Shares in Rex have soared from 40 cents at the start of the coronavirus crises to $1.26 since the airline announced it was close to securing investment to fly Sydney-Melbourne-Brisbane.
The news means that the carrier is one of the few in the industry to have shares trading higher than in January when they were selling for $1.20.
On Tuesday, the airline said it was close to securing $150 million from APAC investment firm PAG Asia Capital. The group will initially invest $50 million in secured convertible notes that could allow it to hold 23 per cent of Rex’s 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.”
The airline first announced in May its ambitious plans to take on Qantas and Virgin by expanding its network to service Australian capital city routes and speculation later linked the airline to the lease of 10 Boeing 737s from Virgin Australia.
The news that a deal for new routes 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.
This led to Qantas chief executive Alan Joyce attacking Rex for accepting the handouts before unveiling plans to expand its network. “That doesn’t feel right,” said Joyce. “That doesn’t seem right.”
Rex fired back, stating Joyce was “misinformed by his advisers” and arguing that it was impossible to use the COVID-19 payments for improper means because they are “strictly audited” by Ernst & Young.