By Staff reporter
Prime Minister Anthony Albanese said the federal government would “examine any proposals” that were presented to secure the future of regional carrier Rex Airlines, with the company’s shares currently in a trading halt.
Rex’s shares were suspended from trade on Monday, pending a further announcement that will be released by Wednesday. The airline had stopped selling tickets on some of its capital city routes on Tuesday.
“We are concerned about Rex,” Albanese said at a press conference. “It’s an important regional airline. What we will do, though, is examine any proposals. Rex receives substantial government support with no conditions.”
Rex launched capital city services as part of a new strategy, putting it in competition with Qantas and Virgin Australia.Credit: Peter Rae
Albanese’s comments indicated that if there was to be any future government support of Rex, it would have conditions.
Airlines received taxpayer funded bailouts throughout the pandemic from the Morrison government. However, a criticism of that financial support was that the Morrison government didn’t attach any conditions to it, compared to other nations, such as the New Zealand government.
During the pandemic, the New Zealand government provided a financial bailout to Air New Zealand, and in return, it received a substantial shareholding in that airline.
In his remarks, Albanese also criticised Rex for moving away from its core role of servicing regional Australia to competing on the cut-throat Sydney and Melbourne route.
There was speculation that EY Australia would be appointed as administrator to review the financial health of the airline, the nation’s third largest. However, an EY spokesperson declined to confirm that speculation and Rex Airlines’ spokesperson also declined to comment. Rex’s chairman John Sharp, a former transport minister in the Howard government, did not return calls.
Rex has been an important carrier in Australia’s aviation market providing links with regional communities and their economies into capital cities, and also servicing the fly-in, fly-out markets to mining centres. “We want to see the aviation industry in Australia continue to be one that provides those services and that access,” Albanese said.
Rex flies to 56 destinations, including between the highly competitive markets of Sydney, Melbourne and Brisbane. In June, it began offering one-way fares as low as $99 between Melbourne and Perth in an effort to steal market share from its bigger rivals Qantas and Virgin.
Ian Myles, a veteran transport analyst with Macquarie said a number of airlines over several decades have tried to compete on the larger routes between major capital cities and have failed, such as Compass Airlines.
“We are concerned about Rex,” said Prime Minister Anthony Albanese. Credit: Alex Ellinghausen
“It’s really difficult to break into that market. You have got to have lots of money to go into those big routes,” Myles said.
However, he noted that it might be more cost-effective for a regional airline in the future to potentially fly into the Western Sydney Airport when it opens in 2026, where it could secure better slots.
A slot is an agreement between an airport operator and an airline that allows the airline to operate take-offs and landings at a specific time and date. Smaller airlines have struggled to compete against Qantas and Virgin for slots at Sydney Airport, and more broadly in the market.
The challenges in the aviation market were evident earlier this year, when budget carrier Bonza airlines, collapsed.
On Tuesday, Federal Transport Minister Catherine King said the government was in touch with Rex Airlines. She said she didn’t want to see Rex fold, but it was important for the airline to keep its customers informed as to what’s happening.
“We’re keeping a pretty close eye on the announcement tomorrow and stand ready. You know, we think Rex is a pretty important part of the Australian aviation industry and stand ready to work with them to see whether there’s any assistance or anything the Government needs to do,” she told the ABC. “We don’t want to see Rex fold.”
Rex also owns air freight, aero medical and charter operator Pel-Air Aviation, the Australian Airline Pilot Academy in Wagga Wagga and Ballarat and also a propeller maintenance organisation. Additionally, it has a 50 per cent stake in National Jet Express, which is a fly-in-fly-out charter and freight operator.
The Transport Workers’ Union on Tuesday said the federal government must ensure that Rex is not allowed to go the way of Bonza, with around 2000 jobs potentially at risk.
“We are of the view that we cannot let Rex fail,” the union’s national secretary Michael Kaine told ABC Radio National on Tuesday
“Rex has carved out an existence despite the massive commercial and competitive dominance of Qantas, and we might be seeing here once again the pressure of that dominance is squeezing Rex out, and we hope that is not the case.”
The federal government is due to release its Aviation White Paper shortly, which examines issues in the sector, including its competitiveness and financial health. It will be used to shape future federal government policy for the industry.
Rex’s shares have fallen by more than one third this year. The airline has narrowed its losses since the pandemic hit, which roiled airlines globally.
In its first yearly half results, released in February this year, Rex increased its total revenue by 4.6 per cent. It reported a half-year loss of $3.2 million, which shrank from a loss of $16.5 million in the previous corresponding period.
Lim Kim Hai stepped down as the chairman of Rex last month but has now called for other directors to go.Credit: Louie Douvis
The airline has also recently had to contend with a boardroom brawl. In early June, the company revealed that Lim Kim Hai, who owns almost 17 per cent of Rex, was removed as its executive chairman, a role that he had held for 21 years. He remained on the board as a director.
Neville Howell, who was the company’s chief operating officer, was appointed as chief executive for two years, and John Sharp was elevated to chairman from deputy chairman.
The company did not explain the reason for Lim’s removal.
Five weeks after those changes, Lim, as a major shareholder, requisitioned a shareholder meeting to remove four Rex directors, including Sharp. In their place, Lim proposed appointing Lim Kang Song and Mukul Soul as directors.
The company said it would update the market on that boardroom tussle, but there has not been any notification apart from the trading halt.
The Business Briefing newsletter delivers major stories, exclusive coverage and expert opinion. Sign up to get it every weekday morning.