REX: Airline goes into administration. What next?

Regional Express (REX) has officially gone into administration as of Tuesday 30 July 2024.

The airline has appointed three members of Ernst & Young (EY Australia) as administrators.

REX’s regional fleet will continue to fly as scheduled. However, all domestic flights between capital cities have now been cancelled. Virgin Australia has agreed to carry passengers booked on those cancelled flights. If you have such a ticket, you should call 13 67 89 by Wednesday 14 August, 2024 to arrange your Virgin Australia substitute ticket.

REX has terminated the sale of seats on its Boeing 737 services between capital cities.

What might happen

The administration will give the airline the opportunity to do some reorganisation, anything from selling the business to reorganisation and other financial maneuvers. But it is important to note that the Administrators have said that:

“The aim was to restructure the business so it can continue to service regional Australia.”

REX Administrators

In short, that means the death of Reginal Express’s ambition to run Australia’s third domestic airline. Vale real domestic airline competition in Australia.

It’s likely that staff associated with the inter-city domestic operation will lose their jobs. That includes everything from pilots to engineers and cabin crew. Virgin Australia and Qantas have both expressed interest in re-employing these staff, given the current difficulty in recruiting staff in the aviation industry.

Regional flying is still profitable

It’s understood that the airline’s regional operations, including its fly-in and fly-out services, are inherently profitable. Only the capital city-to-capital city operation has not been successful and has lost its investors tens, if not hundreds, of millions of dollars.

It is likely that the administrators will work on saving the original regional flying REX and let the investors in the domestic expansion take the losses. Some sources suggest that PAG Holdings, for example, which provided AU$150 million for the expansion, might swap debt for equity. All that will be the challenge that the administrators will face.

PAG has contributed additional funding to enable REX to continue its regional flights during the administration period.

The SMH is reporting that Virgin Australia has already agreed to take over the leases of three of REX’s Boeing 737-800 aircraft. The irony is that Virgin used to lease some of these prior to the pandemic and its own administration.

2PAXfly Takeout — What went wrong?

That’s a good question, and there are many theories. Some suggest it is because of a lack of transport policy reform by the federal government. Airport slot reform—the way airport takeoff and landing slots are managed or hoarded, depending on your view—has been identified by a variety of bodies as needing reform.

Others think that with the dominant player, Qantas, and the minor partner, Virgin Australia, it is impossible to run a third domestic airline. I think that the expansion was mismanaged on a range of levels. It was overambitious, REX had awful lounges, and a frequent flyer loyalty scheme was introduced very late.

Whatever the real reason, there will be more opinions than commenters. The failure of REX does reinforce the idea that the Australian market can only support an airline duopoly.

All I know is the review of the REX Business Class that I have drafted is now probably redundant.