Australia’s third largest airline, Rex Regional Express, is said to be in dire straits and has placed a trading halt on its stock amid media reports that the carrier has been losing as much as AUD $1 million per week.
In a bid to save the airline from going bust, experts from accountancy and consultancy firm Deloitte have been called in to see whether a turnaround plan could save Rex from the brink of collapse.
Things took a dire turn on Monday when Rex, which has been listed on the Australian Stock Exchange since 2005, announced that securities in parent company Regional Express Holdings Limited would be placed in a trading halt.
The trading halt will remain in effect until Wednesday 31st July at the earliest but it could be extended as the airline’s embattled management team prepare an announcement to release to the market.
Analysts believe the current troubles at Rex can be traced back to the airline’s decision to go head-to-head with Australia’s two dominant carriers, Qantas and Virgin Australia, on key domestic routes.
Rex started life as a regional carrier operating small Saab 340 aircraft on underserved routes with no competition. But at the start of the pandemic, the airline saw an opportunity to expand into the larger domestic market.
With capacity and competition at an ebb, Rex acquired six Boeing 737s that had been offloaded from Virgin Australia and launched domestic flights on key trunk routes like Sydney – Melbourne.
But as Qantas and Virgin Australia emerged from the pandemic, Rex faced price wars and capacity dumping that put intense pressure on the airline.
Rex quickly started to rack up losses as it attempted to compete with Australia’s two largest airlines. At the same time, the airline also faced scrutiny from the Australian Securities and Investments Commission, which has resulted in major leadership changes at a critical point in Rex’s history.
The Transport Workers Union (TWU) has blamed flag carrier Qantas for the current turmoil at Rex, accusing the airline of capacity dumping and slot hoarding to put pressure on Rex.
The union says competition is desperately needed, not only to bring down prices for consumers but also to improve working conditions for employees.
News of financial difficulties at Rex comes just months after Australian low-cost startup Bonza went into administration – another airline that decided to start domestic Boeing 737 operations during the pandemic.
Many entrepreneurs have tried to break the Australian aviation market, but sadly, many have also failed.
