REX to transition to ATRs, start domestic jet ops
RQG is set to be returned to lessor. Reportedly the 2 jets are coming from SQ (originally Silkair). The bulk of ZL's 737 fleet when those are delivered are set to be dominated by ex-SQ and ex-VA frames with the two odd-balls from GOL and Jet.
REX's investor presentation is amazingly amateurish It looks like it was put together by someone who was using PowerPoint for the first time.
Their performance is disastrous. YoY, they increased from 7 to 9 737s (a 28% increase) but only managed to increase RPT revenues by 6% which has led to the $25M loss in RPT services as highlighted by Mick. In addition, their cheap as chips lease deals they got their first 737s are now all expiring and they are being forced to pay market rates, which, for a small tenuous operation like REX, will be more than lessors will agree to with the bigger more secure operators.
Their performance is disastrous. YoY, they increased from 7 to 9 737s (a 28% increase) but only managed to increase RPT revenues by 6% which has led to the $25M loss in RPT services as highlighted by Mick. In addition, their cheap as chips lease deals they got their first 737s are now all expiring and they are being forced to pay market rates, which, for a small tenuous operation like REX, will be more than lessors will agree to with the bigger more secure operators.
Pax revenue $311.438 million
up by $18.525 million (+6.32 percent)
-Total revenue $353.388 million
up by $13.556 million (+3.99 percent)
-Cash Costs
Flight and port operations $85.222 million
up by $8.84 million (+11.57 percent)
Engineering and maintenance $54.209 million
up by $16.074 million (+42.15 percent)
Salaries and employee related costs $112.940 million
up by $15.612 (+16.04 percent)
Selling and marketing costs $18.744 million
up by $3.038 million (+19.34 percent)
General administration costs $7.733 million
up by $0.512 million (+7.09 percent)
Finance costs $5.728 million
up by $1.235 million (+27.49 percent)
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Fuel $69.641 million
down by $5.658 million (-7.51 percent)
-
Total cash costs $354.217 million -
up by $39.653 million (+12.61 percent)
+Rex's cost base has exploded, both in nominal terms and relative to revenue. Draw your own conclusions.
I'm actually surprised costs have only risen by 12%, the addition of 9 737 should be more than that. My worry is that they have lost the plot on the regional front, the south east coast schedules look dire compared to the traditional schedules of 10 years ago, and that is the powerhouse of their past income. Interesting that they somehow forgot MacAir went broke servicing all those outback routes and not having any premium regional routes to get the gravy in the peak seasons. Somebody seems to think that the subsidized routes are more important than the high traffic NSW patterns. I guess QLink has no idea what it's doing, having pulled back from the outback routes and jumped in on all the routes Rex has pulled back from and is making good profit. Seems like there will be only QLink in regional NSW, Vic, SA in a few years, probably half crewed by disaffected Rex staff. I think somebody in Rex management must be a QLink plant, the amount of free passengers they have just given away the last year or so by pulling back on very profitable routes. I heard even Sharps have thanked Rex management (jokingly) for there terrible route strategy down south that is gifting them passengers.
Is this press release from the same person who 18 years ago told his pilots “If you can’t handle the heat, get out of the kitchen!” ?
Doesn’t sound like they’re being poached.
Just sounds like you’re getting what you wanted.
Doesn’t sound like they’re being poached.
Just sounds like you’re getting what you wanted.
So according to the reported numbers, they are heading for insolvency in about 4-5 months.
As far as I can see, there are two options. Either a second cash injection to keep it going for a few more years, or get Virgin to buy it. Bain would probably prefer to sit back and let it just collapse. Yield gain overnight with no outlay, would make its sale more attractive.
As far as I can see, there are two options. Either a second cash injection to keep it going for a few more years, or get Virgin to buy it. Bain would probably prefer to sit back and let it just collapse. Yield gain overnight with no outlay, would make its sale more attractive.
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No, I definitely wouldn't say that. They've got another $30 million that they can draw down on from the PAG deal plus $54 million in cash and cash equivalents. Their problem is that they just seem to be blithely barrelling along burning cash with little to show for it, and the plan appears to be just more of the same.
No, I definitely wouldn't say that. They've got another $30 million that they can draw down on from the PAG deal plus $54 million in cash and cash equivalents. Their problem is that they just seem to be blithely barrelling along burning cash with little to show for it, and the plan appears to be just more of the same.
This is just becoming Tiger all over again.
Not sure why you'd reference "9 737". I was comparing the H1FY24 (1 July 2023 - 31 December 2023) numbers to H1FY23 (1 July 2022 - 31 December 2022); the effective change in jet fleet numbers is less than 2 between those periods. Network capacity in terms of ASKs increased by nearly 14 percent between the two halves. Total costs most assuredly should not scale linearly with capacity.
Not sure why you'd reference "9 737". I was comparing the H1FY24 (1 July 2023 - 31 December 2023) numbers to H1FY23 (1 July 2022 - 31 December 2022); the effective change in jet fleet numbers is less than 2 between those periods. Network capacity in terms of ASKs increased by nearly 14 percent between the two halves. Total costs most assuredly should not scale linearly with capacity.
The scary number is the 42% increase in engineering/maintenance, that is what pushes the cash flow negative, an extra $16mil for a few additional 737.
Last edited by 43Inches; 1st Mar 2024 at 09:58.
No, I definitely wouldn't say that. They've got another $30 million that they can draw down on from the PAG deal plus $54 million in cash and cash equivalents. Their problem is that they just seem to be blithely barrelling along burning cash with little to show for it, and the plan appears to be just more of the same.
So many hands in so many pies - meanwhile no one is minding the shop!
