Government guarantee to reassure Rex customers that regional flights will take off

The government has come to the aid of Rex’s administrators facing a collapse in flight bookings due to concerns about the airline’s future.

Transport Minister Catherine King said the government would guarantee regional flight bookings for Rex customers throughout the administration process. Picture: Getty Escape

The federal government has come to the aid of Rex’s administrators facing a collapse in bookings for regional flights due to concerns about the airline’s future.

Rex appointed EY as voluntary administrators last month after caving under debts of $500m. The airline’s domestic jet operation was immediately axed but regional flights have continued with funding from investor PAG.

However it’s believed bookings have not been as strong as administrators hoped, prompting the announcement of a “government guarantee” for regional flight bookings.

Transport Minister Catherine King said the guarantee meant that travellers could “continue to book regional flights on Rex with certainty they would either fly or get their money back”.

“This is not a Commonwealth injection of funds for the administrators,” Ms King told Question Time.

“The guarantee will only be triggered if the service is cancelled, and where no alternate service has been delivered and no refund. If the guarantee is triggered, affected customers will receive a refund directly from their credit card merchant or travel provider, backed by the government guarantee.

“Any drawdown of the guarantee is required to be repaid by administrators.”

Only regional flight bookings with Rex made after the airline appointed EY as administrators at 9.31pm on 30 July 2024, would qualify for the guarantee.

Last week EY partner Sam Freeman revealed to creditors Rex had debts of around half a billion dollars and was unable to pay more than 600 employees their final wages or entitlements after they were let go.

The revelations came as internal sources at Rex shed more light on the airline’s implosion after board members lost faith in former executive chairman Lim Kim Hai.

The source said there was “very little trust about where the business was placed as a result of Mr Lim largely refusing to provide the board with cash flow forecasts”.

“I don’t know how you run any business without a proper forecast, without an outlook, and especially in more challenging times,” the source said.

“I think you can look at the fact EY was brought in for a review of the business, as a kind of vote of no confidence in how Mr Lim was running the business.”

Rex executive chairman John Sharp has maintained a low profile since the airline went into administration. Picture: Jerad Williams

Despite those concerns, there was a belief Rex was “worth saving” due to the airline’s proven record of safe and reliable services.

Ms King said Rex’s continuation was in the best interests of Australia.

“The government is working closely with the administrators to ensure a strong regional aviation presence now and into the future,” Ms King said.

New domestic airfare data released by the Bureau of Infrastructure, Transport and Regional Economics for August, showed travellers were already paying more to fly.

Full price economy fares were at 93.3 per cent of the long term average compared to 76.3 per cent this time last year, and 81.3 per cent a month ago.

Business class fares had also increased from 57.2 per cent in August 2023, to 63.6 per cent this month.

Mr Freeman said the government’s support was a positive step towards securing the future for Rex, and the airline’s 1200-plus employees.

“We have experienced first-hand the importance of Rex’s regional services to the communities the airline serves and would like to express our gratitude to the federal government for stepping in with this support,” Mr Freeman said.

“The guarantee will help Rex to keep flying while we undertake the recapitalisation of the airline and secure its future. We’re currently undertaking a process to find an investor committed to a sustainable commercial regional network.”

Interested parties are currently being given access to a data room, to better understand Rex’s operations and business.

It is understood a number of parties have signed nondisclosure agreements and shown interest in buying the whole business or parts of the business.

Major investor PAG provided funding for the continuation of regional flights at the start of the administration, but was believed to have ruled out buying Rex.

Originally published as Government guarantee to reassure Rex customers that regional flights will take off