Big step for regional airline’s plan to take on Qantas, Virgin

A regional airline has taken a big step in its plan to battle Qantas and Virgin in the Sydney-Melbourne-Brisbane “golden triangle”.

Airline Regional Express has taken a big step towards battling Qantas and Virgin on big city routes next year, negotiating an investment deal of up to $A150 million with an Asian private equity group.

Rex announced on Tuesday it was in advanced exclusive talks with PAG Asia Capital, which manages more than $US40 billion ($A55.4 billion) on behalf of major global institutional investors, with previous investments including Red Rooster, Oporto and Chicken Treat owner Craveable Brands.

Under the plan, PAG will take a stake in Rex of up to 48 per cent and have the right to nominate two directors to the board if the agreement is completed.

It is proposed an initial funding tranche of $A50 million will be drawn by the end of this year, with the remainder drawn over the following three years.

The airline said the investment would be used solely to support the launch of its domestic major city jet operations, scheduled to begin on March 1.

Executive chairman Lim Kim Hai said he was encouraged by the progress of the negotiations so far.

Regional Express executive chairman Lim Kim Hai says the airline’s ‘affordable fares will support Australia’s economic rebuild and recovery efforts’.

“With PAG’s support, I have every reason to believe that Rex can successfully launch its domestic major city jet operations,” he said.

“As a well-established carrier with an impeccable track record, I am confident that Rex will deliver to Australians an alternative major city domestic service that is safe, reliable and affordable.

“Rex’s affordable fares will support Australia’s economic rebuild and recovery efforts.”

Rex, Australia’s largest independent regional airline born from the ashes of Ansett, announced in June its plan to operate an initial fleet of up to 10 narrow-body jets to service the “golden triangle” of Sydney-Melbourne-Brisbane.

It last month reported a net loss of $A19.4 million, saying the COVID-19 pandemic had brought the virtually debt-free company “to its knees” as passenger numbers plummeted by 90 per cent. The result would have been worse without Commonwealth financial help.

At the time, Rex said it believed regional aviation would return to normal within two years, notwithstanding further outbreaks.

It has already started recruiting in preparation for the major city services and in July took Qantas head-on, increasing its flight schedule in response to the national carrier more than doubling its flights to destinations where the companies are in competition.