REX to transition to ATRs, start domestic jet ops
Just off ZL145, the 1730 SYD-MEL, had 28 pax on the flight, booked a $79 fare on Thursday, when the cart came along I ordered a beer ($7) and gave the FA a 10, said she would be back with the change, interestingly REX only accept cash onboard, no plastic. The FA came back 10 mins later said they didn't have any change as I was the only person to have bought something and gave me my $10 back, so that's another $7 the flight lost, but I got a cheap ticket and a free beer. 
Rex have acknowledged there will be losses initially. Such is life for ANY new business. No one can expect 100% load factors in their first weeks of operation.
Looking at the bigger picture, early signs are positive for an overall success of the operation.
The $150 million investment is intended to absorb these losses. Anyone who thinks that is where PAG will end their relationship with Rex is kidding themselves.
There are lots of naysayers on here which is quite sad given a lot of people at Rex are likely your ex-colleagues or someone you know. Regardless of Rex’s domestic success, they won’t be taking your job away. At the end of the day, this is a rumour network and pilots think they are experts at running businesses
Looking at the bigger picture, early signs are positive for an overall success of the operation.
The $150 million investment is intended to absorb these losses. Anyone who thinks that is where PAG will end their relationship with Rex is kidding themselves.
There are lots of naysayers on here which is quite sad given a lot of people at Rex are likely your ex-colleagues or someone you know. Regardless of Rex’s domestic success, they won’t be taking your job away. At the end of the day, this is a rumour network and pilots think they are experts at running businesses
Wasn't the pitch to investors based on Virgin ceasing operations?
Of course it was. However, the investment wasn’t signed on the dotted line until late last year and not even funded until earlier this month.
Plans change and PAG would know very well Virgin are here to stay. Yet the investment continued.
They own more than $40 billion in assets, a company like that (Bain as well) doesn’t just throw away money for the sake of it. They can see opportunities and there are in fact opportunities. It’s just a matter of the painfully slow process to find what works and what doesn’t.
A perfect example is the Gold Coast. Business travel not recovering? Okay, what’s making money currently? Tourism is starting to increase again so let’s look at leisure destinations. As the frequent flyer program isn’t set up as yet it may be a better idea as leisure travel has less of a need for these benefits.
Qantas fly leisure routes too. It doesn’t change their identity though
Plans change and PAG would know very well Virgin are here to stay. Yet the investment continued.
They own more than $40 billion in assets, a company like that (Bain as well) doesn’t just throw away money for the sake of it. They can see opportunities and there are in fact opportunities. It’s just a matter of the painfully slow process to find what works and what doesn’t.
A perfect example is the Gold Coast. Business travel not recovering? Okay, what’s making money currently? Tourism is starting to increase again so let’s look at leisure destinations. As the frequent flyer program isn’t set up as yet it may be a better idea as leisure travel has less of a need for these benefits.
Qantas fly leisure routes too. It doesn’t change their identity though
It would probably be handy to get a few things straight here. Rex is not Compass. Rex's foray into jet operations is not a new business/start-up, it's an expansion. As such the financials are a little bit different. The expansion will have some fixed costs associated with it that do not generate revenue (AOC set up, route set-up, flight/cabin crew training, etc) - that's what a chunk of the PAG seed money is there for.
And note, the $150 million is structured in three $50 million tranches. PAG are not mugs, there will be internal hurdles and triggers associated with the draw downs. Moreover, the whole PAG deal is completely underwritten by an equity stake in the business - if the expansion goes pear-shaped, PAG will end up owning half of Rex (which would return to its mildly profitable regional roots). At this point Rex have drawn down their first $50 million tranche and would almost certainly be getting ready to dip into the second.
Any old how, because you've got that big chunk of set-up costs that need to be paid back you don't want to be adding to those costs, so once you pull the trigger your initial operations should at the very least be coming close to breaking even. That's likely not the case at the moment. No one would have planned for 80 percent load factors right out of the gate but you can bet your bottom dollar that the business plan would have had something like 50 percent load factors for month one. And that was likely on a nine return flights a day basis. They almost certainly have not hit that target. And April's planning target will be a notch up again on March.
More broadly, if you look at a basic measure like asset utilisation, that's not flash. First flight is at 0700, last lands at 2130, six flights in each direction on a super simple point - point shuttle. Compared to the majors, they are undercooking utilisation by at least 15 percent and that's leaving aside the fact that one of their then four jets was sitting at Wagga for most of the first month.
