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Rex says regional decline may have bottomed out after posting return to profitability

written by australianaviation.com.au | February 28, 2017
A Regional Express (Rex) Saab 340 aircraft.
A Regional Express (Rex) Saab 340 aircraft.

Regional Express (Rex) says there are signs the worst may be over after swinging back to profitability in the first half of 2016/17.

The company reported statutory net profit after tax of $6.2 million for the six months to December 31 2016, a return to the black following a $11.4 million statutory net loss in the prior corresponding period when Rex booked an impairment charge relating to the loss of a Defence contract.

Revenue rose 8.8 per cent to $144.3 million, Rex said in a regulatory filing to the Australian Securities Exchange on Tuesday.

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Rex chief operating officer Neville Howell said the company was pleased with the first half results.

“We see indications of the bottoming of the decline in regional travel in the first half of the financial year,” Howell said in a statement.

“If this trend continues in the second half, then this would strongly suggest the beginning of a recovery in the Australian regional economy.

“Rex is well positioned to take full advantage of a recovery in the regional economy and we are confident of turning in very strong results when the rebound happens.”

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The company said in its half-year report the improvement in the bottom line was supported by the performance if its new West Australian routes that commenced a year ago, reduction in fuel costs and a stronger Australian dollar.

Passenger numbers rose 11 per cent to 612,284, while passenger revenue per available seat kilometre improved 1.3 per cent.

Meanwhile, the average fare increased to $213.50, from $205.70 in the prior corresponding half.

Rex began two WA-government regulated routes in February 2016, taking over Perth-Esperance and Perth-Albany services from Virgin Australia.

A slide presentation accompanying Rex’s half year results highlighted the performance of the two routes in comparison to the rest of the airline’s network with load factors on WA flights at 75.5 per cent in WA versus 56.6 per cent on the rest of the network.

Despite the broadly positive set of numbers, Rex said there were still some headwinds in the period ahead, citing the prospect of a stronger US dollar and the the threat of “protectionism by USA” which could slow the world economy.

While Rex declined to offer specific profit guidance for the full 2016/17 year due to “global uncertainties and extreme volatility”, the company did say profit before tax was expected to “be an improvement” from the prior year.

Also, the company said the board would recommend the resumption of dividends “if the full year results indicate that the trend of passenger decline has bottomed out”.

Fly into Spring with Australian Aviation’s latest print edition. Starting from $49.95 a year, you can read comprehensive coverage on all sectors of the industry to keep you in the loop. Get your hands on the subscription today. Subscribe now at australianaviation.com.au.

7 Comments

  • Nick

    says:

    Rex needs to enter more domestic regional routes in Western Australia. We don’t get the luxury of having budget airlines fly between our towns just money hungry qantas and virgin. And some of the highest airfares in Australia. Rex come Esperance VIA Kalgoorlie, or comence a Perth, kalgoorlie, Adelaide service and link your west Australia network to the east coast

  • deano

    says:

    Perhaps VA could have a look at the REX model as they are turning a profit on mid 50% load factors, yet VA have load factors in the 80%s and still struggle to stay in the black

    Still not understanding why REX won’t enter the mainline sector linking their hubs
    Half a dozen older 717s / F100s or 737s linking Sydney, Melbourne, Adelaide, Perth and Cairns
    34″-35″ pitch seating, meals and baggage included, kind of premium economy
    Surely they would have enough onward passengers from their regional destinations to fill most flights, plus selling sector only seats
    With QF and VA seating at 30″ and 31″ pitch seating, there is nothing available between sardine class and business and this point of difference would attract patrons
    Going from 30″ to 35″ pitch on a 737 would only lose 30 seats from 180 (about 15%)

  • Harry

    says:

    Nick,

    Think some WA fares are high, look at flights in & out of CBR(most passengers aren’t paying their own way, ie. public servants & those going to see public servants)

  • john

    says:

    Deano,

    Rex doesn’t want to compete again Virgin & Qantas, but airports like Essendon can easily handle an F100 & offer a point of difference, especially in 10-20 years when western Sydney airport opens.

    Come to think of it, there’s demand for a Bankstown/Essendon & a Bankstown/Archerfield.

    Someone was looking at it, using Vincent Saab 340’s before Vincent went down, nearly 3 years ago I think it was.

