Loving the commentary on here... 🤦♂️
Personally I’m not surprised. There’s been rumours of this for years BUT the recent Lim Kim comments RE the Virgin Administrators was taken the wrong way by most of you I think. Reading between the lines I thought he was disappointed the administrators weren’t cutting VA down to a smaller size so Rex would buy them.
But looking at it from a practical view (no emotion unlike some):
- already have staff, offices, parking areas, slots in all the capital cities.
- enough redundant 320/737 crew floating around to fill at least initial staff positions (especially training and checking).
- 737/320 lease rates would be low right now and Rex could probably get a better deal than current operators
- fuel is cheap and unlikely to go up in the next 2-3 years
- Rex management has plenty of experience running an airline. Yes no jets but it’s just another aircraft that needs filling. They know revenue management, cost control, maintenance, etc. It’ll be adding to what they do.
- they already have feed from a regional network which may fill +10% of their seats from day 1.
- all indications are that they’d stick to linking BNE/SYD/MEL/ADL/PER. With a small route network covering existing Rex bases, they’ll keep their costs reasonably low.
PLUS it looks like being funded by new equity in Rex via the sharemarket. This means no debt to service, which will keep their costs down significantly.
So given all the above I’d argue their costs may come in close to Jetstar. They certainly won’t be chasing the full service market so that should allow them to make a decent profit out of a small network.
It may just be a shot across the bow to any new operators in Aust, but it does have a very good chance of succeeding.