Australia’s third largest airline, Rex Regional Express, has cancelled all Boeing 737 flights and has entered voluntary administration after multiple sources said the carrier was on the brink of collapse.
The dire state of the troubled airline’s finances became apparent on Monday when Rex asked the Australian Stock Exchange to halt trading on its stock amidst reports that it has been racking up huge losses of UAD $1 million per week.
Earlier, anonymous sources cited by Bloomberg claimed that Rex was preparing to appoint Ernst & Young as administrators with an announcement expected to be made public on Wednesday.
News of appointing administrators comes just a day after other sources had claimed Rex was looking to appoint consultants from Deloitte to rightsize the airline and create a sustainable turnaround plan.
The current problems at Rex can be traced back to the airline’s decision in the early days of the pandemic to take on Australian airline behemoth Qantas on domestic trunk routes such as Sydney and Melbourne.
At the time, Virgin Australia was in retreat, and capacity was at an ebb, so Rex seized the opportunity to acquire six Boeing 737s and created a domestic network that was far removed from the small, underserved, competition-free regional routes it operates with small Saab jets.
With the pandemic left far behind, Rex has struggled to compete with the likes of Virgin Australia and Qantas, who have been accused of capacity dumping in a bitter price war designed to drive out their rival.
Although Rex’s Boeing 737 operations are being blamed for the airline’s downfall, it’s the airline’s regional network that has become a lifeline for many people living in rural communities, and the potential loss of Rex will be a major cause for concern for lawmakers.
Rex has entered an agreement with Virgin Australia to transfer its Boeing 737 passengers onto the planes of its once rival. Rex will not, however, offer customer refunds.
An earlier version of this article raised the possibility of Rex entering voluntary administration but has been updated to reflect official confirmation from the airline.
