Rex to fly Sydney-Melbourne-Brisbane by March 2021

written by Adam Thorn | June 29, 2020
A file image of a Regional Express Saab 340B VH-ZLQ. (Dave Parer)
A Regional Express Saab 340B VH-ZLQ. (Dave Parer)

Rex has confirmed it’s set to rival Virgin and Qantas and fly services between Sydney, Melbourne and Brisbane as soon as March 2021.

The business claims it only needs to raise $30 million to expand its network, and is so confident the target will be met that it’s instructed management to “start preparations in earnest”.

The move comes despite the airline telling the government in March that if it didn’t receive a bailout it would shut down its network and would not be able to transport COVID-19 testing samples to the regions.

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Rex plans to operate an initial fleet of five to 10 narrowbody jets based out of Sydney and Melbourne to service the ‘golden triangle’ of Sydney-Melbourne-Brisbane, with a targeted start date of 1 March 2021.

The board believes $30 million is “all that is needed” and hopes to raise that money through a sale-and-leaseback arrangement, equity injection or convertible notes.

While no deal has yet been rubber-stamped, the business says there’s been “strong interest” shown by organisations wishing to participate, including lessors happy to provide $30 million for 15 of Rex’s fleet of 60 Saab 340 aircraft.

Rex’s deputy chairman, John Sharp, said, “Rex has the biggest regional network in Australia and we are the only carrier in Australia that has been able to successfully navigate the turmoil and shocks over the last two decades with uninterrupted operational profits since 2003.

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“Leveraging on Rex’s existing infrastructure and overheads, our cost base for the domestic operation is estimated to be at least 35 per cent below Virgin’s Australia’s (pre-COVID) with 50 per cent lower additional headcount needed proportionately.”

Rex has already signed a memorandum of understanding with turboprop manufacturer Avions de Transport Régional for a range of “potential commercial co-operation”.

The scope of the potential deal includes the eventual replacement of its current fleet with ATR42 and ATR72 aircraft.

“With Rex’s expansive regional network of 60 destinations, existing infrastructure in all these capital city airports, superior efficiencies and unbeatable reliability, it will simply be an incremental extension for Rex to embark on domestic operations especially since one out of every 10 flights in Australia was already a Rex flight during the pre-COVID days,” said Sharp.

“Rex’s domestic operations will be priced at affordable levels but will also include baggage allowance, meals on board and pre-assigned seating.”

The news represents a dramatic change of fortune after the airline warned it could go out of business if it didn’t receive a coronavirus bailout – which it eventually got in the form of a number of government supplement routes.

On 27 March, Australian Aviation reported Rex’s warning that it may not be able to transport COVID-19 testing samples from regional areas to capital cities for analysis unless it received a government bailout. It said it would announce the “shutting down of its network” that day if it didn’t receive “concrete proposals” of financial aid.

Weeks later, on 7 April, Rex raised the stakes in its fight for more financial aid yet again, this time claiming that “lives could be lost” if the airline was unable to transport medical tests on selected routes. The business praised Queensland and Western Australia for offering to subsidise essential services, but said, “no other states have shown any interest”.

Australian Aviation detailed regional aviation’s battle for survival here.

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26 Comments

  • Ian

    says:

    Rex seems to be on a winner, with all it’s regional routes providing feed to jet routes & Qantas/V2 giving them some feed back, to places only Rex flies to.

  • AgentGerko

    says:

    I wondered if Rex was the mystery buyer for the recent sale of a number of Fokker 100’s by VA. As we know, Rex has a history of using older and second hand aircraft. I’ve also said for some time that the ATR42 is the logical progression for Rex. They’re much slower than a Dash 8 but a lot cheaper. As for their trunk route ambitions, I can only wish them good luck and hope they don’t end up like East West, Compass or Impulse.

    • jdfghjdh

      says:

      They may go for the AT42 but it might be through lack of choice rather than anything else.
      Last time I read through a REX financial report, their average load factor was around %60. At that rate, going to a bigger plane won’t be logical. I’ve also seen them comment here and there that they don’t want to go to larger aircraft on their regional routes as they would then have to reduce frequency to make it economical. The few times I’ve flown with REX the flights were only around half full.
      The ATR42 typically has 48 seats not 42 so it’s a really big jump. It’s also quite an old design. It’s had a few upgrades but it’s almost as old as the Saab340. Doesn’t seem logical at all to me.

  • Don’t believe their calculations, as normal airline prudency requires you to have 3 months operating expenses per aircraft in reserve without any revenue. Based on likely utilisation limited by slots and Sydney jet curfew this would require $4 million per aircraft + so it looks like a 5 aircraft launch after you allow also for set-up of type, AOC modification and passenger build after launch costing up to $3m with promotional costs. Unless you can offer 5-6 services in each direction you can’t appeal to other than ultra low fare passengers. This launch also at a time when finally REX is doing expensive fleet replacement from $1m S340 to $10m+ ATR 42.
    This proposal wouldn’t get past financial fitness in Europe. Qantas/Jetstar and re-emerging Virgin certainly won’t open any doors for our Singaporaean friends or is this a front for Singapore Airlines to give them long haul feed?