Yes but operational costs ramp up as you 'operate' so it makes sense the last 6 months was all 9 ships plying the waves, not just the addition of 2. It also depends on when the costs come due and are paid, rather than just a liability. Al things we don't know as are commercial in confidence behind the scenes contracts. When looking at cash movement in large businesses a lot of that cash was spent up to a year or more earlier, the payment just came due during that reporting period.
The scary number is the 42% increase in engineering/maintenance, that is what pushes the cash flow negative, an extra $16mil for a few additional 737.
The scary number is the 42% increase in engineering/maintenance, that is what pushes the cash flow negative, an extra $16mil for a few additional 737.
And we're looking at numbers from the P&L, not the Balance Sheet; they're all current costs, there are no accruals of liabilities. You don't need to know the mechanics of the contracts; standard accounting practices apply.
Not sure what you are arguing, but you said it yourself, its the costs paid during that half, not liabilities, so it could be payment of costs from a year ago. Theres more liabilities from that half still to paid this half and so on. This is just how cash flowed during this period. Which also means some of the revenue earned is for flights still to be operated and so on...
Neville Nobody
I'm don't believe paying a lot more to the pilots would make a difference. Firstly, on a good year, Rex's profits wouldn't sustain paying the
pilots of regional 34 seat machines a wage competitive with 180 seat jets. And frankly, small turboprop drivers, captains and F/Os, will still jump to
the left seat on an A320 or 737 for the same or even less money. Pay a young skipper more than a jet F/O and 90% will still go. I believe
we can take that as fact.
Rex does need to pay more but retention solutions lie elsewhere - lifestyle being one, progression onto the 737 being another. And some respect.
But paying jet like wages isn't enough.
I'm don't believe paying a lot more to the pilots would make a difference. Firstly, on a good year, Rex's profits wouldn't sustain paying the
pilots of regional 34 seat machines a wage competitive with 180 seat jets. And frankly, small turboprop drivers, captains and F/Os, will still jump to
the left seat on an A320 or 737 for the same or even less money. Pay a young skipper more than a jet F/O and 90% will still go. I believe
we can take that as fact.
Rex does need to pay more but retention solutions lie elsewhere - lifestyle being one, progression onto the 737 being another. And some respect.
But paying jet like wages isn't enough.
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Neville Nobody
I'm don't believe paying a lot more to the pilots would make a difference. Firstly, on a good year, Rex's profits wouldn't sustain paying the
pilots of regional 34 seat machines a wage competitive with 180 seat jets. And frankly, small turboprop drivers, captains and F/Os, will still jump to
the left seat on an A320 or 737 for the same or even less money. Pay a young skipper more than a jet F/O and 90% will still go. I believe
we can take that as fact.
Rex does need to pay more but retention solutions lie elsewhere - lifestyle being one, progression onto the 737 being another. And some respect.
But paying jet like wages isn't enough.
I'm don't believe paying a lot more to the pilots would make a difference. Firstly, on a good year, Rex's profits wouldn't sustain paying the
pilots of regional 34 seat machines a wage competitive with 180 seat jets. And frankly, small turboprop drivers, captains and F/Os, will still jump to
the left seat on an A320 or 737 for the same or even less money. Pay a young skipper more than a jet F/O and 90% will still go. I believe
we can take that as fact.
Rex does need to pay more but retention solutions lie elsewhere - lifestyle being one, progression onto the 737 being another. And some respect.
But paying jet like wages isn't enough.
Adjusting pay and conditions at a company like Rex is about setting a flow rate, adjusting a tap. Rex has to be flexible and adjust it's conditions to ensure enough pilots stay long enough to ensure adequate coverage, and a core group of experienced pilots, at least 30%, are retained to train and provide valuable guidance to ensure efficient safe operations. Whilst it's true most young crew are not set on flying a SAAB for a long time many actually will for extended time if the 'conditions' lead to favorable lifestyle. This is why some bases are far more stable in employers like Rex and QLink than others. For Rex traditionally there was a lot of long termers in SA, Vic, Wagga and Albury, Why?, because these bases offered a pretty good lifestyle balance, that is short shifts, lots of time at home, or the single overnight with only about 6 hours duty both days, basically part time work on full time salaries. NSW and now from the sounds of it Qld/WA, are bases where you spend most of your time working, long shifts, with little to no down time, so the flow rate is horrendous. It doesn't take much brain power to understand why the flow rate has turned into a raging torrent in the last year or so, pilots being worked a lot harder, spending large amounts of time away from home, no end in sight of opportunities to move as desired. Now that doesn't mean you can just hire more staff in those bases and work them harder, it doesn't work that way, they are there because the traditional rosters in that base worked well. Increase the work rate for them and they leave like the other bases and you are then left with nothing. The better response would be to try and emulate and expand on the original working conditions in those bases and apply it to the bases where everyone leaves. Or you could focus on those bases and expand their networks with more of the same style of work rate.
Rex can afford to pay a lot more and offer better lifestyle, they just choose not to, they are losing tens of millions in unrealized sales due to not being able to operated schedules during peak seasons. QLink is picking up this slack and profiting on larger aircraft on several routes Rex has cut back on, that shows where the real problem is, it's a matter of priorities.
So like me, you say its about lifesstyle - money isn't enough to keep them. What makes you think Rex can afford to pay more? All the goss on here seems to indicate they are losing **** loads of cash, reserves are running out, they're almost insolvent, PAG's about to do a runner,reports are being doctored to makes things appear rosier - but you say they CAN afford to pay more? My maths say it doesnt appear that way.
So like me, you say its about lifesstyle - money isn't enough to keep them. What makes you think Rex can afford to pay more? All the goss on here seems to indicate they are losing **** loads of cash, reserves are running out, they're almost insolvent, PAG's about to do a runner,reports are being doctored to makes things appear rosier - but you say they CAN afford to pay more? My maths say it doesnt appear that way.