Rex owners up Virgin stake
 

Didn't see that coming!


Rex Airlines owners up Virgin Blue stake; Michael West

The Singaporeans behind regional aviator Rex Airlines have quietly bought a strategic stake in Virgin Blue. They are lurking beneath the 5% disclosure threshold and had no comment when contacted by BusinessDay.

Entities associated with Rex have soaked up around 3% of the carrier. Whether Kim Hai Lim and Thian Soo Lee can get their hands on the readies to make a full bid is an issue in itself. Rex's market cap is only $120 million and though its management runs a tight ship - costs are low and government lobbying high - a scrip bid would have little chance of getting off the ground.

The move to soak up a few shares in Virgin is more likely strategic than a prelude to a bid although Virgin's bombed out share price and cash reserves could present a tasty asset strip.

At balance date Virgin had $604 million in cash. It looks cheap versus its current market cap of $360 million - and the reason is cash burn.

Thanks to a raging fuel price in the last half Virgin put its "average days cash reserves at 101" in its annual report.

Jet fuel costs have since fallen though, along with the diving oil price, and now the formidable challenge is the economy. People just don't fly as much in a downturn and recent traffic figures suggest the malaise is starting to bite.

The Virgin stock price - already under pressure from the economy and a "half-pregnant" strategy of venturing out of straight discount airline territory into international and business segments - was decimated by a barrage of selling when Toll Holdings flogged its 63% stake in the carrier to Toll shareholders via an in specie distribution in August.

The three options for the Rex shareholders would be: one, get some cash from somewhere and launch a bid then merge the two operations; two, buy cheaply and make a turn on the investment and, three, pull off a bid, strip out the cash and wind up the jet leases and other assets to make a profit.

Operationally, there is not so much in the way of synergies as a lack of overlap. It could work. Rex flies small regional routes and its fleet of turbo-prop SAABs would fit with Virgin's Embraers (a decent Brazilian jet) and its 737s.

Funding would be the issue. Via its investment arm, Temasek, the Singapore Government already owns Singapore Airlines and has a stake in discount carrier Tiger. It would not covet Virgin so Temasek is unlikely to get involved.

Would it be a world first for a regional airline to take over a major domestic player?

if they pull the same cr@p at Vb as they try to do at REX, then all it will achieve is 2 airlines with crewing problems.

Virgin REX Airlines....how ironic!;)

In early morning trading VB are up 15%

REX shareholders havn't got a majority foothold yet... as there are no documents lodged with ASIC yet saying that they own more than 5%

Not to say ASIC havn't uploaded it though.

...Or Skystar320....do you mean when someone has less than 5% there is no need for disclosure !!!

lowerlobe, yes skystar320 is correct.

Less than 5% stake no disclosure required.

"REX the Virgin Airline"
would that be a datal merge of seniority lists???
Watch out Qantaslink whoolf whoolf
:D

Hilarious.

Is this why Dixon stated in November 2006 that he considered REX the single biggest threat to QF operations domestically?

-------Virgin - Rex Your Day!!!--------

Couldn't think of anything worse. Its fear by the singaporean. VB are having some tough times yes but once they get thru this its time for the regional killer to do its job.

alreay up 2.5% today

It's interesting to see that just rumors of rex buying out VB has started to push the price up...

Rex also has just purchased 4 more of their saabs outright (with cash) as well as continuing to buy back company shares, easy to see which company is in a good financial position.

Thankfully there are people still dumb enough to invest in airlines or we'd all be out of a job.

Oh what a lame response, Kangaroo Court

Nominate you for the most idiotic post of the year

Not really Skystar heres what Warren Buffett said about Airlines:

Skystar320...

Kangaroo Court is right that we are lucky to have people dumb enough to invest because if there was no investment the airlines would be in a mess....and that means jobs

But Skystar...you can address the stock exchange tomorro and be on CNN and let them know what a sterling investment the airlines are and why!!!

Why bother buying 4 more aircraft if you cant crew what you already have!
If they are splashing money around on vb shares and more aircraft how about they invest some money in pilot wages might go a long way.

You never know assasin, but I'm afraid if they do, It'll have to be forced upon them.

Latest rumour (crewing wise) is that REX have offered to fund a soon to be bypassed F/O to go away and get some night experience (component for his ATPL), and then come back to start his command training! As most people know, REX will do almost anything except the only thing that will begin to turn this situation around.

Of course the funding was offered in the form of a loan, and the candidate politely told them what they could do with that!

Jesus wept!