REX AIRLINES Trading Halt

[Icarus2001]

The outcome would be basically 20-30 years more life for half the cost of a new aircraft, lets say around $5-$10mil a unit,

An interesting idea. So for 60 airframes that would be between $300 and $600million. Add in the purchase price of the airline, that is a large investment in a loss making business.

[43Inches]

Originally Posted by ebt

Great idea, but the returns would be hard to justify the investment required to even get it to demonstration stage, let along certification. Saab nowadays is a military contractor so supporting the legacy commercial turboprops will likely go only as far as getting them to the end of life. Given the limited customer base, which is pretty much just Rex, unless Saab (or someone else) wants to proactively asset manage a '340NG' and create the market for them, it would be hard to justify in Stockholm.

Re-certification would only apply to a major change like changing the power plant, and the associated major work. The original SAAB 340B can be CAT II certified, it's already fitted to many of them, refitting the cockpit to glass is already an option. Renovating the airframe and fitting it out with modern interiors, ANC etc are all just engineering orders, not re-certification. Some of the US 340s were retrofitted with freon air conditioners in lieu of an APU as an example. And there are already approved low weight interior options, seats and fittings available for fitting.

An interesting idea. So for 60 airframes that would be between $300 and $600million. Add in the purchase price of the airline, that is a large investment in a loss making business.

It probably needed to be done 10 years ago, however, what options are there? A used ATR 42 will cost $10-$20 mil, a new one $20-$30mil, and they have a woeful reputation for extended life operation. I assume the new Dornier will come to market in the $20-$30 mil area as would a new SAAB 340NG. Those numbers are just the cost of doing business in aviation, you borrow the money and hope you can pay some of it down in the 20 years of operating, basically what every other airline does, except with much bigger numbers.

[Icarus2001]

basically what every other airline does,

There is also the option of leasing aircraft, as many airlines do. No need to purchase.

[43Inches]

Originally Posted by Icarus2001

There is also the option of leasing aircraft, as many airlines do. No need to purchase.

Leasing is just getting somebody else to borrow the money for you, and handle the purchase and sale of the assets. In return they add their piece of profit and hopefully your government of choice offers a tax incentive for the inefficiency.

[Mixie]

Leasing companies are the most profitable around.

Interestingly 14 of the top 15 aircraft leasing companies are based in Ireland.

Aercap made $3.1b in 2023 ,and 57% of aircraft worldwide are leased .

[Lead Balloon]

Originally Posted by Mixie

... Interestingly 14 of the top 15 aircraft leasing companies are based in Ireland. ...

Ah, the joys of 'Double Irish' tax 'arrangements'. I'm guessing there's a 'Dutch sandwich' for a snack in there somewhere, too.

[1A_Please]

Originally Posted by Mixie

Leasing companies are the most profitable around.

Aercap made $3.1b in 2023 ,and 57% of aircraft worldwide are leased .

$3.1Bn does not make a company amongst the most profitable around. It wouldn't even get you in the Top 150 most profitable companies.

[Icarus2001]

Aercap made $3.1b in 2023

Welcome to the forum.

If you are going to play on here you must understand there are some very qualified people on here, some who think they are qualified and a large number of numpties.
My knowledge of finance is low but "made" does not really cut it as an accounting term.
​​​​​​​$3.1b was their NET INCOME, not their PROFIT.

[Mixie]

All good- my background is qualified accountant ,with emphasis on analytical side of things.

I stopped working corporate side 15 years ago now, concentrating on research to provide income from shares going forward.

Analytical skills, or luck have been very fortunate in that regard ,including Qantas at moment.

Aviation leasing is very profitable due to high capital cost of planes ,and cash flow problems of most airlines to buy planes.

Bonza found that out to their demise imo(unsure if Rex owned or leased) ,other forum members may disagree ,and all good there.

Aviation leasing is a very simple business ,but has massive returns currently.

I realise reading replies on this forum that my background different to a lot of forum members here.

No dramas there ,as this is a pilot forum .

Have a great weekend.

[MickG0105]

Originally Posted by Icarus2001

Welcome to the forum.

If you are going to play on here you must understand there are some very qualified people on here, some who think they are qualified and a large number of numpties.
My knowledge of finance is low but "made" does not really cut it as an accounting term.
$3.1b was their NET INCOME, not their PROFIT.

Aercap would be reporting to EU accounting standards where "net income" is the equivalent of our "net profit".

[Mixie]

Originally Posted by MickG0105

Aercap would be reporting to EU accounting standards where "net income" is the equivalent of our "net profit".

