Albanese government vows to look after Rex

The Albanese government has promised more funding to help administrators sell the airline or for ‘potential contingency options’ that may include a takeover of the failed company.

Rex’s Boeing 737- 800. Picture: Chris Kidd

The Albanese government has reaffirmed its commitment to underwriting the future of embattled regional carrier Rex, aiming to get the business sold.

Rex – Australia’s largest regional airline – fell into the hands of administrators last year after a failed attempt to compete head on with Qantas and Virgin Australia on major capital city routes ended in insolvency.

The government’s financial exposure to Rex’s collapse is listed as a new fiscal risk in Tuesday’s budget papers.

The airline is recorded under “potential contingency options” that could include a government takeover of the failed company.

A loan of up to $80m has already been provided by the government to administrators EY to fund Rex’s ongoing operations until June of this year, and $50m of debt has also been acquired, making the taxpayer Rex’s largest secured creditor.

In the budget papers, the government says it remains “committed to securing regional aviation” by working with the administrators and shortlisted bidders to “maximise the chance of a successful sale of the business”.

“The Australian government will negotiate with shortlisted bidders to support a successful market-led outcome,” according to the fiscal update.

“In the event there is no sale, the government will undertake work on contingency options in consultation with relevant states, including preparations necessary for potential Australian government acquisition of Rex.

“Further financial support, including to support the competitive sale process or in potential contingency options, would be subject to a future decision of government.”

The dominance of Australia’s two domestic airlines also killed off budget challenger Bonza last year, which collapsed following a short-lived bid to break into Australia’s domestic aviation market with the promise of heavily discounted fares on leisure routes.

Administrators have continued to operate Rex’s regional services following their appointment, including flights to 26 regional airports that are exclusively serviced by the airline.

The government said on Tuesday that it continued to work with the states and administrators to maintain connectivity and critical aviation services for regional and remote communities.

“The government recognises the critical role of the Rex network in supporting connection to regional economies, tourism and access to vital medical and other services,” the budget papers say.

“The government is committed to securing regional aviation by working with the administrators of Rex, and shortlisted bidders, to maximise the chance of a successful sale of the business run by the administrators.”

The government said on Tuesday that it was also providing a guarantee for tickets booked by customers during the voluntary administration period, as well as a waiver of the ‘use it or lose it’ test for Rex’s regional slots at Sydney Airport until October 24, 2026.

In last year’s budget, the Albanese government announced an extension of its two funding programs dedicated to Australia’s regional airports – with an additional $50m allocated to its Remote Airstrip Upgrade Program and an additional $40m for its Regional Airports Program.

The demise of Rex comes despite Qantas Airways reinstating dividends at its interim financial result in February, and Virgin Australia’s owner Bain Capital eyeing a possible 2025 initial public offering for the market’s second-biggest airline.

Australia’s aviation market has struggled to sustain a third player outside of its profitable duopoly.

The company’s latest lifeline ensures it will be flying at least until the federal election.

Originally published as Albanese government vows to look after Rex