Rex Airlines Expansion: 19 May 2020
The REX board of directors have initiated talks with cashed up firms wishing to partner and establish a capital city domestic airline, adding to REX’S current profitable regional network.
“A final decision on commencing domestic capital city flights is expected to be made within the next two months.
At this early stage it is unclear if REX will also offer a domestic air freight services and uplift air cargo in the bellies of their passenger aircraft. In relation to air freight, a lot will depend on the type of aircraft REX uses on their domestic routes, it is expected that REX will utilize 737 narrow body aircraft (which will limit air freight capacity) . REX will also need some type of platform to enable handling ( load and unloading ) air freight at terminals around Australia . Air freight in the bellies of domestic REX flights is certainly another way for the airline to add extra ( low cost) revenue to the intended venture (with variable costs) and with little cash outlay requirement. We think REX could offer a great domestic air freight service between capital cities, in addition working with another carrier REX would be in a position to offer a comprehensive national air cargo service (perhaps working with a competitor?)
REX’S Deputy chairman Mr John Sharp commented on ABC Radio : “Rex has been approached by a number of private equity investment bank firms, with the proposition that we should be commencing services between the capital cities around Australia.”
He also stated “Presently, Rex flies from regional centres to all the capital cities in Australia. And the proposition is that we add to that by flying between them and provide a domestic air service in place of the services that was provided by Virgin [Australia].”
Mr Sharp also stated that the airline had been advised that investors with A$200 million (the estimated capital required to launch the expansion) are readily found
The Deputy Chairman also commented that REX was likely to acquire aircraft at very attractive prices considering the current parked and idle fleet of 737’s ( and other aircraft)in Australia.
Mr Sharp commented “A number of people have expressed the belief that it’s going to be very difficult for Virgin to rise from the ashes, given the very heavy cost burden that it carries, the very heavy debt that it carries. And the very high wages that the various enterprise bargains, agreements, impose on the new prospective owners that might take over Virgin.”
Airline flight data reveals Australia’s largest airline Qantas currently holds over 40% market share between capital cities with Virgin Australia holding over 30%. Low cost airline operators Jetstar holds 18%. Brisbane, Melbourne, Sydney and Perth have the highest seat capacity.