Originally Posted by
Slippery_Pete
Wow Deano, I want some of whatever you’ve been smoking!
If (and it’s a big if) they can financially survive the next 2-3 years, then their only future lies in cannibalising the SAAB pilots to fly a slowly expanding jet operation.
The fundamental problem here is that
a) they went cheap with engine maintenance during COVID and it’s massively bitten them in the ass, and
b) the pilot shortage is real and there’s no avoiding it for them.
Agreed, and I will add in point (c) - they will not be able to get 737NGs as cheaply and as quickly as they originally thought they would.
Lease rates on NGs are going up month by month, and it is only continuing as the global supply chain issues hold up the roll-out of the Maxes and Neos, while the P&W issue has carriers with big GTF-powered fleet scrambling for capacity. The first six frames Rex got were at Covid rates and PBH agreements, but in time those will roll off and the owners will jack up the rents to the current market rates, or just take them back and give them to someone that will - and there are no shortage of airlines chasing NGs with green time on their engines.
Even assuming they get to 10-12 737s over the next six months, that is still at far too small a scale to be delivering acceptable returns on their cost of capital, which has also increased due to interest rate rises. That leaves Rex vulnerable if QF or, more likely, VA decides that they want to attack the small slice of the market that they have. For now, both the big ones are making good money and don't have the spare capacity to really try and flood the market with seats to drive Rex out, being able to do so at lower (all-in) unit costs than Rex.
Rex Jet is stuck in startup mode. How long have they been promising to get a loyalty scheme together? When will they get their national network happening?
Yes, hindsight is 20/20, and if LKH knew where things were going to end up, he may not have gone into the larger market. But at the same time, I get why he did, so the issue is now to try and make the best of the situation, and that will require some decisions to be made about what the company actually wants to be: A regional airline with a Tigerair-esque appendage among its other associated businesses, or a sub-scale but full-service airline?
And while I'm on a rant - why bother with the Antarctica stuff? Oh that's right, it's The Hon's pet project from when he owned a slice of and was on the board of Skytraders.