Regional Express (Rex) is warning that its profits could be down 20-30% for financial year 2020 compared with the previous year due to “a very challenging economic environment ahead”.
Regional Express (Rex) is warning that its profits could be down 20-30% for financial year 2020 compared with the previous year due to “a very challenging economic environment ahead”.
Despite the profit warning, Australia’s largest independent regional carrier is pursuing four major developmental projects in the belief that it can “weather the downturn and emerge stronger at the other end”, John Sharp, Rex’s deputy chairman told investors at the airline’s annual general meeting.
Rex has revised its outlook based on a deterioration in trading conditions over the last six months, with the ongoing trade war causing a drastic slowdown in most developed economies. This is likely to lead to “sluggish” passenger numbers, while costs are expected to rise due to an extremely weak Australian dollar, Rex believes.
Rex operates around 60 Saab 340 turboprops on regional routes primarily in eastern Australia, more recently adding a number of services in Western Australia. In the financial year ended 30 June, Rex reported a A$17.5 million ($11.9 million) net profit, up from A$16.9 million the previous year, with revenues climbing 7.5%. Its total fuel bill, however, leaped 30% to A$9.8 million despite hedging efforts. In fiscal year 2019, Rex carried 1.27 million passengers, up 3.6%.
Sharp says: “Rex remains confident that its strong foundations, highly efficient operations and almost no leverage will carry it through the turbulent conditions until the conclusion of the presidential elections in the United States.”
Rex anticipates its pilot training activities in particular will expand strongly, while mining charters are also showing signs of strength. Rex operates its own pilot training school, Wagga Wagga, New South Wales-based Australian Airline Pilot Academy (AAPA). Earlier this month, it announced plans to acquire ST Engineering Aerospace’s Ballarat, Victoria-based pilot training academy.
Rex’s infrastructure development over the next six months is largely based on an expected growth in pilot training demand. A new accommodation block for 100 pilot cadets at AAPA is scheduled to be completed in August 2020, while it is planning to establish a satellite base for AAPA elsewhere in Australia in 2020.
In addition, it has development approval to build a simulator centre at Mascot, Sydney, which it aims to do next July. Around March 2021, the airline plans to establish a new aircraft hangar at Sydney Airport.
