Canberra lays out terms for support of Rex Airlines rescue

The Albanese government will restructure Rex Airlines’ debt, share profits and hold the airline’s fleet of planes as collateral as part of its support for US-based Air T’s bid to take over the regional airline.

About $90 million of Rex’s existing debt will be restructured on terms that allow for repayments over time through a profit-sharing arrangement. The government will also issue a new commercial loan of $60 million to the Australian airline.

These sums will supplement the $50 million that US-based Air T will bring towards a recapitalisation of the business.

Transport and Infrastructure Minister Catherine King.Credit: Alex Ellinghausen

“In exchange for this financing and to ensure value for taxpayer money, Air T has agreed to a range of commitments aimed at preserving essential regional aviation connectivity and improving governance arrangements,” Transport Minister Catherine King said.

The terms of the $90 million debt require Air T to stabilise Rex’s governance and increase “over time” the number of operational planes from its current level of 30 to 44. Air T will have to bolster regional connectivity, engage with state governments, brief the federal government on progress and appoint independent Australian directors to its board.

Rex, which serves Australia’s regional markets, was placed in voluntary administration in July 2024. The government found a buyer in Nasdaq-listed Air T, which operates in regional markets in the US and has extensive international parts and repair operations.

To safeguard the public investment, the government will retain its security over all of Rex’s aircraft and its simulator.

The Albanese government has laid out terms for support of Air T’s takeover of Rex Airlines.Credit: Jeremy Piper

King said this plan ensures Rex’s Saab fleet “cannot be sold without the government’s permission and will continue to service communities across regional and remote Australia”.

The government also announced a separate plan to establish a program for local government and regional and remote airports – capped at $5 million – that supported Rex through the voluntary administration process.

Australian Airports Association CEO Simon Westaway called the support “wonderful news for our regional and remote airports” and thanked the federal government for the “vital support to regional and remote airports that stood by Rex during challenging times”.

Earlier on Tuesday, administrators EY, working for the government, confirmed that creditors of Rex would receive nothing. The deed of company arrangement provides no return to ordinary unsecured creditors for the Rex, the document stated, referring to suppliers, ground handling agents, airports and fuel providers for the airline.

In its report, EY said the factors that contributed to Rex’s failure included the global pilot shortage, which led to “suboptimal fleet utilisation” with not enough planes flying.

Ongoing “supply chain issues, particularly engine maintenance components” were also a contributing factor.

Rex’s decision to invest in 737s to fly capital city routes came as it struggled to keep its Saab regional planes flying core regional routes, which further constrained cashflow. Rex’s fleet size simply wasn’t big enough to service the cities and the bush.

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