Regional Express (Rex) has swung back to profitability in 2016/17 and says it expects clearer skies ahead amid lower fuel prices and an improving local economy.
The airline group reported statutory net profit after tax of $12.62 million for the 12 months to June 30 2017, a return to the black following a net loss of $9.56 million in the prior corresponding period when it booked an impairment charge relating to the loss of a Defence contract.
Revenue rose 7.3 per cent to $281 million, Rex said in a regulatory filing to the Australian Securities Exchange on Tuesday.
Rex executive chairman Lim Kim Hai said it was a “truly solid performance” in 2016/17.
“I see a bottoming out of the declines we experienced in the prior six years with a modest but clear recovery of passenger numbers in FY17, which no doubt mirrors what is happening in the Australian economy,” Lim said in a statement.
“Early indications from the first two months of this new financial year confirm the trend we saw in FY17.”
Operational profit before tax, which excludes one-off charges and was regarded as the best indication of financial performance, was $17.8 million, more than four times the $4.3 million result in the prior year and better than company guidance issued in June for an improvement in excess of 250 per cent.
Passenger numbers rose nine per cent to 1.192 million, while passenger revenue per available seat kilometre (RASK) – a measure of demand – improved two per cent.
Meanwhile, the average fare increased to $213.9, from $207.6 in the prior corresponding half.
Capacity, measured by available seat kilometres (ASK), expanded 6.4 per cent, with 2016/17 the first full year of Rex’s operations in Western Australia operating two government-regulated routes that began in February 2016.
Load factors improved 2.6 percentage points to 57.3 per cent.
In terms of the outlook, Rex said it expected further profit growth in the current financial year.
“The board believes that the Australian economy will continue on a modest recovery and this will translate to a similar growth in Rex’s passenger numbers,” Rex said.
“If this growth materialises, Rex sees its profits increasing in the mid teens percentage compared to the prior year.”
Further, Rex deputy chairman John Sharp said there were good prospects for Rex’s fly-in/fly-out (FIFO) operations, given the recent profit results from the major miners.
“Mining fly-in/fly-out operations show a sign of firming up and the numbers of those increasing,” Sharp said during the company’s full year results presentation.
“You would have noticed that BHP’s profits have been very substantial in the last week or so, (Andrew) ‘Twiggy’ Forrest’s business Fortescue Metals reported a very significant profit growth and that’s a reflection of the fact the price of iron ore and coal and other minerals has all gone up in the last 12 months.
“Those companies are now trading more profitably and as a result more activity is taking place and that means more fly-in/fly-out opportunities for companies like Pel-Air and Rex.”