    Also Albury now has no jets, except Jetgo 37-44 seaters to Brisbane.

    A F100 Albury/Brisbane would work & costwise, would be far more economical than a 37-44 seater jet, as well as to Sydney, as no Albury/Sydney jets anymore.

    Catch is what do you do with F100’s the rest of the week ?

  • Joseph

    says:

    yes Bankstown should be used for commercial flights. It has a small terminal & car parking is free. One of the rental car companies is already there (Thrifty I think it is) & car hire is much cheaper than at Mascot, as Sydney airport charges rental car companies massive fees.

    Many people forced to fly to Mascot don’t want to go anywhere near the eastern suburbs or north shore, ie they want to go west or live in west & don’t enjoy going all the way to Mascot.

    Parramatta is now the 4th biggest metropolis in Australia after MEL, SYD & BNE I read somewhere recently.

    Mascot is plagued by constant delays when weather is fine. Bring on some rain & it’s a nightmare.

    Badgerys might be finished in 10 years or it might take longer. Who knows.

  • Zachary Clark

    says:

    REX should fly to my home town Port Macquarie.

  • Gordon

    says:

    Maybe Rex could look at some of Virgins unprofitable rural routes that could be more suited to their operations or provide an alternative to Qantas Link with on carriage agreement with Virgin.

    But history does show that we tend to end up with two airline groups.( Ansett/Virgin vs TAA/Qantas)

    Nick, good idea for Rex to look at routes out of CBR – agree as a non government employee who goes to CBR to visit family and friends that the fares are inflated and there are not many discounts seats offered.

    John and Joseph, using the secondary airports would be a great alternative as these tend to be in opposite parts of the city to the main airport but i believe there would be a problem with the residential areas around these sites complaining about the noise and upgrading of facilities.

    Deano, I believe you bring to the discussion a very valid point, Increasing the pitch of the seats would provide a point of difference and i think that people will pay a small extra cost for these seats.

    We should all be glad that REX is back in profit and providing some real competition to the other airlines.

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Rex says regional decline may have bottomed out after posting return to profitability

written by australianaviation.com.au | February 28, 2017
A Regional Express (Rex) Saab 340 aircraft.
A Regional Express (Rex) Saab 340 aircraft.

Regional Express (Rex) says there are signs the worst may be over after swinging back to profitability in the first half of 2016/17.

The company reported statutory net profit after tax of $6.2 million for the six months to December 31 2016, a return to the black following a $11.4 million statutory net loss in the prior corresponding period when Rex booked an impairment charge relating to the loss of a Defence contract.

Revenue rose 8.8 per cent to $144.3 million, Rex said in a regulatory filing to the Australian Securities Exchange on Tuesday.

Advertisement
Advertisement

Rex chief operating officer Neville Howell said the company was pleased with the first half results.

“We see indications of the bottoming of the decline in regional travel in the first half of the financial year,” Howell said in a statement.

“If this trend continues in the second half, then this would strongly suggest the beginning of a recovery in the Australian regional economy.

“Rex is well positioned to take full advantage of a recovery in the regional economy and we are confident of turning in very strong results when the rebound happens.”

PROMOTED CONTENT

The company said in its half-year report the improvement in the bottom line was supported by the performance if its new West Australian routes that commenced a year ago, reduction in fuel costs and a stronger Australian dollar.

Passenger numbers rose 11 per cent to 612,284, while passenger revenue per available seat kilometre improved 1.3 per cent.

Meanwhile, the average fare increased to $213.50, from $205.70 in the prior corresponding half.

Rex began two WA-government regulated routes in February 2016, taking over Perth-Esperance and Perth-Albany services from Virgin Australia.

A slide presentation accompanying Rex’s half year results highlighted the performance of the two routes in comparison to the rest of the airline’s network with load factors on WA flights at 75.5 per cent in WA versus 56.6 per cent on the rest of the network.

Despite the broadly positive set of numbers, Rex said there were still some headwinds in the period ahead, citing the prospect of a stronger US dollar and the the threat of “protectionism by USA” which could slow the world economy.

While Rex declined to offer specific profit guidance for the full 2016/17 year due to “global uncertainties and extreme volatility”, the company did say profit before tax was expected to “be an improvement” from the prior year.

