Rex targets double-digit profit growth despite “ominous” headwinds

written by australianaviation.com.au | November 21, 2018
Regional Express Saab 340B aircraft at Cairns. (Seth Jaworski)
Regional Express Saab 340B aircraft at Cairns. (Seth Jaworski)

Regional Express (Rex) has reaffirmed expectations of double-digit profit growth in the current financial year even as it faces substantial challenges from the impact of global events on the local economy.

While the company reported a 34 per cent improvement in net profit in 2017/18, Rex deputy chairman John Sharp told shareholders at the company’s annual general meeting in Sydney on Wednesday the board was “under no illusion that this financial year will continue in the same giddy trajectory”.

“We face ominous global and local headwinds that will not fail to have its impact eventually on the Australian economy,” Sharp said in prepared remarks.

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Sharp said those global and local headwinds include the trade war between the United States and “virtually everyone else”, US sanctions imposed on Iran that are “responsible for Brent oil … powering towards US$100 per barrel” and the weakness of the Australian dollar.

There is also the world-wide shortage of pilots, which has led to a reduction in capacity and a rise in the airline’s cancellation rate in 2017/18.

Rex posted net profit of $16.9 million for 2017/18, up from $12.6 million in the prior corresponding period. The result was above company forecasts of a 20 per cent increase.

While the company said at the time of the full-year results announcement in August there were “grounds to believe” the airline group would achieve double-digit growth for 2018/19, there were too many uncertainties in the external environment to provide a reliable profit forecast.

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Sharp told shareholders indications so far in the current financial year suggest Rex was on track meet that target.

“The board is cautiously confident that the group will still be able to turn in at least double-digit growth for the new financial year if fuel prices remain at today’s level,” he said.

“The revenue growth in the first quarter of the financial year bears out the optimism of the board.”

Also on a positive note, a slide presentation accompanying Sharp’s address to shareholders noted the recently launched Western Australia routes would “bring additional contribution to the group”, while the Australian economic recovery “seems to have continued strength”.

Rex won the West Australian government tender to operate flights from Perth to Canarvon and Monkey Mia in January and flights began in July.

Meanwhile, stronger international enrolment at Rex’s pilot training school in Wagga Wagga, the Australian Airline Pilot Academy, was another “tailwind” for the company.

Sharp thanked staff for going “way above and beyond” to minimise disruptions to the flying schedule from the impact of the pilot shortage on regional aviation.

“I would like to single out the pilot group in particular who have accepted last minute call outs so that regional passengers do not miss their hospital appointments or the important business meeting,” Sharp said.

“Rex, and indeed the regional communities we service, owe them a huge debt of gratitude.”

Oil prices come off recent highs

While Brent crude oil prices topped US$86 a barrel in early October, they have fallen steadily since and currently sit at close to US$62 a barrel, levels not seen since late 2017.

Figures from the International Air Transport Association (IATA) showed jet fuel prices have risen about 13 per cent in the past 12 months.

However, they were down about 11 per cent in the past month, according to the IATA jet fuel price monitor.

A Regional Express (Rex) Saab 340 aircraft.
A Rex Saab 340.

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Rex targets double-digit profit growth despite “ominous” headwinds Comment

  • Mick

    says:

    When will Rex do something about fleet renewal? Those Saab 340’s are mostly pushing 30 years old now.

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