The Times Australia
The Times World News

.

Rex Airlines’ future up in the air amid questions about viability of small airlines in Australia

  • Written by Justin Wastnage, Adjunct Industry Fellow, Griffith Institute for Tourism, Griffith University

Winter is always a tough time to be an airline in Australia.

This current cold snap has been exacerbated by a cost-of-living crisis, causing would-be holidaymakers to tighten their belts as the aviation industry again braces for more bad news.

This time it’s from Regional Express Holdings, parent company of Rex Airlines, whose shares are in a trading halt pending a “material announcement” to the stock exchange, expected Wednesday.

Responding to many Australians having a lower disposable income, the major carriers Qantas and Virgin Australia, have reduced airfares after recovering strongly from the COVID shutdown.

Qantas’s budget sister Jetstar has been particularly aggressive, with sub-$100 fares back on the menu after a four year absence.

Yet, as witnessed by the collapse of Bonza in May[1], airlines without deep pockets can be squeezed out of the market.

Analysts have always had higher hopes for Rex, which provides feeder services from regional towns across New South Wales, Queensland and to a lesser extent, Victoria, to the eastern capital cities.

The airline also has significant regional operations in other states and is backed by a private equity firm PAG Asia Capital [2](formerly the Pacific Alliance Group).

These factors should have helped the business stave off the worst of the ravages that beset Bonza.

Supply versus demand

Yet there are some simple market economics at play in Australian commercial air transport.

We are a nation of 28 million people, but we are also concentrated into 25 population centres of greater than 100,000 inhabitants[3].

Studies suggest that route viability relies on towns being at least this size to ensure sufficient two-way traffic. For example, the US has about 250 population centres with more than 100,000 people, while Europe has about 400.

This was, in many ways, Bonza’s downfall, relying on one-way leisure traffic to smaller towns that could never repay the favour with passengers returning.

Budget carriers’ blighted history

Bonza was merely the latest in a string of failed low-cost carriers hoping to break the effective duopoly that is the Australian air market. Tigerair Australia collapsed during the pandemic despite earlier being rescued by Virgin Australia.

Before Tigerair, it was Air Australia in 2011 and before that, Backpackers Xpress in 2005. Impulse collapsed in 2001. Each had bet on duplicating the US and European budget carrier model, but in a much smaller market.

Airplane sitting on a tarmac
Impulse Airlines was one of several low-cost carriers to fold in the last two decades in Australia. Dave Hunt/AAP[4]

Yet Rex is fundamentally different, the core of its business is flying 34-seater Saab 340 turboprop aircraft in and out of regional towns, connecting with capital cities.

Much of this flying is underpinned by state subsidies that are further propped up by federal government assistance to maintain the regional airport infrastructure.

Often these routes are managed monopolies, meaning either Qantas Link or Rex have sole provider status, albeit in return for agreed service levels and maximum fares set by the relevant state government.

Not enough planes

One of Rex’s key problems is aircraft availability. As the Saabs reach the end of their working life, there don’t appear to be any suitable replacements.

So Rex has been forced to ground half of it Saab fleet, awaiting parts so scarce that the airline sent salvage teams[5] around the world to find them.

This has caused it to axe some under-performing routes, highlighting the importance of the flights in regional communities where they have transported passengers to business meetings and medical appointments in big cities, while providing outback towns with fresh food.

The airline may have solved the Saab problem by opting for the 42-seater Franco-Italian ATR-42[6], which is the work-horse of regional routes in Europe. But any deliveries would be at least five years off and come with a high price tag.

Expansion problems

But now, the current headache is the expansion into Brisbane-Sydney-Melbourne routes.

This is compounded by the costs associated with its major city service, which uses a fleet of six ex-Virgin group Boeing 737-800s leased at a cut-price rate after COVID but now attract market rates of about $180,000 per week, by some reports[7].

These aircraft are central to Rex’s underlying objective to secure a third of Australian air traffic and become the true third player in the market.

To achieve this, it secured a $150,000 convertible note from PAG – essentially a loan the private equity group can cash in at a three times premium for shares once the company has trebled its value.

The convertible note debt instrument, common in the tech startup world, is known for raising tensions in leadership teams, as its terms are predicated on the success of a strategic plan.

Trouble at the top

This may explain some of the unusual board shenanigans that have taken place recently within Rex.

The Singaporean owners of the airline recently ousted executive chairman (and company insider) Lim Kim Hai[8] and replaced him with Rex stalwart and former federal transport minister John Sharp.

