REX to transition to ATRs, start domestic jet ops
 

Media release

29 JUNE 2020

ASX RELEASE
REX BOARD HAS APPROVED PLANS FOR DOMESTIC OPERATIONS

Following the announcement to the ASX on 13 May 2020 of the Regional Express Group’s intentions to explore the feasibility of commencing domestic operations in Australia, Regional Express (Rex) has been engaged in confidential exploratory discussions with various parties to assess the availability of funding for starting up domestic operations.

The Rex Board has now formed the view that Rex could successfully embark on domestic operations. Consequently, the Board has approved an initiative to raise a minimum of AUD$30 Million, which the Board now believes will be all that is needed for the launch of limited domestic operations, through one or more of the following avenues: sale-and-lease- back arrangement, equity injection and convertible notes.

Discussions with interested parties including lessors and private equity funds have not been finalised and the Board will reconvene within three weeks to decide on the structure of the fund raising and the maximum amount that will be raised. Where necessary, the Board will seek shareholder approval for the fund raising.

Due to the strong interest shown by various external parties to participate in the fund raising, including lessors willing to provide AUD$30 Million for 15 of Rex’s fleet of 60 unencumbered Saab 340 aircraft, the Board has now formed the view that funding will be forthcoming for the minimum target sought. Consequently the Board has authorised management to commence preparations in earnest for the operation of an initial fleet of five to ten narrow-body jet aircraft to be based out of Sydney and/or Melbourne to service the golden triangle (Sydney- Melbourne-Brisbane). The Board has confirmed 1 March 2021 as the targeted start date for domestic operations, subject to fund availability and regulatory approval.

Rex has also confirmed the execution of a non-binding Memorandum of Understanding with Avions De Transport Regional (ATR), the world’s largest manufacturer of turboprop aircraft, for a range of potential commercial co-operation that would complement Rex’s domestic operations. The scope of the potential co-operation is attached in the Schedule.

Rex’s Deputy Chairman, John Sharp, said, “Rex has the biggest regional network in Australia and we are the only carrier in Australia that has been able to successfully navigate the turmoil and shocks over the last two decades with uninterrupted operational profits since 2003.”

“With Rex’s expansive regional network of 60 destinations, existing infrastructure in all these capital city airports, superior efficiencies and unbeatable reliability, it will simply be an incremental extension for Rex to embark on domestic operations especially since one out of every ten flights in Australia was already a Rex flight during the pre-COVID days. Leveraging on Rex’s existing infrastructure and overheads, our cost base for the domestic operation is estimated to be at least 35% below Virgin’s Australia’s (pre-COVID) with 50% lower additional headcount needed proportionately.”

“Rex’s domestic operations will be priced at affordable levels but will also include baggage allowance, meals on board and pre-assigned seating. Booking channels will include both Rex direct and Global Distribution Systems (GDS). Lounge membership will be available for subscription. It will be a hybrid model that Rex has so successfully pioneered over the last two decades for its regional operations.”

This announcement is authorised by the Board of Directors, Regional Express Holdings Limited.

Regional Express (Rex) is Australia’s largest independent regional airline operating a fleet of 60 Saab 340 aircraft (pre-COVID) on some 1,500 weekly flights to 60 destinations throughout all states in Australia. In addition to the regional airline Rex, the Rex Group comprises wholly owned subsidiaries Pel-Air Aviation (air freight, aeromedical and charter operator) and the two pilot academies Australian Airline Pilot Academy in Wagga Wagga and Ballarat.

This will be the downfall of Rex. Anytime there is competition they whinge whinge whinge.

Successful company when they have a monopoly. Not so much when they have to compete.

With all the money that the Fed government has given them, doesn't this count as a national airline/flag carrier?

don't look over here, but 90 days ago we were on the verge of bankruptcy, a generous Cash bailout of $54million (non repayable)made all those issues disappear.

What a joke. Government should have received equity.

nah "we can't pick winners and losers " says our PM

Wow 30m to start a jet operation. I'm off to the bank via CASA to pick up the AoC.
Oh! That doesn't leave much left. Will work out the planes, simulator, slots, training, gates.

Tiger mark 3?, Compass mark 3? Air Australia mark 2? Jet go mark 2?
Sounds like Singapore wants payback and it doesn’t matter what it costs them!

We all also know who will be their number one VIP in their lounges.

And start in March against a full on Qantas and some form of VA, it is going to end in tears.

$30 mill will get them 10 Fokker F100s easily, with money left to spare for the AOC!

For a business that has been simplicity incarnate for decades they sure seem keen on introducing a lot of complexity at roughly the same time. They're going from a paddle ball to juggling chainsaws. If nothing else, it'll be interesting to watch.

...and the loser will be Virgin Mk2 with REX potentially taking some of the cream off the cake as they struggle to get traction.

Tiger in 2007 startup costs were only $10m for 4 Aircraft and came in under budget.

The same version of Tiger that were almost grounded by CASA for outsourcing their safety department to Singapore, that one?
The same version of Tiger that had staff busted going through Jetstar bins for stationary as legend goes at Melbourne airport? (It is after all a rumour network].

Classic, surprised they just didn’t repaint a Jetstar 320 with a Tiger on the side while they were at it- surely no one would notice!

Well I for one hope they are successful and maybe can soak up a few displaced people from elsewhere, not to mention shutting up a few of the naysayers.

Who in Australasia has spare narrow body (A320s) and ATR72s right now (that isn't in administration)...

Qantas wouldn't get ACCC approval.
Virgin/Tiger obviously don't have the money.
Alliance could swoop in, but they are quite well placed to start up this venture without REX as a partner.

I would be EXTREMELY surprised if Air New Zealand didn't step into this whole in the market. They have spare capital, spare aircraft, spare pilots and simulators for training - and they have been very public this year about their desire to extend their reach within the Australasian regional market.

This is great news!
With the loss of irrational behaviour in the duopoly from VA and Qantas, someone had to pick up the baton.
Enter Rex.
QF alone will swamp the market with cheap seats.
VA will have to follow suit to keep market share.
More jobs for all!

Yeah that’ll go over big with the punters when there’s going to be widespread unemployment in the Australian aviation sector.
Qantas does not play well with others and I expect a vigorous response from both them and Bain.

Here we go again, they will start up and if they fall Virgin/Bain will buy them out and call it Tiger.