  • So in an economic environment where it’s marginal whether 2 trunk route operators can be supported, we are apparently about to get a third operator???

  • Marum

    says:

    I guess if government money is on offer, most people,and organisations will do anything, to get their greasy little fingers into it. As has been proven with the various green groups, and their so called clean-green-power.

    I remain very much a Keynesian economically. ie. All government intervention is always too little too late, and only serves to exacerbate the situation.
    I am amazed how easily everyone surrendered their hard won freedoms over this CoVID 19 business, and accepted laws, which would make the most totalitarian state proud.

    Freedom is fragile indeed….Marum.

  • John Crayon

    says:

    Something fishy going on. You can’t go from near bankruptcy to expansion in 3 months during a pandemic. This needs to be looked into and I’d be starting with the behind closed doors meetings between the Govt and Rex.

  • Ben

    says:

    I guess the Board is happy to kiss goodbye to 15 Saabs when this venture goes belly-up six months in…I think it’s fairly well established that even though our market should be able to support 3 domestic carriers, it can’t. I guess those who have no regard for corporate history will be doomed to repeat it – I just hope it doesn’t wipe Rex out completely.

  • AvGeek

    says:

    “only carrier in Australia that has been able to successfully navigate the turmoil and shocks”… what absolute rubbish. Rex and it’s owners has only ever been (very very) successful at squeezing every last dollar they could out of the various local, state and federal governments. They cry poor at every opportunity and are the first and loudest to have their hand out. It would be interesting to see over the last decade or so, how much profit was true and how much was a direct hand-out from government.

    Having been forced to fly them on a regular basis (only airline) to several rural locations over the last few years, they couldn’t give a rats about the customer, regularly charging premium rates for short below par flights on planes that are older than I am, dirty (do they clean them at all… I mean even at night?!) and usually late. Then there is their amazingly caring attitude(not!)… nothing at all like good rural hospitality. The constant change of rules (2 bags allowed this week, next week not. Carry yr OWN bags onto the flight… that’s premium service… $50 bucks for that pleasure… but only if it’s from Melbourne, if its in Mildura or Broken Hill, then its no charge!). Then there’s the ‘Sweet or Savoury snack’ that consists of whatever budget, end of the range product they get that day or week. 6AM flight… here’s a pack of Salt & Vinegar chips! Half an hour late for nearly any end of day flight I’ve been on… suck it up mate…., you turn up 5min late even after having checked in online and yr off the flight… at cost of course for the new ticket.

    $30M?! To compete against Qantas and Virgin on the golden triangle with 5-10 planes? Judging by that I suspect the planes will be of a similar vintage as their current fleet with a service to match!

    If I were the government (any level) looking at this, I’d be asking quick-smart about what happened to their ’emergency situation’ and where the government handout has gone. Cant have been that dire a situation to be effectively be launching a new airline. This is disgraceful.

  • Fed up Crew

    says:

    So how’s that 200 million that the DPM gave them going? So much for not picking winners.

  • Mark

    says:

    This is what you do when you get $80 million of taxpayers money for free.

  • Greg

    says:

    So one minute they’re going broke then after a Government bailout they announce they’ve got the cash to buy jets and expand into domestic operations? Serious questions need to be asked of the Rex board and the office of the Deputy Prime Minister.

    • john

      says:

      more nat/lib pork barreling
      Rex’s deputy chairman John Sharp said the move by Rex to start a new capital city airline would require about $200 million in capital investment. The Saab 340 aircraft flown by Rex seat 34 people which is the right scale for the regional routes. There is no competition on 85 per cent of the routes flown by Rex. Rex has confirmed it’s set to rival Virgin and Qantas and fly services between Sydney, Melbourne and Brisbane as soon as March 2021.
      The business claims it only needs to raise $30 million to expand its network, and is so confident the target will be met that it’s instructed management to “start preparations in earnest”.
      The move comes despite the airline telling the government in March that if it didn’t receive a bailout it would shut down its network and would not be able to transport COVID-19 testing samples to the regions.

  • Big Willie

    says:

    John Sharp is the Donald Trump of aviation!!

  • That Ron guy

    says:

    Marum, not too sure on your definition of Keynesian economics, but that’s another issue.

    I feel this move by Rex is a disaster waiting to happen. Qantas will be chomping at the bits to get back in the air & the Low cost Jetstar / Premium Qantas combo will be a powerful 1-2 punch. They’re gonna, literally, come flying out f the gates as soon as there allowed to. Virgin will come limping out but wont be far behind. By March next year, Rex’s offering will be too little, too late.

