Rex stuck in the red due to pilot, engineer shortage and a slowdown in business travel

Rex has revealed it’s heading for a significant loss in the 2023 financial year due to a lack of pilots which is keeping a third of its regional fleet from flying.

A Rex Airlines’ Boeing 737 taking off from Sydney Airport. Picture: Getty

Rex Airlines has blamed a shortage of pilots and engineers, plus a significant slowdown in corporate travel demand, for putting the company on track for a $35m loss in the year to June 30.

The interim guidance was issued to the ASX late on Tuesday after Rex went into a trading halt on Monday pending the update.

A brief statement authorised by Rex executive chairman Lim Kim Hai said the expectation of an operational profit for the 2023 financial year had been revised.

“The global shortage of pilots and engineers, along with supply chain shocks post-Covid have disrupted Rex’s network,” Mr Lim said.

“(These have) forced Rex to make significant reductions to its flight schedules over the last couple of months to match the need for aircraft, pilots and engineers to what is available.”

As reported by The Australian on Monday, a third of Rex’s regional fleet of 58 Saab 340s was now out of action due to the lack of skilled workers.

The parked aircraft had resulted in extensive cuts to scheduled flights in remote areas of Queensland, New South Wales, Victoria and South Australia.

Six of the airline’s seven Boeing 737s continued to fly major city routes and the seventh was undergoing routine maintenance.

Rex has previously announced two more 737s were due to arrive in June and July but there was no update provided on the status of those aircraft.

Mr Lim said business travel in May and June had significantly fallen due to corporate travel budgets being exhausted by “exponential increases in international airfares”.

He said the group now forecast an operational loss of $35m, following on from a $46m loss in the 2022 financial year.

There was some scope for optimism. Mr Lim pointed out that unaudited revenue from regional Saab operations was above pre-Covid levels.

“Rex remains optimistic for its outlook on a group operational profit before tax for the 2024 financial year and beyond, with the continued expansion of its domestic jet operations,” he said.

At Rex’s half-year results, the airline said regional operations had been a “drag” on the group’s financial performance but were expected to return to profit by the end of March.

There was also high hopes for a contract won by the recently acquired National Jet Express.

The deal with mining company BHP Mitsubishi Alliance would result in the airline providing fly-in, fly-out services in Queensland from July 1.

Rex shares last traded at $1.21, down from a high of $2.06 in late 2020 when the airline unveiled plans to expand on to major city routes with the backing of Asia-based investment firm PAG.

Under the deal, PAG was to provide Rex with up to $150m to support the jet operations.

Once the full amount was drawn down by Rex, PAG would hold a 48 per cent stake in the carrier, which entitled the firm to two board seats.

Rex’s loss puts the airline at odds with major carriers Qantas and Virgin Australia, which had both forecast a strong return to profit in the 2023 financial year.

Qantas was expected to report a record gain of close to $2.5bn, and Virgin Australia was also on track for a solid result after a $125m profit in the six months to December 2022.