex’s executives at EY.
Running any airline is difficult, and making a profit on an Australian regional airline is even more difficult. Rex hit a dead end when its ambitions expanded beyond regional markets and it went after Virgin and Qantas to capture the intercity market.
Loading
It hit the competitive wall when Virgin and, to a lesser extent, Qantas used lower fares to combat the interloper.
Ultimately, Rex became another aviation casualty, joining the list of teams that have tried to break Qantas’ dominance over the years.
Complicating matters further, the corporate regulator, the Australian Securities and Investments Commission (ASIC), took legal action against Rex late last year.
In December, ASIC took Rex and chairman Lim Kim Hai and directors John Sharp, Lincoln Pan and Siddharth Khotkar to the NSW Supreme Court for “serious management failures”, claiming they misled the market about the company’s financial position in February 2023.
Rex had a ringing experience. An ambitious push into lucrative intercity routes has come to a head even as it struggles with boardroom rows and management turmoil.
So the Rex’s rebirth under new ownership and management will be more of a relief than a festivity.
The Market Summary newsletter is a summary of the day’s transactions. Take it every weekday afternoon.
