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Rex returns to profit, says outlook bright

written by australianaviation.com.au | August 29, 2017
A Regional Express (Rex) Saab 340 aircraft.
A Rex Saab 340.

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.

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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.

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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.”

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9 Comments

  • deano

    says:

    REX continues to make profits on under 60% load factors
    VA is losing money on 80%+ load factors
    Perhaps REX could buy out VA for $1, like VA bought out Tiger, and turn VA around….

  • matty

    says:

    Hope they’re budgeting for replacement aircraft because the SAAB’s will not live forever!!

  • Barry Walsh

    says:

    They could drop flight prices to Tas as it is more to fly from Burnie/Wyn to Melb than from Melb to Bris.!!!!

  • random

    says:

    Where to next for REX on fleet replacement? A decision has to come eventually. What is the logical replacement?

  • Ben

    says:

    They could drop fares on a lot of sectors – but therein lies their success. They find niche markets where no one else will fly and due to no competition, they can charge higher fares. I like what they offer though. The staff seem friendly and I always think it’s a nice touch that the pilot waits at the bottom of the stairs to see you on and off the plane. Some of the Saabs are quite nice, with the newer/brighter interior. However others look very old and tired when you get inside. I’ve always thought the ATR 42-600 would be a great replacement aircraft. They are slightly bigger than the Saabs, but are still available new from the manufacturer. Trouble is, to replace all the Saabs, you’d need 50+ of the ATR. I can’t imagine that would be cheap. Even if Rex is profitable, I don’t know how they’d raise the capital for that. Still, it would be interesting to know what their long term fleet strategy is,

  • Robert Allcock

    says:

    I am REX shareholder and customer for a long while now(also pilot.) Well done REX with forward looking views on Pilot Training and inclusion of all peoples in such.

  • Bren

    says:

    My flight booking a week early was 3 times the price of someone who booked 36hrs prior !!! If there was competition i would not fly REX !! Especially when i was was in the rear row of the aircraft and the hosty was profusely apologizing for the metal rattle coming from behind the cargo hold we even got offered ear plugs to block the noise! Really REX roll on competition

  • Craigy

    says:

    @ Barry Walsh. Maybe it is more expensive because you only have a max of 34 passengers to cover the cost of the service versus 170 odd on a B737 or A320.

  • Paul Case

    says:

    @ random… Should REX replace Saab with Kingair?

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