Rex to fly Sydney, Melbourne, Brisbane after $30m raising

Rex will raise $30m to embark on a new domestic operation flying between Sydney, Melbourne and Brisbane.

Regional Express (Rex) aircraft on the tarmac at Sydney Airport. Picture: AAP

Regional Express Airlines is planning to raise at least $30m to compete with Qantas and Virgin Australia on the Golden Triangle routes of Sydney-Melbourne-Brisbane from next March.

A statement lodged with the ASX on Monday, revealed the Rex board had approved plans to raise a minimum of $30m because the board considered “that was all that was needed to launch limited domestic operations”.

Rex deputy chairman John Sharp had previously indicated $200m was being sought for the plan which would involve a fleet of five to ten narrow body jets based out of Sydney or Melbourne.

The statement to the ASX said Rex had received strong interest from various external parties to take part in the fund raising “including lessors willing to provide $30m for 15 of Rex’s fleet of 60 unencumbered Saab 340 aircraft”.

“Consequently the board has authorised management to commence preparations in earnest,” the statement said.

On the back of the announcement to the ASX shares in Rex soared 17 per cent, to close at $1.10 a share.

Mr Sharp said the new domestic flights would be priced at affordable levels, and include baggage allowance, meals on board and pre-assigned seating.

It was not yet decided if the jets would offer business class but “lounge membership would be available for subscription”, he said.

“It will be a hybrid model that Rex has so successfully pioneered over the last two decades for its regional operations,” said Mr Sharp.

He said with existing infrastructure in the three capital city airports in question, it would be an “incremental extension for Rex to embark on domestic operations”.

“Leveraging on Rex’s existing infrastructure and overheads, our cost base for the domestic operation is estimated to be at least 35 per cent below Virgin’s Australia’s (pre-COVID) with 50 per cent lower additional headcount needed proportionately,” Mr Sharp said.

Centre for Asia Pacific Aviation executive chairman Peter Harbison said the relatively low sum being raised to start the new routes was not unrealistic.

With 60,000 aircraft grounded across the world, the lease for a second-hand A320 or Boeing 737NG could be as little as $50,000 a month, he said.

“$30m is enough in today’s market, especially when (Rex) already have an operation, they have infrastructure, they’ve got a lot of operational capabilities and they’ve got an AOC (airline operators certificate) as well,” said Mr Harbison.

“You don’t need a whole lot of cash, assuming they’ll get FIRB approval but that would be hard to reject because they do already operate here.”

As well as the fleet of A320s or Boeing 737s, Rex had entered into a non-binding agreement with Avions De Transport Regional (ATR) to replace its current fleet of ageing 60 Saab 340s with ATR 42 and 72 turboprops.

The Saab 340s have an average age of 25 years, and made headlines in 2017 when one aircraft lost a propeller southwest of Sydney midflight.

No timeline had been established for the fleet renewal.

Mr Harbison said as the most lucrative route in the world, the Golden Triangle could support a third competitor.

“There is room for Rex but it would certainly take a bit of wind out of the sails of Qantas and Virgin Australia,” he said.

Aviation consultant Neil Hansford said Rex would have the benefit of being able to on-sell fares for flights between Melbourne, Sydney and Brisbane to its regional passengers.

“Let’s just hope they don’t end up collapsing as a result of this new venture, and take those regional services down with them,” Mr Hansford said.