Rex could face millions in fines after touting domestic routes competition

Did Rex breach the Corporations Act by failing to inform the ASX of its plans before telling the media?

A Rex (Regional Express) aircraft at Sydney Airport. Picture: James Gourley/AAP

Regional Express airlines’ decision to trumpet its $200m plan to compete with Qantas and Virgin Australia on major domestic routes, could cost the carrier millions of dollars in fines.

Labor Senator Tony Sheldon has asked the Australian Securities and Investments Commission to investigate whether Rex breached the Corporations Act by failing to inform the ASX of its plans before telling the media.

Under new penalties introduced by the federal government last year, breaches of corporate disclosure requirements carry fines of up to $10.5m, or 10 per cent of annual turnover.

On May 12, Rex deputy chairman John Sharp revealed in the business media, the airline was talking to interested parties about a potential $200m investment to launch capital city services in competition with Qantas, Jetstar and Virgin Australia.

The reports prompted the ASX to halt trading in Rex shares until it updated the market and responded to a series of questions about its lack of market disclosure.

When the trading halt was lifted on May 13, Rex shares surged 32 per cent to $1.19.

Rex formally responded to the ASX on May 20 insisting it did take its continuous disclosure obligations seriously, claiming it did not consider the information provided to the media to constitute “material information”.

“Rex has made many announcements of contracts worth several hundreds of millions with barely a ripple on the share price,” said the response from chairman Lim Kim Hai and Mr Sharp.

But the response did not satisfy Senator Sheldon, who wrote to ASIC chair James Shipton requesting an investigation.

He said the level of detail provided by Rex to the media, could reasonably be expected to affect the share price.

“Rex’s plans to expand into markets in direct competition with Qantas and Virgin, after having received a disproportionate share of government financial support, are inappropriate and exploitative,” wrote Senator Sheldon, in reference to the $54m paid to Rex out of a $100m regional aviation assistance fund.

“Their failure to inform the ASX of these plans per the ASX listing rules flies in the face of Australian corporate standards. If Rex or any officer of Rex has contravened the Act, I further request that ASIC take appropriate enforcement action against them.”

Senator Sheldon denied a rival airline had lobbied him to write to ASIC saying “as a union official, he had fought to see corporate Australia held to the highest standards”.

“As a Senator I intend to keep up that work,” he said.

“Continuous disclosure is an obligation that should be taken seriously by every Australian publicly listed company.”

The Australian understands ASIC was assessing Senator Sheldon’s request.

A Rex spokeswoman said trading in their shares was halted after their plan was revealed in the media, so “nobody was deprived of any opportunities nor did anyone benefit illicitly”.