Australia’s third largest airline enters voluntary administration
A major Australian airline has fallen into insolvency, with administrators revealing the staggering number of jobs set to go.
Australia’s third largest airline has fallen into insolvency and entered voluntary administration after a disastrous attempt to compete with Qantas and Virgin Australia.
Regional Express, better known as Rex, will ground all its Boeing 737 jets and cease flying immediately between Australia’s major cities. Virgin has said it will allow Rex customers with tickets on 737 flights to transfer them to its services.
Rex has said that its flights to and from regional cities, which use smaller Saab 340 turboprops, will continue as normal.
As a result, the Transport Workers Union say more than 600 workers could be axed in what’s been described as a ‘dark day’ for the industry.
It is understood Rex workers have now been briefed by administrators, with TWU confirming 610 jobs will be lost across the Rex Airlines and Regional Express Holdings Limited businesses.
The RAL business, which services 737 flights in capital cities, will cease to operate, with 360 jobs to be made redundant.
The voluntary administration process for Rex, which operates regional routes, will continue, though 250 job losses have also been indicated.
It is understood the total number of job losses will be confirmed later today.
“This is another dark day for aviation, with over 600 families faced with sudden joblessness in an industry that has taken hit after hit,” TWU National Secretary Michael Kaine said.
“We are working to secure job opportunities at other airlines and aviation companies for ground crew, cabin crew and pilots.”
Meanwhile, statement posted to the airline’s website on Tuesday evening said it had appointed Ernst and Young as administrators.
It comes just months after start up budget carrier Bonza went to the wall.
But if a rescue package cannot be found for Rex the outcome would be more dire as the Sydney based airline is a lifeline for many smaller centres across the country. It serves 56 destinations, many of them remote.
The airline had earlier suspended share trading on the ASX – a clear sign it was in strife.
Disastrous attempt to compete
When Australia was still in the midst of the pandemic and Virgin’s future was looking shaky, Rex made a bold attempt to expand.
It entered the most profitable – and most competitive – markets for air travel launching flights between the major capital cities.
With only smaller turboprop planes, Rex leased former Virgin Australia 737s to take on both Virgin and Qantas.
But with fewer frequencies, lower brand recognition and two formidable competitors, Rex struggled.
In June, Rex slashed fares between Melbourne and Perth to less than $100 one way, in a bid to win custom from Qantas and Virgin. But it couldn’t make the more competitive routes stack up financially.
The airline lost more than $3 million in the first half of 2023/2024.
Qantas, Virgin Australia respond to collapse
Rival airlines Qantas and Virgin Australia have responded to Rex falling into voluntary administration, with both airlines saying they were “sad” and “difficult” day.
“This is a challenging day for our industry and we are sad to see Rex enter voluntary administration with the immediate suspension of its Boeing 737 operations,” a spokesperson for Qantas said.
“We know this will be a difficult period for many Rex customers and employees and we stand ready to assist.”
The spokesperson said Rex customers impacted by cancelled flights due to the grounding of their domestic jet services can contact Qantas and Jetstar to be reaccommodated on the same route as their original booking at no charge, where seats available.
In a statement on the Rex website, the stricken airline said it was working with Virgin Australia to assist impacted passengers.
“An agreement has been reached with Virgin Australia to honour all prepaid tickets for the Rex Group’ direct services between domestic capital cities, at no additional cost to passengers.
“If you hold a prepaid ticket for future travel on any of these routes, you can transfer your Rex booking to a similar Virgin Australia flight.”
Customers must re-book their flight by Wednesday 14 August or they will lose their money.
“Regional flights are unaffected by the administration and will continue to operate as normal,” it stated.
“Customers can continue to make bookings at rex.com.au or via their travel agent.”
Virgin Australia has secured three leases over aircraft from Rex.
“This is a difficult moment for Australian aviation with Rex entering voluntary administration and announcing the immediate suspension of its 737 jet operations,” a spokesman for Virgin said.
“It is also a reminder of the challenging nature of our industry.”
Virgin also invited Rex employees to apply for jobs with them.
“The team at Virgin Australia are thinking about everyone at Rex today, an airline with a proud and important role in Australian aviation, particularly for regional Australia,” the spokesman added.
‘Cycle of crises’ as hundreds of jobs hang in limbo
The Transport Workers Union says that while further discussion around the status of jobs and the closing down of the jet services business will be discussed today, the industry itself is in a “cycle of crises”.
Blaming a “vicious, hyper-competitive and unregulated market”, TWU National Secretary Michael Kaine said hundreds more aviation workers are now facing stand downs, job losses and uncertainty.
“It is absolutely critical that as many jobs as possible are protected through the continuation of regional flights, while entitlements are secured for those unable to retain employment,” Mr Kaine said.
“The Federal Government has sent positive signals that it does not intend to leave regional Australia in the lurch.
“Aviation is locked in a cycle of crises. While the Rex administration is handled as quickly as possible, we also need a long-term fix.
Mr Kaine said the big question now facing the industry is given the size of the Australia, what measure needs to be introduced to ensure “viable aviation that can serve the community reliably and affordably”.
Meanwhile Sydney Airport has labelled the airline’s downfall as a “difficult day” for Australian aviation, and evidence that action needs to be taken to improve competition and efficiency.
Sydney Airport CEO Scott Charlton said it’s time for drastic change within Australia’s aviation industry.
“Our first thoughts go to the Rex passengers and employees that will be impacted by the Administration,” he said.
“What this situation demonstrates is that we need to change some things in the Australian aviation market for competition to thrive, because recent history suggests the barriers are too high.”
Government looking at Rex ‘proposals’
Prime Minister Anthony Albanese told the ABC that he and transport minister Catherine King had called for more information from the airline following the trading halt, adding that Rex was an “important airline”.
“Rex is particularly important for regional communities and there are a range of communities where Rex is the only airline serving some of those destinations,” Mr Albanese said.
“There are a range of communities in New South Wales, in Queensland, in South Australia and right around the country that rely upon Rex … so it’s important.”
Speaking to reporters in Sydney on Tuesday, the Prime Minister added his government would look at “any proposals” to help Rex, but noted the airline’s shift in to some of the more competitive routes in Australia may have worked against the airline.
“One of the things that I expressed concern about was that Rex moved away from their traditional role of being a regional airline into flights from Sydney to Melbourne,” Mr Albanese said.
“Rex as a regional airline provides important links with regional communities and particularly between capital cities and regional communities. It is important for those local economies.”
The Transport Workers Union (TWU) said about 2000 employees have been thrown into limbo after the trading halt.
As reported by AAP, in February, Rex Airlines reported a bottom-line net loss of $3.2 million for the first half of the 2023/24 financial year on the back of rising costs, especially for fuel.
However, that improved on the $16.5 million loss reported in the previous corresponding period.
Following the collapse of Bonza, Qantas Airlines CEO Vanessa Hudson cast doubt on there being enough room in Australia’s domestic market for more than three airlines.
“History proves not [in having more than three airlines in Australia],” Hudson said earlier this month at Perth Airport.
“If you think of why three airlines really struggle, it’s a number of things. One is its our (smaller) population.
“The economics of being a viable airline, it’s incredibly challenging. It’s capital intensive, the next biggest challenge we have is decarbonisation, so that is significant. We believe that all carriers in the market – no one can be winners or losers from decarbonisation. Everyone should be doing it, it’s the right thing to do.
“I don’t think there is sufficient volume to sustainably support a significant growth in the number of players.”
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