It is all semantics anyway.

Net profit or Net Income-who cares anyway??

They are listed on Nasdaq with currenr market cap $18.5b USD.

The highest market cap airline companies worldwide iwn their own planes with Qantas sitting 15th currently.

I have upset a few forum members here but that was not my intention .

I have a different perspective and say it as I see it based on my research.

[MickG0105]

Originally Posted by Mixie

...
They are listed on Nasdaq with currenr market cap $18.5b USD.
...

AERCAP HOLDINGS N.V. (AER) is listed on the New York Stock Exchange (NYSE), not Nasdaq.

Originally Posted by Mixie

... The highest market cap airline companies worldwide iwn their own planes
​​​​​​...

The two largest airlines by market cap, Delta and United, most assuredly do not own all of their fleets; both run mixed owned/leased fleets. Same same with IAG (7th by market cap), Singapore (9th) and Turkish (10th); IAG is moving to a 50/50 owned/leased fleet, Singapore are around 70/30 and Turkish presently around 80/20.

Originally Posted by Mixie

...
I have upset a few forum members here but that was not my intention .

I have a different perspective and say it as I see it based on my research.

"A different perspective"? I guess t​​​hat's one way of saying "routinely wrong". And we've often seen the quality of your "research".

To the extent some forum members are "upset", it's because of poor research, and poorer interpretations leading to you to stating rank nonsense with the absolute certainty of an adolescent.

For better or for worse, many of us are afflicted with acquired afabulasia; that is, we're BS intolerant.

[Mixie]

Thanks for the reply.

Let us see where the Qantas share price goes in the next 12 months.

I bought when reputational damage was at its worst and media/analysts stating shares were overvalued due to ageing fleet/broken brand.

Nobody seem to mention that Qantas owned their frames whilst competition including Bonza,Rex and Virgin did not.

They was also no mention of Qantas signing order with Airbus coming out of Covid at hopefully very favourable prices given state of airline industry at that time.

80% return to date ,and perhaps it was luck, but I am not selling based on my research.

Report in Australia Financial Review of continued elevated fares in golden triangle continue,with cheapest Qantas fare $1313 Sydney-Melbourne 1 way for yesterday-no other fares were available on Qantas.

They used Etihad as comparative example with flight Melbourne to Paris costing $1300 just 2 weeks ago.

Now that is a profit margin this accountant understands, and great for Virgin as well to be operating in this environment.

Why would u lease when you could buy is beyond me ,unless airline did not have the cash flow.

Ownership gives airline control and future borrowing power, simple as that.

We are of different mindsets and all good.

[43Inches]

Leasing vs purchase depends on long term strategy and availability. Lease companies use scale to buy numerous production slots and then can offer them at lease rates comparable to what you would otherwise pay if you borrowed the money and purchased a small run of units at a higher price. If you are an accountant you would know there are certain tax benefits to leasing and to outright purchase. There is also the matter of how long you imagine you will be operating such aircraft, most modern jets are best kept under 10 years old to get the most from the latest efficiency gains. A 20 year old jet probably burns 10-20% more fuel and maintenance and parts costs are again large percentages higher. If you lease, you can sign the contract for 10 years, and then re-lease new machines and keep the fleet age as efficient as possible without having to deal with acquisition and sales costs. You might want to ask Hertz and a few other rental car agencies how their old strategy of purchase and sell vehicles at low kms has gone with their electric cars... I think Hertz is now down 4 straight consecutive losses into the billions due to the junk status of used Teslas and Polestars.

Aviation is one of those places where underlying profits mean nothing. An airline is constantly renewing fleet, brand, staff and everything else. There is never a point where you are just running without some form of change happening, if you are it means things are aging and losing value, so its false numbers, at some point you have to play catch up at more than whatever cost you saved by pinching pennies.

[KRUSTY 34]

Ok, back on subject.

Heard an interesting rumour from a VA ground handler yesterday that VA are looking at acquiring REX. Possibly had its genesis in the BS John Sharp was spewing on the 4 Corners interview, or is there something else afoot?

And yes I know, a VA ground handler! But it is a rumour network.

[43Inches]

Originally Posted by KRUSTY 34

Ok, back on subject.

Heard an interesting rumour from a VA ground handler yesterday that VA are looking at acquiring REX. Possibly had its genesis in the BS John Sharp was spewing on the 4 Corners interview, or is there something else afoot?

And yes I know, a VA ground handler! But it is a rumour network.

