Stories abound of instability in the nation’s aviation sector. Budget airline Bonza fell into administration in April. The mooted listing of Virgin Australia keeps faltering, and now Qatar Airways wants to gobble up a strategically important part of it.
And what of Regional Express? Its executive chairman, Lim Kim Hai, was hot-swapped in June for deputy chair John Sharp, a former transport minister in the Howard government. Lim had served as executive chairman for 21 years, and aside from brief remarks issued by the company acknowledging his “extraordinary service”, no further reason was provided for this sudden and startling tweak to the board.
Seething, as you would expect, Lim went on to requisition a shareholders meeting to remove Sharp and three other directors from the board: Lee Thian Soo, Ronald Bartsch and Jim Davis. No reasons were provided for that development either.
This upheaval is taking place just as Rex finds itself in a spot of serious financial bother, so serious, it seems, that Margin Call hears that the airline has invited a turnaround team from Deloitte to rifle through its books and try to stop the proverbial plane from crashing into the mountain.
Leading that team are Sal Algeri and Richard Hughes, memorable for their role in the recovery of Virgin Australia after that airline slid into voluntary administration in 2020. Deloitte didn’t respond to questions about Rex and Rex itself declined to comment. “Given Rex is a public company, we do not respond to press or market rumours or speculation,” a spokesman said.
Rex’s troubles are not necessarily with its regional routes, which are said to be profitable, but with its expansion into the prized city destinations of Sydney, Melbourne and Brisbane, known in the industry as the Golden Triangle (a misnomer, by the way, the route connecting them forms no obvious triangle).
The expansion into those capital city markets began in 2020; meanwhile the airline’s market share languishes in the single digits and the whole jolly has cost the business dearly. Deloitte’s partners are in a fever attempting a restructure solution as a rescue package. That too, we hear, is teetering towards failure.
Where to from here? Rex’s Golden Triangle dilemma could become intractable enough to push the airline into administration. Whether or not that occurs, the appearance of Deloitte’s clean-up team at least provides a plausible explanation for the airing of linen about to start in the boardroom.
After all, it was Sharp who said last year that profitability mattered more than market share, a remark made only after Rex posted a loss of $16.5m for the half to December 2022. Its latest results weren’t quite as fugly – a $3.2m loss for the half to December 2023.
Taxing times at PwC
PwC Australia chief Kevin Burrowes wasn’t exactly a hit during his appearance at a partners’ summit at Sydney’s Park Royal on Monday. Of course not.
The CEO had only just admitted a week earlier that PwC understated its partner incomes and left them all facing stinging tax bills. Oh, and that they needed to pay them posthaste.
As Margin Call reported at the time, the amounts ranged from $30,000 to $300,000, and it almost certainly meant some stiff had to fire-sale their wife’s Cayenne to come up with the money.
The added indignity was that the partners had already taken an enforced pay cut – on average 20 per cent – to atone for the sins of the tax leaks scandal.
But now, to cover for PwC’s botched tax estimations, the partners have apparently been tossed a bone. Burrowes announced on Monday that distributions would be brought forward from their usual date of October to help out with the bill shock everyone is facing with the tax office.
As for how much the partners draw, that’s determined by a “responsibility rating”, a scale ranked from 1.1 to 3.5, with lower scores denoting greater seniority and entitlement. Partners who had their responsibility rating slashed last year (as part of their salary drop) are having them reinstated en masse.
It means that when all is said and done, the pay cut Burrowes trumpeted so hard a year ago – a public display of contrition largely designed to win back work for the firm – will now be mostly reinstated.
You do have to admire the symmetry of it all.
Cutting Kennett
Former Victorian premier Jeff Kennett didn’t mince words while addressing a gathering of Liberal faithful ahead of the party’s state council meeting to be held this weekend.
The gathering at Moonee Valley Racecourse will involve around 1000 delegates and include the usual round of speeches from Peter Dutton and Victorian opposition leader John Pesutto.
What’s actually at stake are the coveted office-bearing positions on the party executive, including the roles of president and treasurer, held by Philip Davis and Karyn Sobels, respectively.
They’re being challenged by Graham Watt, a former carpet cleaner and successor to Kennett in Burwood, but who lost the seat to Labor in 2018. Watt is better remembered, however, for refusing to join a standing ovation in the Victorian parliament when former Australian of the Year Rosie Batty gave an address in 2015. Why did he refuse to stand? At the time Watt cited “very personal and private reasons” for the perceived snub.
But back to Kennett. So deeply does he care about the direction of the party that he schlepped two hours by car from his coastal beach house to a private function in Glen Waverley where he held forth in front of about 100 people.
We hear he expressed much concern about Watt and dubbed him an “undesirable. As for Lucas Moon, who’s challenging for the role of treasurer, Kennett said: “I wouldn’t give him $1 of my own money.”
Rytenskild eyes his old Tabcorp job
First Adam Rytenskild was dumped as Tabcorp CEO, now he’s won a Fair Work Commission case against it, so could he be plotting a return to the position since filled by Gillon McLachlan?
MinRes in game of cat and mouse
The Legal Practice Board of Western Australia is looking into MinRes and its lawyers’ conduct, which is interesting timing as its company secretary has just been made legal counsel to the board.