Australia’s Regional Express has confirmed plans to expand into capital city flights within Australia.
“Rex discloses that it has been approached by several parties interested in providing the equity needed for Rex to start domestic operations in Australia,” it said in a statement to the Australian Securities Exchange (ASX) today, in response to news articles about plans to commence domestic airline operations and its comments on the administration process of Virgin Australia.
The operator called for a trading halt on 12 May, “pending the ASX announcement in relation to a news article published today”.
It says in the latest statement: “The preliminary estimate of equity required is in the vicinity of A$200 million ($130 million) dollars and the structure of equity raising is yet to be determined.”
Rex says its board has begun talks with potential equity partners to establish a domestic network, in addition to its regional services.
“The board is expected to make a decision on whether or not to proceed within the next eight weeks. Should the board decide to proceed, the domestic operations are expected to commence on 1 March 2021.”
Deputy chairman John Sharp said on an ABC Radio National programme on 12 May: “Rex has been approached by a number of private equity investment bank firms, with the proposition that we should be commencing services between the capital cities around Australia.”
He added: “Presently, Rex flies from regional centres to all the capital cities in Australia. And the proposition is that we add to that by flying between them and provide a domestic air service in place of the services that was provided by Virgin [Australia].”
Regarding the estimate of a A$200 million capital injection, Sharp said the airline had been advised that investors can be “readily found to provide that”.
He also noted that Rex could likely acquire aircraft at competitive prices given the current parked and idle fleet in Australia.
When asked about the feasibility of Rex’s expansion plans, Sharp said, “A number of people have expressed the belief that it’s going to be very difficult for Virgin to rise from the ashes, given the very heavy cost burden that it carries, the very heavy debt that it carries. And the very high wages that the various enterprise bargains, agreements, impose on the new prospective owners that might take over Virgin.”
Cirium schedules data shows that Qantas has over 41% market share on capital city routes in terms of seat capacity, while Virgin Australia holds 32%. Other operators include Jetstar Airways with an 18% market share and 7.6% with Tigerair Australia, low-cost carriers owned by Qantas and Virgin, respectively. Routes between Brisbane, Sydney and Melbourne have some of the highest seat capacity.