Their original business plan was for nine return flights a day, Sydney - Melbourne. Despite all of Sharpie's carry on they most assuredly had sufficient aircraft to manage that but they didn't - one factor would have driven that change of schedule. They've then been a bit over the shop with where to next - Brisbane, Adelaide, Gold Coast, etc Now, no plan survives contact with the enemy but you generally like something that has had a few months work put into it to hold together longer than a few weeks.
And they had a rejected take-off out of Sydney in week 1 and some sort of tech issue with RQC which very luckily for Rex didn't get picked up by the media. So, all in all, a less than stellar start.
Next month, things don't get easier for Rex, ostensibly they get harder, and harder by at least an order of magnitude. OOL and ADL come on line which means that (a) they won't have the luxury of two spare jets to cover for RQC's next tantrum and (b) they'll have to manage a more tightly integrated schedule.
As to naysaying, calling stuff as it is is not naysaying. To be successful, Rex's expansion needed a lot of intermeshing moving parts to come together pretty much perfectly - thus far, I don't think that we are seeing that.
In the long run, as the Zen Master said, "We'll see."
And note, the $150 million is structured in three $50 million tranches. PAG are not mugs, there will be internal hurdles and triggers associated with the draw downs. Moreover, the whole PAG deal is completely underwritten by an equity stake in the business - if the expansion goes pear-shaped, PAG will end up owning half of Rex (which would return to its mildly profitable regional roots). At this point Rex have drawn down their first $50 million tranche and would almost certainly be getting ready to dip into the second.
Any old how, because you've got that big chunk of set-up costs that need to be paid back you don't want to be adding to those costs, so once you pull the trigger your initial operations should at the very least be coming close to breaking even. That's likely not the case at the moment. No one would have planned for 80 percent load factors right out of the gate but you can bet your bottom dollar that the business plan would have had something like 50 percent load factors for month one. And that was likely on a nine return flights a day basis. They almost certainly have not hit that target. And April's planning target will be a notch up again on March.
More broadly, if you look at a basic measure like asset utilisation, that's not flash. First flight is at 0700, last lands at 2130, six flights in each direction on a super simple point - point shuttle. Compared to the majors, they are undercooking utilisation by at least 15 percent and that's leaving aside the fact that one of their then four jets was sitting at Wagga for most of the first month.
Their original business plan was for nine return flights a day, Sydney - Melbourne. Despite all of Sharpie's carry on they most assuredly had sufficient aircraft to manage that but they didn't - one factor would have driven that change of schedule. They've then been a bit over the shop with where to next - Brisbane, Adelaide, Gold Coast, etc Now, no plan survives contact with the enemy but you generally like something that has had a few months work put into it to hold together longer than a few weeks.
And they had a rejected take-off out of Sydney in week 1 and some sort of tech issue with RQC which very luckily for Rex didn't get picked up by the media. So, all in all, a less than stellar start.
Next month, things don't get easier for Rex, ostensibly they get harder, and harder by at least an order of magnitude. OOL and ADL come on line which means that (a) they won't have the luxury of two spare jets to cover for RQC's next tantrum and (b) they'll have to manage a more tightly integrated schedule.
As to naysaying, calling stuff as it is is not naysaying. To be successful, Rex's expansion needed a lot of intermeshing moving parts to come together pretty much perfectly - thus far, I don't think that we are seeing that.
In the long run, as the Zen Master said, "We'll see."
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I got nervous when basics like (a) change your booking online, has been out of service since mid December (It’s nearly April for Christ sake), and (b) online check-in, did not work from the get go so they sidelined that for the moment. These are just everyday basics that no airline should go without for days left alone nearly 4 months.
I still think they would be better going after the Tiger share and bringing in things like carry on only (cheaper fares), and ‘big seat up front’ sort of product like Sprit in the states.
Jetstar (now Virgin) are now sending in more machines from Japan and Singapore, also which further dilutes whatever revenue Rex wanted.
I still don’t know what share of the revenue market they are actually taking. Jetstar are pretty clear they want that Tiger share, and are sending in the equipment to cover that. Virgin looking at a lite model fare bucket like Delta, in both cabins, to again, take that revenue, which further squeezes Rex.
