REX AIRLINES Trading Halt
 

It hasn't cratered but it does continue to decline. $0.60 was seen as a protection level but once it fell through it, the share price continued to decline and is now $0.56 meaning the share price is exactly half of what it was this time last year. It is likely it will test $0.55 in the next few days and, with no sign of any meaningful demand, it is just as likely to be approaching $0.50 by the time the annual results are released at the end of August.

Nev has a base salary as reported the other month of $350k. They have previously said they don’t believe in high salaries for management, however these people are likely not employable anywhere else which is why they are still there.

A early start to the holiday is only really 2 or 3 days worth of red ink for him.

Again, Rex (a few mongrels at HQ) show how obsessed they are with being dodgy and corrupt. The sooner this circus closes the better for everyone. Sure, many workers will feel the pinch but will be better for Australian aviation in the long term to see these clowns gone. Most of those saab guys are dinosaurs or green cadets.

REX AIRLINES Trading Halt
 

A article in tomorrows Australian saying Deloitte has been called in to look over the books.

It's out:

https://archive.is/rHiex/again?url=h...6e7facc6%3Famp

Yikes
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It’s quite frustrating to read that, again, another case of airline management down under who burn the house to the ground and wait until only smouldering pieces remain before calling in help, front line workers and families now suffer the consequences.

It didn’t need to be like this, I think this 737 operation could have worked, could have been done differently, but it’s been done the Rex way. It’s clear PAG are not offering further funding.

Rex needs to go back to being Rex. The issue is, the old Rex is also wounded with a depleted Saab fleet. Disposing of the Jets and going back to ‘what once was’, isn’t that easy either.

Not good for anyone if they go under.


REX CALLS IN TURNAROUND SPECIALISTSStories abound of instability in the nation’s aviation sector. Budget airline Bonza fell into administration in April. The mooted listing of Virgin Australia keeps faltering, and now Qatar Airways wants to gobble up a strategically important part of it.

And what of Regional Express? Its executive chairman, Lim Kim Hai, was hot-swapped in June for deputy chair John Sharp, a former transport minister in the Howard government. Lim had served as executive chairman for 21 years, and aside from brief remarks issued by the company acknowledging his “extraordinary service”, no further reason was provided for this sudden and startling tweak to the board.

Seething, as you would expect, Lim went on to requisition a shareholders meeting to remove Sharp and three other directors from the board: Lee Thian Soo, Ronald Bartsch and Jim Davis. No reasons were provided for that development either.

This upheaval is taking place just as Rex finds itself in a spot of serious financial bother, so serious, it seems, that Margin Call hears that the airline has invited a turnaround team from Deloitte to rifle through its books and try to stop the proverbial plane from crashing into the mountain.

Leading that team are Sal Algeri and Richard Hughes, memorable for their role in the recovery of Virgin Australia after that airline slid into voluntary administration in 2020. Deloitte didn’t respond to questions about Rex and Rex itself declined to comment. “Given Rex is a public company, we do not respond to press or market *rumours or speculation,” a spokesman said.

Rex’s troubles are not necessarily with its regional routes, which are said to be profitable, but with its expansion into the prized city destinations of Sydney, Melbourne and Brisbane, known in the industry as the Golden Triangle (a misnomer, by the way, the route connecting them forms no obvious triangle).

An expansion into those capital city markets began in 2020, its market share remains in the single digits, and the whole jolly has cost the business dearly. Deloitte’s partners are in a fever attempting a restructure solution as a rescue package. That too, we hear, is teetering towards failure.

Where to from here? Rex’s Golden Triangle dilemma could become intractable enough to push the airline into administration. Whether or not that occurs, the appearance of Deloitte’s clean-up team at least provides a plausible explanation for the airing of linen about to start in the boardroom.

After all, it was Sharp who said last year that profitability mattered more than market share, a remark made only after Rex posted a loss of $16.5m for the half to December 2022. Its latest results weren’t quite as fugly – a $3.2m loss for the half to December 2023

Another heapin' helpin' of that good old Rex arrogance! Given Rex is a public company, they have an obligation under S.674 of the Corporations Act 2001 to disclose to the market any information that would reasonably be expected to have a material effect on the price or value of the company.

It would be great if reporters commenting on financial matters could properly interpret financial reports. Rex's H1FY24 operating results were manifestly worse than H1FY24.

