Regional airline Rex has hit financial turbulence, with the company halting trading on the Australian stock market ahead of a major announcement expected later this week.
The news follows a weekend report in The Australian suggesting Rex has called in consulting firm Deloitte to help turn the airline around.
Rex operates four routes from Melbourne to Tasmania, including King Island, Burnie, Devonport and Hobart and has been unable to return a profit since the pandemic.
Aviation expert and Managing Director of Par Avion Shannon Wells said he does not believe Rex “will fall over” but instead expects a “big restructure”, particularly with the larger Boeing 737 services.
If the airline were to collapse, it would end competition in the Devonport and Burnie markets, where QantasLink currently operates, giving the Flying Kangaroo a monopoly.
A third of Rex’s ageing Saab 340 fleet, used on the Devonport and Burnie runs, are out of action due to a shortage of parts, pilots and engineers.
The airline started a jet service to Hobart last year using Boeing 737-800 aircraft, the same aircraft used to take on Virgin and Qantas on the lucrative Sydney to Melbourne route.
“In theory, it sounded good [to launch larger 737 services] because if you’re flying from, let’s say, Burnie to Melbourne, but you actually want to go to Sydney, that allowed you to stay on the same airline, which … in theory made good business sense,” Wells told ABC Local Radio.
“And then what happened is that Qantas is pretty ruthless … they’ve gone to fare wars and then Qantas entered markets which they haven’t been in for a long time.”
“So all of a sudden, you had Qantas coming into Burnie, competing against every sort of profitable route which Rex had to the regional locations. Qantas go ‘you want to play the big boys, we’ll play with you’ and it started a bit of a competition there.”
“At the end of the day, it can’t cost $79 as much as we’d all like it to, to fly from Burnie to Melbourne forever. There’s only maybe 20 people in an aircraft. It’s just, it’s impossible.”
The Transport Workers Union (TWU) has expressed serious concerns about the potential reduction in services, with boss Michael Kaine stating that around 2,000 jobs are at risk.
“This is a sign that the aviation industry is broken, it’s actually in crisis,” he said.
“We’re looking forward to hearing back from Rex as a matter of urgency, to try and get some more clarity on this situation.”
The news follows the collapse of budget airline Bonza in April, which operated services between the mainland and Launceston.
