Rex plots expansion to domestic services with $200m equity injection

Regional airline Regional Express says it could be operating its own domestic services by March next year.

Rex says it has a plan to start offering domestic services by March next year. Picture: Bev Lacey

Regional Express deputy chairman John Sharp says the airline is still considering whether to proceed with a public share issue to raise $200m to launch its own domestic services by March next year, but stressed the airline wanted to be debt free to take on Qantas and a resurrected Virgin.

Mr Sharp said the regional carrier was being overly cautious in the amount of money it was looking to raise in negotiations with several potential strategic investors and that it could begin services to major capital cities earlier than March if required.

“We are really conservative. We haven’t had any debt in the company for many years. We don’t like debt.

“What we want to do is have sufficient funds to ensure we can do everything we need to do,’’ he said on Wednesday after shares in the regional carrier closed more than 30 per cent higher at $1.19 after it confirmed it was talking to several parties about a capital raising.

“Many people argue we could do it for less and we probably could. But we want to be in a strong position if something unexpected happens. Our aim is to go into this with no debt, which will position us well against Virgin and Qantas.”

The airline is seeking to have a high capacity qualification added to its air operators certificate to support the expansion plan, which would reportedly involve leasing 10 narrow-bodied jets to add to its existing turboprop fleet.

Mr Sharp said the in-flight service offering on-board the new flights “won’t be fancy but it won’t be low cost.”

He said the Rex board, which will consider the expansion plan over the next two months, was still deciding whether to make a public share issue for the raising or bring one or more strategic investors onto to the share register.

“We will probably offer current shareholders the opportunity to invest but we haven’t decided on the approach yet. At this stage we are still talking to various investor organisations. We have had a number of companies contact us since we went public with our plans,’’ he said.

It is expected that Rex executive chairman Lim Kim Hai, who owns 20 per cent of the company, would support any public share issue.

Only six weeks ago Rex said it could not last another six months under the conditions of the COVID-19 pandemic, before the federal government announced a $198m assistance program to all regional airlines, which is supporting Rex’s current services through the crisis.

This has led to some scepticism about its expansion plans and speculation that some government figures have been critical of its plans to use regional airport slots for domestic services.

“Our share price has never reflected our net tangible assets of around $200m. We think there are other things to add to the balance sheet,’’ Mr Sharp said.

“The government support is about providing services through the worst part of the pandemic. We are the vehicle through which the government supports regional communities.”