If it holds any truth it would be on the basis those owed money come to some agreement on the debt at some point to take a hit that's better than what they will get back from break up and liquidation. Added to that now another $80mil from the government. And Bain/VA view Rex as an easier option rather than phoenix VARA on the East coast.

[scrotometer]

What is worth acquiring?
Some old SAABs that are essentially orphans on the world airline fleet market?
Some crap management?
I wouldn't be going near it
If it were worth something it would already be snapped up like Pelair was.

[43Inches]

Originally Posted by scrotometer

What is worth acquiring?
Some old SAABs that are essentially orphans on the world airline fleet market?
Some crap management?
I wouldn't be going near it
If it were worth something it would already be snapped up like Pelair was.

It's worth something, just not what parties are willing to pay for it, or what the administrators are willing to drop the price to. At some point those 'Sh***box SAABs' will be liquidated and somebody will either fly them or scrap them for some return. Even Pelair is not being sold as 'Pelair' as such, it's just the air ambulance contracts from the look of it, not the SAAB charter side. So there is a lot of negotiation going on for the sales.

[Icarus2001]

It's worth something, just not what parties are willing to pay for it,

Perhaps it has the same value as Tiger did for Virgin when purchased from Singair?

[Mixie]

Originally Posted by 43Inches

Leasing vs purchase depends on long term strategy and availability. Lease companies use scale to buy numerous production slots and then can offer them at lease rates comparable to what you would otherwise pay if you borrowed the money and purchased a small run of units at a higher price. If you are an accountant you would know there are certain tax benefits to leasing and to outright purchase. There is also the matter of how long you imagine you will be operating such aircraft, most modern jets are best kept under 10 years old to get the most from the latest efficiency gains. A 20 year old jet probably burns 10-20% more fuel and maintenance and parts costs are again large percentages higher. If you lease, you can sign the contract for 10 years, and then re-lease new machines and keep the fleet age as efficient as possible without having to deal with acquisition and sales costs. You might want to ask Hertz and a few other rental car agencies how their old strategy of purchase and sell vehicles at low kms has gone with their electric cars... I think Hertz is now down 4 straight consecutive losses into the billions due to the junk status of used Teslas and Polestars.

Aviation is one of those places where underlying profits mean nothing. An airline is constantly renewing fleet, brand, staff and everything else. There is never a point where you are just running without some form of change happening, if you are it means things are aging and losing value, so its false numbers, at some point you have to play catch up at more than whatever cost you saved by pinching pennies.

Car leasing and aviation leasing are completely different IMO especially when China is changing the game by flooding the market.

Nissan is in big trouble and German car manufacturers likewise.

Boeing and Airbus are the only manufactures from my understanding and 1 of them has serious production problems at moment.

That is why leasing frames have gone sky high in recent times which has been great news for aviation leasing companies but not airlines as unfortunately Rex and Bonza found out to their cost

Hindsight is a great thing but there was only going to be 1 outcome once they decided to compete with Qantas on high margin domestic routes.

The beauty for Qantas going forward is that are replenishing their frames that reach 23/24 frames with new fuel efficient state of the art frames over next 5 years.

The new frames for Jetstar are giving them $7m savings over frames they replace from memory in last annual report.

That is a serious competitive advantage IMO and I backed that up by investing my own money in them.

I am repeating myself, but from my research ,Qantas strategy is to run their frames till 23/24 years-great in a low fuel environment, sure there is extra maintenance ,but they will be replaced by fully owned Qantas frames from Airbus when there time is up.

Owning will always be better than leasing IMO although argument could me made that Qantas should have leased the 12A380s rather than buying them.

Other forum members have said, my research is rubbish, no problem with that, and wish them well.

I look at OPEC,crack spreads,2025 oil production by country,1 parameter among many in my decision to continuing holding Qantas shares.

I also have subscriptions to both the Australian and Australian Financial Review to get insights on Australian airline industry and hopefully this forum will help as well.

It is great to get different view on here and thank forum members for their alternative view.

Those views just doesn’t make sense to me ,and that is why would be interested to gauge whether those particular forum members have accountancy qualification or background in financial analyst.

I know this may not be popular but it is reassuring to me that current Qantas CEO came from a finance background.

Anyway, last comment on this particular thread and Rex will survive with government support.

Their shareholders got burnt though ,and Warren Buffet said never invest in airlines.

I have made an exception to his rule based on my research ,but it is still a risk and lot of u think my research is rubbish anyway, and hopefully there is not a Covid type event around the corner.

Have a great weekend fellow forum contributors .