The federal government has agreed to guarantee all flight bookings for passengers travelling with struggling airline Regional Express over the next four weeks.
Transport Minister Catherine King said on Thursday federal funding would be given to Rex to provide certainty to regional travellers who may be concerned their flight will not take off because the business is under administration. The guarantee means all Rex passengers will get their money back in the event their booking to or from a regional destination falls through during the administration period.
Transport Minister Catherine King has been under pressure to bail out Rex. Credit: The Sydney Morning Herald
“Rex’s continuation is in the best interests of Australia, and the government is working closely with the administrators to ensure a strong regional aviation presence now and into the future,” King said in a statement.
“The guarantee is for all regional flight bookings with Rex made after it entered voluntary administration at 9.31pm on July 30, 2024.”
She confirmed the government would keep working with Rex’s administrators as the process continued.
Rex appointed EY as voluntary administrators on July 31 after failing to turn a profit and stopped all capital city flights. It has stood down about 600 staff and has debts of more than $500 million, owed to its plane lessors, airports, refuellers, staff and tens of thousands of airline customers.
EY partner Sam Freeman welcomed the announcement and said he was committed to recapitalising the airline. At the time he was appointed, he confirmed the administration period was expected to last five weeks, and he was confident of finding a buyer to take over the airline.
“We’re currently undertaking a process to find an investor committed to a sustainable commercial regional network,” Freeman said on Thursday.
“Rex is here for regional Australia, and we encourage all Australians to see Minister King’s announcement today as a confidence boost and continue booking during the voluntary administration.”
Rex is responsible for flying about 5 per cent of Australia’s domestic passengers.
Transport Workers’ Union national secretary Michael Kaine said the funding was a stopgap and the government should guarantee the entitlements of Rex’s 1200-strong workforce.
“Hundreds of workers who lost their jobs in the blink of an eye have now been waiting two weeks for any information on how, or when, they will be able to access their owed entitlements,” Kaine said.
The small airline business is responsible for flying about 5 per cent of domestic passengers, with the remaining 95 per cent absorbed by the duopoly of Qantas and Virgin.
Rex has served Australia’s regional routes for 21 years and expanded to 11 major domestic routes including on the golden triangle between Sydney, Melbourne and Brisbane after COVID-19. It also owns a fly-in, fly-out charter service, National Jet Express, and two pilot schools, and holds a number of emergency services contracts.
The ASX-listed airline has been struggling with successive losses for years despite a string of profitable months at the start of last financial year. It has been crippled by a global shortage of pilots, competition from its bigger rivals and the costs associated with flying on major domestic routes.
Rex has been criticised for expanding into major domestic routes instead of investing in its regional fleet renewal and has struggled with profitability since.
Rex received more money per passenger than any other airline during the COVID-19 pandemic due to its role in keeping the regions connected.
It received $120 million from the former Coalition government between 2020 and 2021 over a mix of regional and domestic aviation grants.
It also received a $150 million injection from private equity group PAG Capital in 2021 and commenced flying the golden triangle soon after.
Qantas Airways and Virgin Australia confirmed they would prioritise all sacked Rex staff for vacancies at their airlines and offered to rebook affected passengers without charge.
Virgin has so far booked 125,000 Rex passengers onto flights at no charge, the equivalent of 715 Boeing 737s at full capacity.
Qantas and Virgin made the same offer when budget carrier Bonza went under earlier in the year.
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