By Amelia McGuire
Regional Express (Rex) has grounded all flights between capital cities after entering voluntary administration following an emergency board meeting on Tuesday evening.
About 360 of 2000 Rex employees have been stood down so far, with more than 600 total jobs at risk if the airline is forced to ground its regional operations in addition to its major routes. Rivals Qantas Airways and Virgin Australia have committed to hiring as many affected Rex employees as possible.
Rex is responsible for flying about 5 per cent of domestic passengers, with the remaining 95 per cent absorbed by the duopoly of Qantas and Virgin. It has served Australia’s regional routes for 21 years and expanded to 11 major domestic routes including on the Golden Triangle between Sydney, Melbourne and Brisbane after COVID-19. Its most recent major domestic route, between Melbourne and Perth, was only launched last month.
The ASX-listed airline has been struggling with successive losses for years despite a string of profitable months at the start of last financial year. It has been crippled by a global pilots’ shortage, competition from its bigger rivals and the costs associated with flying on major domestic routes, forcing it to suspend a string of regional routes over the past year.
It has also been embroiled in a board stoush helmed by major shareholder and former executive chair Lim Kim Hai, who seeks to regain control of the company.
Transport Minister Catherine King confirmed on Wednesday the government has reached out to Rex’s voluntary administrators Ernst & Young, but is yet to provide any funding to the struggling airline.
“What we don’t want to do is make the mistakes of the previous government, frankly, of throwing millions of dollars without government having a bit of a say about what happens in this sector and being involved,” King told ABC Radio on Wednesday afternoon.
“So we’ll look at what [is required], what the asks are... but we also want to make sure that we have a stronger aviation sector coming out of this.”
King said the government was focused on ensuring Rex can continue to operate its regional routes, but came short of committing to fund it.
“But let’s be blunt, aviation is incredibly challenging. It’s not just challenging in this country. It’s an industry that has a lot of costs in it. It’s an expensive thing to run. We see – Australia is not the only country that sees airlines go under,” King said.
“Our effort is on making sure we’ve got regional services and regional connectivity. That was their core business, that’s what we want to make sure happens.”
King argued the government’s failure to reform the allocation of landing and take-off slots at Sydney Airport was not the reason for Rex’s troubles, despite shadow minister Bridget McKenzie’s claims.
Virgin Australia has moved to secure three leases over part of Rex’s Boeing 737-800 fleet, with chief executive Jayne Hrdlicka pointing to the collapse as indicative of the complex nature of the industry.
“Recognising the importance for regional Australians to have access to a comprehensive domestic and international network, Virgin Australia also intends to partner with Rex’s regional business … through potential code share or interline arrangements in the future,” she said.
Virgin’s aircraft orders have been delayed due to the ongoing quality assurance problems at US manufacturer Boeing. Virgin has ordered 31 Boeing 737 aircraft, which are expected to arrive behind schedule.
Virgin and Qantas have offered to fly all Rex passengers with tickets on major domestic routes, such as Sydney to Melbourne, at no charge.
Rex insiders are hopeful the slimmed-down version of the airline can exit administration through a deed of company arrangement within weeks.
Virgin has ruled out a formal takeover of Rex, which would see Virgin absorb Rex’s regional network. Hrdlicka said Virgin’s stint in administration had shown the business the importance of streamlining its core jet services.
“We went through our own tough times and that taught us the importance of sticking to your knitting,” Hrdlicka told ABC Radio.
Sources who were not authorised to speak publicly said consultancy EY has been working with Rex board members since about April, after a dispute between Lim Kim Hai and the other directors came to a head.
Lim – who owns a 22.1 per cent equity stake in Rex – stepped down from chairing the airline in June after an inquiry from the ASX asked why Rex did not disclose that he was related to a director of a fly-in-fly-out airline, National Jet Express (NJE), when it acquired the smaller business in 2022. Lim’s brother-in-law Thian Song Tjoa held 30 per cent of NJE at the time.
Rex said it believed it had behaved appropriately, and disputed Tjoa was a related party to Rex and “only has a relevant interest in 1 per cent of Rex”. It’s not clear whether the ASX was satisfied with this response, but Lim stepped down as chair soon after.
Earlier this month, Lim launched a board coup against his fellow directors, including former Howard government minister John Sharp, and sought to be reappointed as executive chair.
Rex is the second Australian airline to enter voluntary administration this year, following the demise of budget carrier Bonza in April. Unlike Bonza, Rex owns the leases to its aircraft directly and received a $150 million injection from PAG Asia Capital to secure its Boeing 737 fleet and compete against Qantas and Virgin during COVID-19.
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