This sounds like the Bonza playbook. Nothing to see here, everything going well, plenty of cash for the next two years. Then call for financial advice to dig themselves out of a hole. Leading to bingo, doors are closed, see you later. The tax payer picks up the allowances and the needle returns to the start…

Events back in 2007 have led Rex to where they are now. That's when they decided they owned staff and didn't have to work with their employees to achieve a better workplace. Since then instead of real expansion the airline has generated profits from cost cutting and cherry picking subsidies, none of which are solid long term business plans for a company which main focus should have been its traditional regional customers. Instead their heart in the country is now being picked apart by QLink adding to their major competitors profit and expansion/upgrades. I could probably point directly at 3 or 4 major years in history where regional patronage was booming only to be stymied by a lack of staff, mainly pilots, leading to a loss of reliability and passengers jumping ship or driving. So even thugh Rex has been profitable in the past they could have been exponentialy more successful had they not hit these management induced speed humps.

Agreed on both points!

You’d think if you’re are calling in Deloitte to look at restructuring the business - then the ASX probably should have been told!

And it constantly surprises how little digging business journalists from the Australian or AFR do into Rex.

Safe to say, it is likely that REX will be suspended from quotation on Monday and when/if is appears back available for trade the actual price could be somewhere between $0.05 and $0.20.

Yikes indeed!

Do you hear that? Chickens coming home to roost.

It's a bit hard to say without knowing where they've landed this FY.

My view - and it's just an opinion - is that they are probably worth a bit more than that, given the variety of potential revenue streams that they have. I'm also a view that, while they have basically just sleepwalked their way into this predicament, they've at least called in administrators before they have completely exhausted all their cash. Things MIGHT be salvageable (emphasis on MIGHT).

What will Deloittes tell them ? You are losing money on 737 routes so stop flying those. You don’t have enough and can’t keep pilots and engineers so you need to pay them more and put up ticket prices to cover that. Trouble is then you have less paying customers and probably the pilots at least will still leave. I hope like hell they survive but am not confident.

Deloitte will have access to the complete warts-and-all dataset of booking profiles, yields, cashflow, etc and will be able to take a very focussed commercial view of proceedings.

PelAir is almost certainly profitable so there's a starting point.

There is almost certainly a kernel of profitable routes for the B737s, just as there are routes that have just been cash incinerators. There may be a play by exiting some routes and increasing frequency on others.

You'd have a good look at what's going on with the Academy. You'd also have a look at NJE - it looked like it was on the cusp of profitability at the end of last year.

There may be a path out of it, there may not - as the Zen Master was fond of saying, "We'll see."

They don’t have any real stability, it’s been an issue and they have done nothing to address that. Have a look at the fleet in the air now, GDS is showing roughly 50% loads for the 7 NGs up right now. Transcontinental Perth not looking that flash.

Watch ancillary revenues start to appear. Basic Economy would be a start, bring the price down, watch the loads jump very quick.

Probably best to get Deloitte in while LKH is not holding the power. Not someone I can imagine working with such people. Just imagine lol.

Are you saying the 737 operation is saveable Mick? Because I thought it was losing $1m a week.

And would exiting some routes and increasing frequency on others be enough to turn that around? It seems like a big ask….

I'm speculating, Colonel. Presently, they are probably losing more than $1 million a week on domestic jet ops, where said ops consists of around 314 or so flights a week, covering some 11 city pairs (12 if you count the E-jets doing ADL-PER three times a week). Two thirds of those flights are on the triangle.

There are a couple of routes that seem to see not unreasonable pax numbers; MEL-OOL springs to mind. There are many routes where they are just torching cash; SYD-MEL leaps off the page when you look at this month's numbers.

Could you construct a route structure/flight schedule/pricing strategy that is better commercially than the current offering? Undoubtedly! Could it sustainably make money for them? Your guess is as good as mine.

One thing for sure and certain is that if they have engaged Deloitte, they will be able to cut through bullsh!t and determine if there's a pathway out.

I don't think LKH will take an ounce of notice of Delloites if he wins the boardroom battle, and he will shut the investigation down. Let's hope the current board have got the kahunas to take him on all the way and prevent this from happening. Seems like Nifty is gearing up to be a casualty of the purge.