They also had 6 months to setup some form of basic FF program, now faced with these double credit promos from the other two and points being thrown around everywhere.
To get any form of scale and return on such big investment they need 20-30 aircraft. They acknowledge that having said it many times, but that’s billions of expected revenue with no clear pathway to it.
I still think they would be better going after the Tiger share and bringing in things like carry on only (cheaper fares), and ‘big seat up front’ sort of product like Sprit in the states.
Jetstar (now Virgin) are now sending in more machines from Japan and Singapore, also which further dilutes whatever revenue Rex wanted.
I still don’t know what share of the revenue market they are actually taking. Jetstar are pretty clear they want that Tiger share, and are sending in the equipment to cover that. Virgin looking at a lite model fare bucket like Delta, in both cabins, to again, take that revenue, which further squeezes Rex.
They also had 6 months to setup some form of basic FF program, now faced with these double credit promos from the other two and points being thrown around everywhere.
To get any form of scale and return on such big investment they need 20-30 aircraft. They acknowledge that having said it many times, but that’s billions of expected revenue with no clear pathway to it.
Saab schedule is ramping up as of this week due to jobkeeper ending. It could help with 737 loads with connecting pax..
Struth, a common sense approach. Looking into the crystal ball Singapore would be first mob on the list that would hold interest in merging Rex/virgin. They would buy and pay out Bain and PAG.
The LH aircraft won't be 330s/777 it would be a one fits all i.e. A350,B787-9, or last pick 777 with folding wings and I hope all the redundant pilots get first pick.
That's assuming covid is over and Singapore are all cashed up again.
If Rex are employing the Tiger pilots then they may go full circle and be flying back with Virgin's active Tiger AOC come 2 or 3 years.
The LH aircraft won't be 330s/777 it would be a one fits all i.e. A350,B787-9, or last pick 777 with folding wings and I hope all the redundant pilots get first pick.
That's assuming covid is over and Singapore are all cashed up again.
If Rex are employing the Tiger pilots then they may go full circle and be flying back with Virgin's active Tiger AOC come 2 or 3 years.
When will people understand that SIA is very good at what it does within the Republic of Singapore but outside of its borders it has a large number of failed airline investments. Why would SIA or rather Temasek consider putting any more money into an Australian airline given the failure of Ansett, Tiger and Virgin? I can't see any state owned carrier investing until their own balance sheet has recovered from the ravages of COVID. As for Qantas going the way of Ansett because of fleet types, its not going to happen. Mainline only has one narrow body type and one wide body type on its domestic network. The other aircraft are flown by contractors. As for LH it is only the 787 and A330 that it is currently operating. Types grounded or not yet purchased can't be included in the "too many types" box. Qantas is run by people who at least understand the industry. Ansett was run by a newspaper owner and a road transport owner who had very little knowledge or interest in the airline industry.
Dixon oversaw the first demise (NZ and AN) and Joyce got to see 'SQ' run off from the Australian domestic scene with their tail inbetween their legs TWICE after the Tiger Airways and Virgin financial failures. The combined Virgin failure/Covid effects meant SQ also had to be bailed out by their government parent (Temasek) as well.
A lot of speculation in regards to SQ and/or Temasek regarding any interest in the Australian domestic market (apart from SQ's ill-fated Virgin 20% stake) in the past few years prior to COVID had always ended up as fake news.
I don't any airline (state owned or not) will be investing any further in other airlines apart from the existing ones they may keep until their financial balances recover to a point where some aren't as reliant on government handouts/bailouts.
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Oh dear, you know what that means, Not-so-Sharp will be running to the ACCC crying his eyes out and sooking about so-called unfair predatory actions that are not in the best interests of the fare paying public..... etc etc tug tug tug.
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And with the addition of 5 737's to VA Mainline over the next 3 months, they will continue to do so. One would have to think Bain has deeper pockets than Sharp & Co. do?
The demand is currently alive and well. I’ve been full for quite a while now. Oversold on many. We are not selling our arses off either for next to nothing.
The issue here is they can’t stimulate demand from what is ultra low fares.
The only other startup I’ve heard about with similar load issues was Ozjet.
The issue here is they can’t stimulate demand from what is ultra low fares.
The only other startup I’ve heard about with similar load issues was Ozjet.