Originally Posted by
dragon man
Not good for anyone if they go under.
REX CALLS IN TURNAROUND SPECIALISTSStories abound of instability in the nation’s aviation sector. Budget airline Bonza fell into administration in April. The mooted listing of Virgin Australia keeps faltering, and now Qatar Airways wants to gobble up a strategically important part of it.
And what of Regional Express? Its executive chairman, Lim Kim Hai, was hot-swapped in June for deputy chair John Sharp, a former transport minister in the Howard government. Lim had served as executive chairman for 21 years, and aside from brief remarks issued by the company acknowledging his “extraordinary service”, no further reason was provided for this sudden and startling tweak to the board.
Seething, as you would expect, Lim went on to requisition a shareholders meeting to remove Sharp and three other directors from the board: Lee Thian Soo, Ronald Bartsch and Jim Davis. No reasons were provided for that development either.
This upheaval is taking place just as Rex finds itself in a spot of serious financial bother, so serious, it seems, that Margin Call hears that the airline has invited a turnaround team from Deloitte to rifle through its books and try to stop the proverbial plane from crashing into the mountain.
Leading that team are Sal Algeri and Richard Hughes, memorable for their role in the recovery of Virgin Australia after that airline slid into voluntary administration in 2020. Deloitte didn’t respond to questions about Rex and Rex itself declined to comment. “Given Rex is a public company, we do not respond to press or market *rumours or speculation,” a spokesman said.
Rex’s troubles are not necessarily with its regional routes, which are said to be profitable, but with its expansion into the prized city destinations of Sydney, Melbourne and Brisbane, known in the industry as the Golden Triangle (a misnomer, by the way, the route connecting them forms no obvious triangle).
An expansion into those capital city markets began in 2020, its market share remains in the single digits, and the whole jolly has cost the business dearly. Deloitte’s partners are in a fever attempting a restructure solution as a rescue package. That too, we hear, is teetering towards failure.
Where to from here? Rex’s Golden Triangle dilemma could become intractable enough to push the airline into administration. Whether or not that occurs, the appearance of Deloitte’s clean-up team at least provides a plausible explanation for the airing of linen about to start in the boardroom.
After all, it was Sharp who said last year that profitability mattered more than market share, a remark made only after Rex posted a loss of $16.5m for the half to December 2022. Its latest results weren’t quite as fugly – a $3.2m loss for the half to December 2023