    As has already been said, did Impulse (guess where their B717’s are now…), Compass (I and II), Ozjet or Australian Airlines (the green & gold one) not teach us anything?

    As for speculation on what aircraft they would use, mention has been made above of Fokker 100’s. Personally I think that’s a boring, dated-looking plane. If they wanted to have any sense of pizzazz, they’d need something like E190’s. Unfortunately, $30m doesn’t get you anywhere near a fleet of shiny new A220’s.

    And of course if Rex leaves their core business (Regional stuff) undefended, then this foray into foolishness will sap them dry & Qantas will clean that up too. I’d be thinking about some more Q300’s right now if I was Alan Joyce.

    • hsgfh

      says:

      I don’t think people booking domestic flights look at the “pizzazz” of the aircraft’s appearance when picking an airline and unless we’re talking about something like the Comet or Caravelle, most jet airliners have the a similar external appearance in terms of modernism and appeal with only a few exceptions like the awkward BAE100. The appearance of the E190 is hardly going to get someone excited. Most people don’t even look at the outside of the plane and the airline can make the interior look any way they want.

  • Brian

    says:

    $30 million? I think there’s a zero missing.

  • TD

    says:

    They’ll potentially be running 4 aircraft types at one time if all that is said above happens. Good luck to that in operations and engineering assuming they get approvals and the crews in all fields and the tooling etc and then after CASA approvals (which in themselves need months of forward paperwork). In addition , valuing a S340 at $2 M each for 15 of them unlikely to use in equity. Couple this with ex crew and passenger experiences (e.g. Avgeek above), and the old saying is if it’s too good to be true it won’t be. Good luck to them if they are already going for it; guess they have the money to throw into the planning. So where or what is Rex Rat hiding from the big picture?

  • OC

    says:

    Odds on Rex is cutting a deal with Airbus to buy the A220 (Airbus owns 50% of ATR). Airbus only recently opened the Mobile facility in Alabama in addition to the existing facility in Canada so will be running down their order book fast as they continue to deliver them to airlines.

    If so the lease rates will be very attractive given ultra low bond rates due to central bank QE + the manufacturer keen to move planes and establish a beachhead in Australia. Combine that with terrific levels of fuel burn, MUCH more comfortable seating (genuine 18 inch plus seats in economy) and a plane that is easier to fill and Rex could be a real threat against two airlines flying old, thirsty and uncomfortable 737s (I know I would definitely fly them to avoid the sardine can that is the 737).

  • Sean

    says:

    Having experienced flights on their SF34 aircraft on many occasions, the passenger experience can only be described as incredibly average. Perhaps stick to what you know and invest there first? In normalised times, MEL-SYD and SYD-BNE are some of the world’s busiest routes. But, they also were when Ozjet, Compass 1 and 2, Impulse operated – is there room for another airline on domestic legs? I have my doubts.

  • Thomas

    says:

    I took a deliberate decision about 10 years ago to never fly Rex again. This decision was a result of a number of negative experiences with services, eg; cancelling flights at the last minute; check you in and then tell you that there is a 3 hour delay. I could drive faster Melbourne to Albury and after that experience I did. Then the issues with propeller falling off and fire on board. Do they really think they can compete with advanced airlines such as Qantas and Virgin. They will squander the Taxpayers handout courtesy of the Federal Government and then go broke.

  • Dave

    says:

    Reading this article and the comments above kinda explains why Michael McCormack was quite short and sharp with his ‘Rex’ answers on the ABC’s Four Corners last night. Looks like CEO John Sharp still has good friends in very high places.

  • John

    says:

    If only flying syd/mel with jets you can base 2 at each port & have 1 spare. & still have a decent schedule. Eg. 6am, 6.45am from each port then when they arrive at 7.30am & 8.15am turn them around asap.

    3 at each port would be better.

    Plenty of small business owners who are watching the dollars wjo don’t want to spend anything like $1k for a day trip in economy.

  • Jim Thorn

    says:

    Qantas, Jetstar & Virgin 2.0 operating next year in a market that will at best see a third of the RPKs of 2019. Rex are obviously proving yet again that old adage – How do you make a small fortune out of aviation? You start with a big one! Please guys, you run a pretty good regional operation and have survived two decades of often rough weather so just do what you do well and harvest those extra dollars for ultimate fleet replacement.

  • Peter

    says:

    Best news yet. Now we can have online connex and baggage. Would choose Rex always as use regional services. Go Rex. Wish they had MRZ and TMW.

  • Ian McKelvie

    says:

    Why would you fly a puddle jumper from Syd-Mel-Bne ? it takes way too long and flying a low altitude with bad weather is not my idea of fun. Stick it – I want a jet thank you very much.!

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