Headshot of a grey haired man
John Sharp, who replaced Lim Kim Hai as head of Rex. Mick Tsikas/AAP[9]

Mr Lim’s removal appears to be partially linked to the $48 million takeover of West Australian charter airline National Jet Express[10] (formerly Cobham Aviation Services Australia) in 2022.

The trading halt currently has no impact on Rex services. There is media speculation that a consultancy firm has been appointed to restructure the group.

Just a setback?

Yet, despite fears of another collapse, Rex appears to have more of the foundational building blocks of a national airline network than Bonza did.

It also, through years of servicing marginal electorates across regional Australia, has a far warmer welcome in Canberra than the start-up Canadian leisure airline ever could have hoped for.

It is likely, therefore, that the rumours of Rex’s death have been greatly exaggerated.

References

  1. ^ as witnessed by the collapse of Bonza in May (www.indaily.com.au)
  2. ^ PAG Asia Capital (www.pag.com)
  3. ^ concentrated into 25 population centres of greater than 100,000 inhabitants (www.ussc.edu.au)
  4. ^ Dave Hunt/AAP (photos.aap.com.au)
  5. ^ the airline sent salvage teams (www.rex.com.au)
  6. ^ 42-seater Franco-Italian ATR-42 (www.aviationnews-online.com)
  7. ^ $180,000 per week, by some reports (www.afr.com)
  8. ^ Lim Kim Hai (www.ch-aviation.com)
  9. ^ Mick Tsikas/AAP (photos.aap.com.au)
  10. ^ National Jet Express (www.aviationbusinessnews.com)

Read more https://theconversation.com/rex-airlines-future-up-in-the-air-amid-questions-about-viability-of-small-airlines-in-australia-235761

Times Magazine

Headless CMS in Digital Twins and 3D Product Experiences

Image by freepik As the metaverse becomes more advanced and accessible, it's clear that multiple sectors will use digital twins and 3D product experiences to visualize, connect, and streamline efforts better. A digital twin is a virtual replica of ...

The Decline of Hyper-Casual: How Mid-Core Mobile Games Took Over in 2025

In recent years, the mobile gaming landscape has undergone a significant transformation, with mid-core mobile games emerging as the dominant force in app stores by 2025. This shift is underpinned by changing user habits and evolving monetization tr...

Understanding ITIL 4 and PRINCE2 Project Management Synergy

Key Highlights ITIL 4 focuses on IT service management, emphasising continual improvement and value creation through modern digital transformation approaches. PRINCE2 project management supports systematic planning and execution of projects wit...

What AI Adoption Means for the Future of Workplace Risk Management

Image by freepik As industrial operations become more complex and fast-paced, the risks faced by workers and employers alike continue to grow. Traditional safety models—reliant on manual oversight, reactive investigations, and standardised checklist...

From Beach Bops to Alpine Anthems: Your Sonos Survival Guide for a Long Weekend Escape

Alright, fellow adventurers and relaxation enthusiasts! So, you've packed your bags, charged your devices, and mentally prepared for that glorious King's Birthday long weekend. But hold on, are you really ready? Because a true long weekend warrior kn...

Effective Commercial Pest Control Solutions for a Safer Workplace

Keeping a workplace clean, safe, and free from pests is essential for maintaining productivity, protecting employee health, and upholding a company's reputation. Pests pose health risks, can cause structural damage, and can lead to serious legal an...

The Times Features

Tricia Paoluccio designer to the stars

The Case for Nuturing Creativity in the Classroom, and in our Lives I am an actress and an artist who has had the privilege of sharing my work across many countries, touring my ...

Duke of Dural to Get Rooftop Bar as New Owners Invest in Venue Upgrade

The Duke of Dural, in Sydney’s north-west, is set for a major uplift under new ownership, following its acquisition by hospitality group Good Beer Company this week. Led by resp...

Prefab’s Second Life: Why Australia’s Backyard Boom Needs a Circular Makeover

The humble granny flat is being reimagined not just as a fix for housing shortages, but as a cornerstone of circular, factory-built architecture. But are our systems ready to s...

Melbourne’s Burglary Boom: Break-Ins Surge Nearly 25%

Victorian homeowners are being warned to act now, as rising break-ins and falling arrest rates paint a worrying picture for suburban safety. Melbourne residents are facing an ...

Exploring the Curriculum at a Modern Junior School in Melbourne

Key Highlights The curriculum at junior schools emphasises whole-person development, catering to children’s physical, emotional, and intellectual needs. It ensures early year...

Distressed by all the bad news? Here’s how to stay informed but still look after yourself

If you’re feeling like the news is particularly bad at the moment, you’re not alone. But many of us can’t look away – and don’t want to. Engaging with news can help us make ...