Rex remains in the red for first half but hopeful of profit by June

Rex has failed to return to profit in the first half of the 2023 financial year but is hopeful of a different story by June.

Rex’s 737 operations are making money for the airline but regional services operated by Saab 340s are proving a “drag” on finances. Picture: Joe Corrigan

Rex has failed to join rivals Qantas and Virgin Australia on the right side of the ledger in the first half of the 2023 financial year, posting a $16.5m after tax loss.

The result was a 55 per cent improvement on the $36.7m loss recorded in the previous corresponding period and was partly attributed to a $23m fair value loss on the convertible notes facility entered into with investor PAG.

Operating loss for the period was $1.9m, and government grants and subsidies declined 93 per cent to $1.9m.

Passenger revenue improved 326 per cent on the previous first half, while the fuel bill climbed 374 per cent.

The airline noted that regional operations flown by Saab 340s had been “a drag” on financial performance but were cash positive, and should return to profit by the end of March.

In contrast, Boeing 737 services between major cities had been making money since September 2022, positioning the group for a full year gain.

The airline formerly known as Regional Express operates a fleet of seven Boeing 737s, with two more to be added in June and July.

Rather than adding new routes, Rex was expected to use the extra aircraft to increase frequencies and resilience on busy Golden Triangle routes between Sydney, Melbourne and Brisbane.

Rex chairman Lim Kim Hai said the results were “pleasing given that domestic jet services had really only operated in a Covid-free environment since February 2022”.

“To achieve profitability in such a short period under a normal environment is fairly unprecedented in the world,” said Mr Lim.

Rex’s domestic market share was now 5.3 per cent up from just 1 per cent in mid-2021.

Qantas and Jetstar held a 61 per cent stake and Virgin Australia 33.6 per cent.

The full year results in August were expected to see partnership agreements with travel agencies come to fruition for Rex and higher revenue from expanded operations.

Qantas last week reported a record $1.43bn profit for the first half, and Virgin Australia also returned to profit in the last six months of 2022, with an estimated profit of $125m.

The Rex board decided not to pay an interim dividend but was optimistic of a full year profit, “barring any further external shocks”.

Shares in Rex finished the day unchanged on the ASX at $1.50, still well below their pre-Covid high of $2.05.

Qantas shares continued to recover ground lost after last week’s half year profit result, closing up 14 cents at $6.42.

Rex paid its all-male board and executive team – some 17 people – at least 20 per cent more in the 2022 financial year, the airline’s annual report said in October.

Rex deputy chairman John Sharp saw his total package more than double from $155,970 to $338,660, thanks to long-term benefits worth about $185,000.

Neville Howell, the airline’s executive director and chief operating officer, was the highest paid employee, with a total package of $474,978, followed by the general manager of corporate services Irwin Tan on $390,062. Rex chairman Lim Kim Hai has never drawn a salary.