REX: Regional Express airline board trouble
The Ex-Executive Chair, having stepped down, now wants to eject the entire board. Singapore-based Lim Kim Hai stood down as chairman of REX (Regional Express) last month (June 2024) days after the ASX queried related party transactions.
His replacement Chair was to be former Howard government minister John Sharp, with Neville Howell to be the chief operating officer.
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Board instability
The board’s instability dates back to May 2024, when we learned that the Australian Securities Exchange (ASX) had some questions about the planned acquisition of National Jet Express (NJE) for AU$48 million. The question arose because REX had not disclosed the relationship between Mr Lim and his brother-in-law, Thian Song Tjoa, during its 2022 acquisition of fly-in, fly-out operator National Jet Express. The two owned 50% of NJE together.
Mr Lim, the largest shareholder, has now called for a shareholder meeting to sack the board, including Mr Lee and Mr Sharp, but not a nominee of PAG Asia Capital. This private equity firm funded REX’s expansion into an inter-capital city with AU$150 million.
This move meant that REX became a competitor to the big boys, Jetstar, Qantas and Virgin Australia.
Some analysts predict that the launch of a direct Melbourne-to-Perth route will reduce fares on that route by 40%.
Profit, but actually a loss?
The ASX has previously asked the company why it took a week to tell shareholders that it would miss profit predictions in 2023. It posted an after-tax profit of AU$14.4 million, which was mainly due to a revaluation of the NJE holding by AU$44.5 million. For the half year to December, it actually suffered a loss, albeit on a 6% increase in earnings of AU$353 million.
2PAXfly Takeout
REX has a red hot go at becoming a significant third force in domestic flying. However, in my experience its flights are far from full, its lounge offering poor, and with low frequencies servicing capital city destinations.
I want REX to succeed, I’m even a minute shareholder, like I am in quite a few Australian Airlines. But board instability is never good for an organisation.
On the other hand, a sweep of the broom through the management, could well sparkle things up in the longer term.
I’m maintaining a holding brief.
What did you say?