A large number of potential buyers have expressed an interest in embattled regional airline Rex as administrators work to keep the embattled carrier flying while weighed down with $500 million (US$328.6 million) in debt.
Ernst & Young (EY) Australia has been appointed to chart a path forward for the five companies in the Rex Group since the airline called in the administrators and grounded its Boeing 737 fleet on major metropolitan routes.
Rex’s regional flights have continued because of continued funding from private equity firm PAG Asia Capital as the airline desperately seeks a buyer or financial lifeline.
EY partner Samuel Freeman, a corporate turnaround expert, on Aug. 9 told a first meeting of Rex creditors administrators were contacting “a large number of likely interested parties” in a bid to find a buyer or investor for the airline.
“The process has formally commenced,” he said.
“Some are already executing on disclosure agreements … there’s been quite some interest, which is really positive.”
Freeman said the airline, which was carrying about $500 million debt across the group, was in daily discussions with the federal government.
Labor figures have said they will back Rex as long as it prioritises regional flights.
In New South Wales (NSW), where Rex is based, Premier Chris Minns has kept open the possibility of state government assistance, but early in the week he said no meeting had taken place with administrators.
Freeman said an asset-sale program had started as part of turnaround efforts, with company land and buildings, spare parts and a flight simulator all potentially up for grabs.
He said an initial probe indicated competition in the domestic “trunk route” market was a key contributor to the financial woes.
The airline has struggled since an aggressive expansion in 2021 to compete on key capital-city routes against majors Qantas and Virgin Australia.
Rex had “challenges around securing the frequency it needed to be a profitable business in that space,” Freeman said.
Other contributors were a shortage of pilots that created “sub optimal fleet utilisation”, supply chain issues and maintenance problems.
The airline operates a fleet of ageing Saab 340 aircraft on regional routes.
“There’s been issues with engine maintenance parts, turbine props and the like, which has again impacted fleet utilisation,” Freeman said.
Nearly 600 jobs at Rex have been axed and about 1000 more are in limbo amid uncertainty on the future of the carrier, which is a critical transport link for regional and remote communities.
The Transport Workers Union, which represents Rex workers, wants the federal government to take an equity stake in the airline to secure at-risk jobs and shore up regional transport links.
A second creditors’ meeting will include a vote on whether to return the Rex companies to the existing board, place them under a deed of company arrangement or liquidate them.
Formed in 2002, Rex is Australia’s largest independent regional airline and makes about 1050 flights a week on 45 routes.