The Australian competition watchdog has given Rex Airlines the green light to proceed with its purchase of Cobham’s regional flying unit.
It comes less than two weeks after Rex announced it would scoop up the fly-in, fly-out (FIFO) operator Cobham for $48 million and expand its services further into Queensland and the Northern Territory.
The ACCC revealed late on Tuesday that considered all provided information and “does not intend” to conduct a public review into the purchase and therefore has no objection to the sale.
The final sale is still subject to approval by the Foreign Investment Review Board, which Rex expects to happen within the coming weeks.
Cobham’s global parent company Advent International has been looking to sell off the company’s Australian business since February, opting to offload Cobham’s two major local units — its charter/FIFO business and its special missions unit — separately.
Rex’s purchase would see it acquire 100 per cent of National Jet Express (NJE), which provides FIFO services in Western Australia and South Australia, as well as freight services from Sydney to Adelaide, Brisbane, Melbourne, and the Gold Coast.
The deal adds further fuel to fire in an ongoing dispute between Rex and Qantas over network expansion — particularly after the Flying Kangaroo said it would fully acquire rival charter and FIFO operator Alliance, which has a strong network in the Sunshine State.
Rex said earlier this month that half of the funding for this $48 million purchase would be provided by its own cash reserves and drawing down an additional $15 million from its $150 million investment from PAG Asia Capital, agreed in 2020.
“The remaining 50 per cent of funding will be provided by its joint venture partners, one of whom is Rex’s Chairman, who will be funding their 50 per cent share with private funds,” said the business in a statement to the ASX.
“They have agreed to convert that debt funding to be issued new shares in NJE to reduce Rex’s debt burden, so that ultimately Rex and its joint venture parties will each own 50 per cent of NJE.”
Later, Rex’s deputy chairman, John Sharp, told the AFR, “The mining industry doesn’t want to be dominated by Qantas, and it wants a strong healthy competitor because, if the market is dominated by Qantas, Qantas will gouge the market.
“So, our role will be to ensure the mining industry has choices.”
Rex’s executive chairman, Lim Kim Hai, called FIFO a “booming sector” in Australia that is set to experience strong growth.
“With this acquisition, Rex will have a FIFO arm that is simply unparalleled in Australia,” he said. “NJE has a completely modern fleet comprising eight Bombardier Q400 turboprops and six Embraer E190 jets for FIFO work.
“Both aircraft types are fuel efficient and have enhanced operational reliability and low carbon emissions when compared with the predominantly 40-year-old Fokker 100s used by the other major FIFO operators.
“The company will invest in modern aircraft and technology to enable NJE to expand from its traditional bases of Western Australia and South Australia and bring our unique brand of FIFO services also to Queensland and Northern Territory.”
Lim added the company will “naturally be the partner of choice for resource companies all over Australia” who have been “crying out for so long for a FIFO provider that is able to address their triple priorities of minimal impact on the environment, comfort, the safety of its staff, and reliability of service”.
The move follows a long-running war of words between Rex and Qantas over network expansion, which has seen Qantas’ chief executive, Alan Joyce, mock Rex’s “empty aircraft” and Rex deputy chairman John Sharp argue that he doesn’t know how Joyce can “look at himself in the mirror some mornings”.
Qantas has consistently denied any wrongdoing.
In May, Australian Aviation reported how Qantas would purchase Alliance Aviation three years after acquiring a 19.9 per cent stake in the carrier.
The airline said that the move, which would see Alliance become a wholly owned subsidiary of Qantas, would allow it to “better serve the growing resources sector”.
It came just one month after the ACCC finally cleared Qantas’ stake in the airline, after a three-year investigation into its impact on competition.
Alliance currently holds wet lease agreements with both Qantas and Virgin for the use of its fleet for regional, charter, and FIFO operations.