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Rex takes on Qantas in FIFO after $48m Cobham deal

written by Adam Thorn | July 16, 2022

Rex is set to take on Qantas yet again after announcing it would buy fly-in, fly-out (FIFO) operator Cobham for $48 million and expand its services into Queensland and the Northern Territory.

It significantly comes two months after the Flying Kangaroo said it would fully acquire charter and FIFO operator Alliance, which has a strong network in the Sunshine State.

Qantas and Rex have been involved in a long-running dispute over network expansion, with Rex launching flights between major capital cities and Qantas flying on previously small, Rex-exclusive routes.

Rex’s new deal will 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 regional airline said half of the funding 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.

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“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% 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.”

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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 WA and SA 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.

Comments (5)

  • Scott

    says:

    Typical Australian Aviation. Turns a story about another airline into one about Qantas.

  • Vince

    says:

    Very impressive deal – $48M is a great price to pay for a business that generated $142M in sales last year. 50% of the acquisition was funded by REX Executive Chairman Lim Kim Hai. If that doesn’t instil confidence in REX’s future growth, nothing will. Given the experience and talent of the management team, I’d expect Cobham to easily increase its current 10-15% market share in the FIFO sector. These guys are shrewd operators with a no nonsense approach, and Lim Kim Hai is one of the best capital allocators in the Airline industry.

  • Ashley

    says:

    Who’s Sharp trying to kid?
    As if his airline doesn’t ‘gouge’ its’ customers’ on various routes’, & has done so for ages’.

    As he’s always having cheap shots at QANTAS, it seems the guy has problems’ with competition.

    All this ‘deal’ means is more debt for Rex for years’ to come, added to the current leases’ being paid monthly, for 6 B738NG’s, & 4 very old Saabs’.
    It’ll be interesting to see future trading books, where monies’ are moved from one part, FIFO, to another part, Rex, with its’ losing routes’, including the so-called ‘golden triangle’ ones’.

    He can’t help himself in trying to have ‘oneupmanship’ against our National Carrier.

  • ken

    says:

    Sure makes Virgin now a small player in the FIFO market

  • Lhano Martins Xavier Junior

    says:

    This Boeing 717 is basically a Douglas DC9 who was rebranded. Have improvements, but is basically DC9.
    The Embraer E190 or Airbus A220 are good planes for replace a Boeing 717.

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