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Rex “well poised” as operating conditions improve

written by australianaviation.com.au | November 26, 2014
A Saab 340B at Sydney Airport. (Seth Jaworski)
A Saab 340B at Sydney Airport. (Seth Jaworski)

Regional Express (Rex) deputy chairman John Sharp says the airline group is on track for an improvement in full year profit in 2014/15 and has foreshadowed a boost to dividends as capital expenditure spending comes down in the current year.

The financial guidance was presented to shareholders at the company’s annual general meeting in Sydney on Wednesday.

“The group believes that its passenger demand has stabilised and FY15’s profit would be better than FY14’s,” Rex said in a slide presentation.

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The regional carrier has reported falling profits for the past two financial years amid a drop in passenger numbers. Despite this, the carrier was Australia’s most profitable airline group in 2013/14, given the heavy losses posted by Qantas and Virgin Australia.

For 2013/14, Rex reported a 44.9 per cent drop in net profit to $7.725 million, while passenger numbers declined 3.4 per cent to 1.053 million.

Sharp told shareholders the drop in net profit came amid “one of the most toxic environments Australian aviation has seen”. However, operating conditions have improved.

“We believe that the Rex group is now well poised to take advantage of the upturn of the economy when that happens,” Sharp said in prepared remarks.

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“Our passenger numbers have stopped declining and fuel prices have remained low during the first part of this financial year.”

The airline did not pay a dividend in 2013/14 due what it said was the sharp decline in profits, substantial capital outlay and uncertain economic environment.

Sharp noted Rex spent $56 million in capital expenditure in 2014/15, purchasing 25 Saab 340B+ aircraft and spares, as well as building a full flight simulator centre.

“The investments are expected to generate a superior rate of return compared to what the group is currently achieving,” Sharp said.

With that spending completed, the airline said it would revisit the question of dividends in the current year.

“There being no more major capital investment on the horizon, the group should be in a position to significantly increase the dividend payout ratio once the recovery is firmly rooted,” Rex said.

Jim Davis, Chris Hine, Ron Bartsch and Neville Howell were comfortably re-elected to the board, while the remuneration report also passed easily.

Rex shares were steady at $1.02 at lunchtime on Wednesday.

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4 Comments

  • Dean

    says:

    When will Rex link it’s hubs in Sydney, Melbourne and Adelaide with direct services?

  • Chuck

    says:

    I would have thought that REX would now be looking at ways to connect its now expanding QLD network which is isolated to those in NSW/VIC. REX would probably need to avoid going head to head with mainline operators on trunk routes, so connections would have to come through regional centres like Mildura, Mt Gambier, Albury, Newcastle, and Toowoomba (Wellcamp).

  • Dean

    says:

    For years Qantas and Virgin have been competing on regional routes so why offload Rex customers to the big 2 for connecting connections to other capital cities. I would think that the deployment of a couple of Saabs connecting, even just Sydney and Melbourne direct, would be well patronized by loyal Rex customers connecting in both directions and would not even need to be promoted or sold as just a Sydney – Melbourne flight, from there who knows, we may just see the emergence of a legitimate 3rd independent mainline airline in this country. Rex has a massive feeder network already established and still makes a profit operating flights on some very marginal sectors. The addition of 5 or so direct Sydney – Melbourne daily flights with high load factors with mainly connecting customers would certainly bolster their bottom line and help offset some of their routes that are even marginal of they have exited recently. For example a marginal NSW regional route would be more viable if 10% of passengers continued on to Melbourne as double the revenue would be created for those passengers

  • Chuck

    says:

    I doubt the economics of S340B on trunk routes….. there just aren’t enough passengers. They would be better off hub-busting, with routes like Canberra-Geelong(Avalon), Canberra-Newcastle, Newcastle-Toowoomba(Wellcamp), or Toowoomba-Townsville. Bypass the hubs where possible and work with the major regional centres with populations above 150,000.

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