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Rex bracing for tough 2019/20

written by australianaviation.com.au | August 23, 2019
A file image of Rex Saab 340Bs in Cairns. (Seth Jaworski)
A file image of Rex Saab 340Bs in Cairns. (Seth Jaworski)

Regional Express (Rex) says it is bracing for tough times ahead amid a deteriorating global economy after posting a small improvement in net profit for 2018/19.

The regional airline group said net profit for the 12 months to June 30 2019 rose 3.6 per cent to $17.5 million, compared with $16.9 million in the prior corresponding period.

Revenue rose 7.5 per cent to $317.6 million, Rex said in a regulatory filing to the Australian Securities Exchange (ASX) on Friday.

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Rex executive chairman Lim Kim Hai said it was a harsh operating environment, as the ongoing trade tensions between China and the United States had hit economic growth in Australia and around the world.

That, in turn, had led to a difficult second half of 2018/19.

“I am pleased that Rex is still able to maintain the same level of profitability as the prior financial year with the strong momentum of the first half just about balancing the downward pressures of the second half,” Lim said in the airline’s annual report.

Rex said it carried 1.27 million passengers in 2018/19, a 3.6 per cent increase on the prior year.

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Capacity, measured by available seat kilometres (ASK), rose 2.9 per cent, while load factors improved 1.8 percentage points to 63.1 per cent.

And the average fare was up $5.90 or 2.7 per cent, to $222.3.

However, the airline’s total fuel bill jumped 30 per cent to $42.5 million in 2018/19, from $32.7 million in the prior year.

Looking ahead, the airline group said it expected passenger numbers would be “stagnant” in the current year, based on trading conditions over the past six months.

Further, a weaker Australian dollar was expected to again have a negative impact in the current financial year as it did in 2018/19, Rex said.

As a consequence, Rex has guided the market to expect a lower profit in 2019/20.

“Rex will not be spared the full brunt of the global headwinds in the new financial year, and our profits could be eroded by 15-20 per cent as things stand,” Lim said.

“However, with virtually no debt and very strong foundations, we are confident that Rex will have the wherewithal to wait out this slowdown just as Rex traversed the period following the Global Financial Crisis while still making operational profits every year.”

Despite the gloomy outlook and the “possibility of a technical recession in Australia”, Lim said there were some parts of the market doing well.

“Surprisingly mining activities seem to be re-gaining momentum, and there is a good chance that the group could pick up some additional charter operations,” Lim said.

“Also, pilot training is still facing strong worldwide demand and talks are underway with international partners to train more pilots for international carriers at the Group’s pilot academy, AAPA, based in Wagga Wagga.”

Rex declared a final dividend of eight cents per share, fully franked.

The small improvement in Rex’s bottom line followed Qantas reporting a 6.5 per cent decline in full year net profit on Thursday. Virgin Australia, which was due to hand down its financial results on August 28, has guided the market to expect an underlying loss for 2018/19.

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2 Comments

  • Ralph Hendriksen

    says:

    Being one of the most unreliable airlines I have ever flown with. Pot luck whether your flight would go or be cancelled with notice as late as the night before. Always some rubbish reason, but I suspect more to do with insufficient passengers to make the flight profitable. I have given them away, now drive to Sydney the afternoon before and stay in a comfortable hotel, then ample to the airport the next day. No pressure, no stress. In my view, Rex doesn’t deserve to have a business.

  • Ben

    says:

    @RALPH HENDRIKSON – a little harsh. I fly regularly with Rex (About once a month over the last 8 years). I find their on time performance to be very good. Usually every single flight I’ve taken has arrived or departed on time or even ahead of schedule. Granted – there have been a few weather related or congestion delays. One cancellation – due to high winds/single runway ops in SYD. However received credit/free flight on my next booking due to cancellation. They’re a great airline. Certainly I use VA and QF at about the same frequency and their delay/cancellation rates on flights I’ve been on have been higher than Rex.

    One thing that they could improve would be the age of their fleet. However they’re kind of between a rock and a hard place. There’s nothing really out there that offers a new like for like replacement of the Saab – maybe the ATR 42-600, but that would still be a capacity increase – where they’re already struggling to fill flights. It’s possible the kingair 350 could work. However then they wouldn’t need cabin crew. Possibly they could fly a mixed fleet of ATRs and Kingairs to split between low and high density sectors. However this may lead to higher long term operating costs.

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