Rex has today announced it’s close to a deal to lease six 737-800 NG aircraft to fly its new network between Sydney, Melbourne and Brisbane.
The news comes after Rex revealed it was in advanced negotiations with an APAC investment firm to secure $150 million of investment to launch the new domestic network in March 2021.
On Wednesday, the regional airline announced it had signed a letter of intent with two lessors that will see three of the Boeing aircraft ready to fly between Sydney and Melbourne at launch, with another two to follow by Easter and the final one shortly after.
“From there, Rex will continue to grow the domestic fleet in line with the return of passenger demand and hopes to see its fleet of 737-800 NGs reach 10 by year end,” said Rex deputy chairman John Sharp.
“The signing of these letters marks another significant milestone for our entry into the domestic jet market. Our preparations are progressing very well and on schedule and we hope to obtain regulatory approval by December. Advanced ticket sales are also envisaged for December, subject to regulatory approval.”
Last week, Australian Aviation reported how PAG Asia Capital could initially invest $50 million for secured convertible notes that could allow it to hold 23 per cent of Rex’ shares by December.
Rex’s executive chairman, Lim Kim Hai, said, “With PAG’s support, I have every reason to believe that Rex can successfully launch its domestic major city jet operations.”
After the initial investment, the regional carrier would then be able to draw down the remaining $100 million over three years, which would see PAG then hold 48 per cent of the business.
The deal, based on current issued share capital, is subject to due diligence being completed and a review by an independent expert.
“PAG is a well-respected and highly successful investment group which manages more than US$40 billion on behalf of major global institutional investors,” said Kim Hai. “I am encouraged by the progress of Rex’s negotiations to date with an investor of PAG’s reputation and experience.”
In May, the airline first 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.
Speculation later linked the airline to the lease of 10 Boeing 737s from Virgin Australia.
The news that a deal for new routes and aircraft might be close comes after Rex recorded an underlying profit before tax of $250,000 and an increase in revenue, from $318 million last year to $322 million in FY20, despite the coronavirus crisis.
The positive results also marked a remarkable turnaround from March, when Rex warned it would have no choice but to announce the “shutting down of its network” if it didn’t receive financial aid, even threatening to stop transporting COVID-19 testing samples.
The strong performance was in part attributed to the company accepting $62.1 million of government grants, including JobKeeper and regional aviation bailouts.