Canberra cash helps Rex profit take off

Rex has managed to increase its half year profit to $9.9m with the assistance of almost $60m in help from the federal government.

Rex sent its 737 over Sydney's CBD to mark Australia Day, 2021 and promote its upcoming flights from Melbourne to the city. Picture: Joe Corrigan

Regional Express airlines has managed to increase its half year profit 45 per cent to $9.9m after tax, with the help of significant federal government assistance.

In the six months to December 31, the airline saw passenger numbers slump 71.2 per cent resulting in a 70 per cent hit to revenue.

Freight revenue also fell but funds from charter operations increased 10 per cent.

Total airline revenue of $65.6m was almost doubled by government grants and assistance worth $59.4m.

Rex chairman Lim Kim Hai acknowledged the government help, saying without that assistance the airline would have had to shut down 90 per cent of its network.

“On behalf of all regional carriers and the regional and rural communities they service, we offer our grateful thanks to the federal government,” said Mr Lim.

“Fortunately, parts of the group’s activities including aeromedical work and charter activities were relatively insulated from the effects of the pandemic and have performed strongly.

“This has contributed to enabling the group to achieve a statutory profit after tax of $9.9m.”

The half year result is in stark contrast to Qantas, which on Thursday reported a $1.47bn statutory loss after tax, down from a $648m gain in the previous corresponding half year.

Discussing the results, Qantas Group CEO Alan Joyce this week drew several comparisons with Rex, which has accused the larger airline of anti-competitive behaviour.

“The (government) support Rex has gotten which is $130m on a $300m business, is proportionally seven times the support Qantas has gotten from the federal government,” Mr Joyce said.

“The support for us which totals $1.2bn on a variety of programs, Rex got the equivalent of over $7bn from the federal government so I don’t think they can complain about government support.”

Rex deputy chairman John Sharp said Mr Joyce was fudging figures because the half year results showed clearly they had received about $59m.

The Wagga Wagga-based operator will launch its first domestic flights between Sydney and Melbourne on Monday with the backing of PAG Asia Investment.

Mr Lim said the operations were not expected to be profitable in the current financial year but should break even the following year if the domestic recovery was strong.

Only marginal improvement was expected in Rex’s regional operations before June, with the COVID vaccine rollout not likely to make any material difference until the new financial year, he said.

“Should this eventuate then the expected cessation of all government assistance packages in the final quarter of this financial year will mean that the group is expected to incur significant losses in that period,” he said.

“The board has decided against paying out any interim dividends and is not able to provide any guidance on profitability for the full financial year in light of the extreme volatility we face.”

The half year results were announced after the close of trade on the ASX on Friday, with Rex shares ending the day down 8 cents at $1.58.