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Rex says profits up but future bleak

written by australianaviation.com.au | March 1, 2012
Despite a rise in profits, Rex has predicted a dark future for regional aviaition. (Scott Mason)

Good news has rarely sounded so bad.

Regional Express released first half financial results this week showing solid profits of $18.5 million but predicting a dismal future, with a “toxic” economic environment and “draconian” government policies conspiring against regional aviation.

“The twin effects of the impending global economic slowdown and the federal government’s draconian policies on regional aviation will no doubt succeed in wiping out regional air services to all but the biggest regional centres over the next few years,” the airline said in a statement, adding that it soon might be forced to cut services on unprofitable rural routes.

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Australia’s largest independent regional carrier singled out the carbon tax for criticism, saying it would cost the airline more than $6 million per year even as fuel prices continue to skyrocket.

While the comments reflect Rex’s longstanding public stance against the carbon tax, the numbers released this week lent some new weight to its bleak assessment of the future of regional aviation.

The airline’s passenger numbers for the six months through to December 31 fell 4 per cent while costs per seat kilometre increased more than 8 per cent, mostly due to rising fuel prices. Rex said its positive financial results were mainly due to the strong growth of mining charters for subsidiary Pel Air as well as the commencement of Pel Air’s contract with Ambulance Victoria.

Those numbers underscored the extent to which regional aviation has reflected the increasingly “two-speed” economy of much of rural Australia, with growth overwhelmingly driven by the mining and natural resources sectors. Rex said those factors could force it to shift its focus away from passenger services that provide a vital link for regional towns – a threat it clearly hopes to leverage for more favourable treatment by Canberra.

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“Rex will be monitoring the situation closely and in the absence of a more favourable environment will be compelled to divert its resources from marginal regional routes to more lucrative mining charters in order to protect shareholders’ returns,” the carrier said.

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