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Regional Express (Rex) has reportedly made moves to secure up to 10 Boeing 737s off the back of Virgin Australia’s restructuring, including the dismantling of its budget arm, Tigerair.
Sources have told The Australian Financial Review that Rex is in the process of cutting a deal with aircraft lessors over a number of 737s that were due to be leased to Virgin Australia, prior to its entrance into voluntary administration earlier this year.
In May, the airline announced its ambitious plans to take on Qantas and Virgin, by expanding its network to service Australian capital city routes, including the coveted Golden Triangle – between Melbourne, Sydney and Brisbane.
The regional carrier later confirmed to the ASX that it intends to have its new network up and running between capital cities by March 2021, and is contemplating options to fund its expansion.
Meanwhile, Virgin executives and incoming principal investor, Bain Capital, are in the process of reducing costs by operating at a smaller capacity, cutting Tigerair, and simplifying the airline’s fleet exclusively to 737s.
Notably, there is no intention to see Virgin Australia become a budget carrier in and of itself, much to the union’s relief.
Sources suggest that Virgin is in the process of short-listing the aircraft it is proposing to keep, allowing lessors to offload those it has chosen not to keep on board to other parties, including Rex.
Rex expands off the back of government funding
Rex has received criticism from unions and the media for seemingly using its COVID-19 related government grants to fund its expansion.
Rex – which recorded annual revenue of $320 million in the 2019 financial year – accepted over $54 million in government grants throughout the pandemic period to date.
This figure is more than the grant money provided to Qantas and Virgin combined, and more than any other airline in Australia.
Rex has just over 1,100 staff members on its payroll and is largely owned by overseas interests.
At the time, opposition transport spokeswoman Catherine King told the AFR that the exorbitant grants were an example of the Morrison government “looking after their National Party mates”.
She also accused the government of harbouring double standards, after refusing to assist in the bailout of stricken Virgin Australia despite numerous requests, prior to its entrance into voluntary administration.
“The government said they weren’t supporting Virgin, A, because they wanted to take an industry-wide approach to their support and, B, the significant foreign-ownership structure of Virgin,” King said.
“They’ve broken both of those promises.”
Today, TWU national secretary Michael Kaine has come out with fiery accusations that Rex is being unfairly favoured by the coalition government, thanks to its deputy chairman John Sharp, who was the honorary federal treasurer for the National Party from 1999 to 2017.
“The entire aviation industry needs assistance, not just one small carrier which has close political links to the Coalition. This is an entirely partisan way to deal with an industry in crisis,” Kaine said.
He added: “Thousands of aviation workers struggling for months without JobKeeper are angry to read today that Rex is receiving significant government help, allowing it to buy planes.
“Thousands of Virgin workers about to lose their jobs are also frustrated to realise that the federal government refused their company’s cry for help but is pumping money into another operator.”
Meepa
says:Well, at least Rex are ‘doing it’; Even if that means with the wrong aircraft type for a Low Cost Operation!
The obvious choice is Airbus for a LCC type model (like most LCC carriers), in which I am sure Rex will follow.
There seems to be not a big shortage of pilots at the moment, but my bet would have been on the Tiger aircrew and FA’s as they are already accustomed to LCC operations, and the aircraft can go to more airstrips with its higher mounted engines and the brake fans etc.
Kim
says:All those opposing Government support for Rex fail to understand that country people need access to air travel for mail, health and other vital services. Qantas only supports areas where it can unfairly compete with Rex -Kangaroo Island is a prime example.
Peter Riddle
says:Strange things occurring in strange times. Virgin Australia will rebound stronger with new owners and a tighter network. Foolish move by REX at this time. Their own fleet in NSW is all but grounded and there seems little interest from them opening up the regional routes and driving capacity and the regional economy. I’d suggest their efforts stay focused on their current business and getting staff back at work and aircraft in the sky, then worry about expansion.
Edward
says:A few months’ ago, I thought they were ‘crying poor’???
Not very principled, IMHO, in many ways.
Taking on QF competing the ‘Golden Triangle’ is a mistake, but they’ll learn the hard way.
None of my hard-earned $$$$ will be going their way, on any flight paths.
AlanH
says:That’s all well and good Kim but this is about Rex using their copious bailout money in a time of stringent belt-tightening for everyone else to buy aircraft to service the Golden Triangle of Melbourne, Sydney and Brisbane. Not much there for “regional Australia”.
hrth
says:How is the 737 the wrong aircraft for a LCC? The world’s biggest LCCs by far are either Southwest or the Ryanair group. They have about 1000 737s between them and no Airbus at all.
You say that most LCCs are using Airbus. Maybe there are more carriers but in terms of aircraft numbers what you say does not add up. After having a quick look at what the 10 largest LCCs use and there are more 737s aircraft in the fleets than Airbus. Westjet, Gol, Lionair, Norwegian.