Also, the company said the board would recommend the resumption of dividends “if the full year results indicate that the trend of passenger decline has bottomed out”.

Fly into Spring with Australian Aviation’s latest print edition. Starting from $49.95 a year, you can read comprehensive coverage on all sectors of the industry to keep you in the loop. Get your hands on the subscription today. Subscribe now at australianaviation.com.au.

7 Comments

  • Nick

    says:

    Rex needs to enter more domestic regional routes in Western Australia. We don’t get the luxury of having budget airlines fly between our towns just money hungry qantas and virgin. And some of the highest airfares in Australia. Rex come Esperance VIA Kalgoorlie, or comence a Perth, kalgoorlie, Adelaide service and link your west Australia network to the east coast

  • deano

    says:

    Perhaps VA could have a look at the REX model as they are turning a profit on mid 50% load factors, yet VA have load factors in the 80%s and still struggle to stay in the black

    Still not understanding why REX won’t enter the mainline sector linking their hubs
    Half a dozen older 717s / F100s or 737s linking Sydney, Melbourne, Adelaide, Perth and Cairns
    34″-35″ pitch seating, meals and baggage included, kind of premium economy
    Surely they would have enough onward passengers from their regional destinations to fill most flights, plus selling sector only seats
    With QF and VA seating at 30″ and 31″ pitch seating, there is nothing available between sardine class and business and this point of difference would attract patrons
    Going from 30″ to 35″ pitch on a 737 would only lose 30 seats from 180 (about 15%)

  • Harry

    says:

    Nick,

    Think some WA fares are high, look at flights in & out of CBR(most passengers aren’t paying their own way, ie. public servants & those going to see public servants)

  • john

    says:

    Deano,

    Rex doesn’t want to compete again Virgin & Qantas, but airports like Essendon can easily handle an F100 & offer a point of difference, especially in 10-20 years when western Sydney airport opens.

    Come to think of it, there’s demand for a Bankstown/Essendon & a Bankstown/Archerfield.

    Someone was looking at it, using Vincent Saab 340’s before Vincent went down, nearly 3 years ago I think it was.

    Also Albury now has no jets, except Jetgo 37-44 seaters to Brisbane.

    A F100 Albury/Brisbane would work & costwise, would be far more economical than a 37-44 seater jet, as well as to Sydney, as no Albury/Sydney jets anymore.

    Catch is what do you do with F100’s the rest of the week ?

  • Joseph

    says:

    yes Bankstown should be used for commercial flights. It has a small terminal & car parking is free. One of the rental car companies is already there (Thrifty I think it is) & car hire is much cheaper than at Mascot, as Sydney airport charges rental car companies massive fees.

    Many people forced to fly to Mascot don’t want to go anywhere near the eastern suburbs or north shore, ie they want to go west or live in west & don’t enjoy going all the way to Mascot.

    Parramatta is now the 4th biggest metropolis in Australia after MEL, SYD & BNE I read somewhere recently.

    Mascot is plagued by constant delays when weather is fine. Bring on some rain & it’s a nightmare.

    Badgerys might be finished in 10 years or it might take longer. Who knows.

  • Zachary Clark

    says:

    REX should fly to my home town Port Macquarie.

  • Gordon

    says:

    Maybe Rex could look at some of Virgins unprofitable rural routes that could be more suited to their operations or provide an alternative to Qantas Link with on carriage agreement with Virgin.

    But history does show that we tend to end up with two airline groups.( Ansett/Virgin vs TAA/Qantas)

    Nick, good idea for Rex to look at routes out of CBR – agree as a non government employee who goes to CBR to visit family and friends that the fares are inflated and there are not many discounts seats offered.

    John and Joseph, using the secondary airports would be a great alternative as these tend to be in opposite parts of the city to the main airport but i believe there would be a problem with the residential areas around these sites complaining about the noise and upgrading of facilities.

    Deano, I believe you bring to the discussion a very valid point, Increasing the pitch of the seats would provide a point of difference and i think that people will pay a small extra cost for these seats.

    We should all be glad that REX is back in profit and providing some real competition to the other airlines.

Leave a Comment

Your email address will not be published. Required fields are marked *

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