Administrators for Regional Express say “numerous” potential buyers have expressed interest in the struggling airline despite questions surrounding the state of its books as preparations begin for the sales process as early as next week.
Rex appointed EY as voluntary administrators on Tuesday and stopped all capital city flights after the consulting firm conducted a business review of the ASX-listed company in May.
Rex has traditionally been a regional airline but expanded into flying between capital cities in 2021.Credit: Andrew Taylor
EY partner Sam Freeman said he had been contacted by a “large number” of parties interested in a potential acquisition of Rex’s business via a deed of company arrangement. The voluntary administration period is expected to be five weeks.
Rex has traditionally been a regional airline, but expanded into flying between capital cities in 2021 after receiving $150 million from investment firm PAG Asia Capital. It also owns a fly-in, fly-out charter service, National Jet Express, two pilot schools and holds a number of emergency services contracts.
“We have received a large number of expressions of interest to be involved in the sales process … We have confidence there’s going to be a lot of people participating,” Freeman said.
‘We have received a large number of expressions of interest to be involved in the sales process.’
EY partner Sam Freeman
Freeman would not confirm the identities of potential parties and said the administrators were not yet in a position to talk about Rex’s debt or the number of possible creditors.
PAG has injected more money into Rex so it can continue its regional operations during administration.
Virgin has agreed to take over the lease of three of Rex’s Boeing 737-800s. There is also speculation around whether the Bain Capital-owned airline is interested in acquiring all or some of Rex’s other assets. Outgoing Virgin boss Jayne Hrdlicka has rejected this idea, saying the airline has learnt from its own 2020 stint in administration to “stick to its knitting”.
Rex has been criticised for expanding into major domestic routes instead of investing in its regional fleet renewal and has struggled with profitability since. The average age of Rex’s fleet is 30 years. Analysts estimate any buyer looking at about $300 million in capital expenditure to renew its ageing fleet of Saab 340s.
The airline has been crippled by a shortage of spare parts since flying resumed after the COVID-19 pandemic. As it stands, 25 of its 57 Saabs are grounded across the country’s airports.
Freeman dismissed this criticism and argued that Rex’s fleet had enough depth to wear operational issues, and pointed to the carrier’s strong on-time performance and low cancellation levels.
“To run the existing network you need about 31 planes. At any given time Rex has about 11 planes sitting at various ports to be interchangeable when necessary and about five going through ordinary maintenance. There’s considerable redundancy back-up and that’s what drives its strong performance,” Freeman said.
Rex was forced to suspend some flights on seven of its regional routes from Sydney Airport to destinations including Albury, Coffs Harbour and Orange last September due to the ongoing issues with its fleet.
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