No buyers for Rex’s regional airline two months into voluntary administration process

No buyers have emerged for Rex or the airline’s regional business – described by one insider as a ‘bit of a Frankenstein’ – two months after administrators were appointed.

No buyers have emerged for Rex and there has been virtually no interest in taking on the regional airline, a source close to the administration has revealed.

EY was appointed as voluntary administrator to Rex on July 30, as the company teetered on the brink of collapse with debts of around $500m.

In August, EY sought an extension of the administration until November 25, to provide the best chance of a better return for the company’s 4800-plus creditors.

Since then few details have been revealed about the administration’s progress or any interested buyers. But a source closely involved with the administration and the Rex board said a number of assets had been sold, providing some cash proceeds.

They included the sale of a Boeing 737 flight simulator, spare parts and non-essential real estate, including a small house near Sydney Airport purchased by former chairman Lim Kim Hai.

“Rex has always been a bit of a Frankenstein business that was put together so it was somewhat inevitable the business would be broken up,” said the source.

“It has also understandably been a slow process but I think things are starting to move ­finally.”

A number of parties had been looking at charter business Pel-Air and the Rex flight training academy, but there were “no obvious buyers” for the regional airline, the source said.

Operating since 2002, Regional Express as it was known included a fleet of 57 Saab 340s and a flight network encompassing 45 destinations.

A Rex Saab 340 approaching Tullamarine Airport in Melbourne. Picture: William West/AFP

“I’m a bit surprised somebody hasn’t stepped forward because the business does make money, and I think the concerns around the fleet are somewhat overblown,” said the source.

“These Saabs have largely flown short distances over a long period of time so people like to talk about age in terms of years, but in terms of kilometres flown, it’s not that old a fleet. I think people might be waiting to see if the government might provide some sort of guarantees or support for the business to allow them to step in.”

Transport Minister Catherine King has previously said her department will work closely with administrators to ensure the future of the Rex regional airline, and “no option was off the table”.

A spokeswoman confirmed that remained their position.

The federal government has been acting as a guarantor for passengers buying tickets on Rex regional flights, with the promise they would be refunded if the service was cancelled.

It is not clear how many customers have taken up the offer, but on-time performance statistics for August show 95 flights, or 2.1 per cent of services, were cancelled by Rex in the month.

The administration is not expected to be extended beyond the current deadline of November 25, with the source suggesting deals will be finalised in coming weeks.

He said a couple of parties were interested in buying the flight training school business as a going concern, while others were looking at bulldozing the academy and redeveloping the properties in Wagga Wagga and Ballarat.

“It’s a very large, very attractive property right next to the airport in Wagga and the same in Victoria,” he said.

“I do feel that it would be a real shame for the flight academy to go. It is a unique service that’s available for airlines in Australia.”

As the administration unfolded, it is understood more evidence has emerged of how poorly the airline had been run under the direction of Mr Lim, who was ousted as chairman by his fellow board members in June. That includes a lawsuit brought by US aircraft maintenance firm Jet Midwest in the NSW Supreme Court, accusing Rex of stealing planes from the Kingman storage facility in Arizona.

The alleged theft of four Saab 340s, essentially for parts, occurred in late 2020 after Rex had paid only 10 per cent of the agreed purchase price, according to court documents.

Rex had denied liability or any knowledge of the planes’ whereabouts, the documents said.

Jet Midwest is seeking more than $10m in compensation from Rex plus legal costs, with the matter next due to come before the court for mention on October 18.