Australian airline Rex set to appoint EY as administrators

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*********** airline Rex set to appoint EY as administrators

*********** airline Rex is set to fall into administration as soon as Wednesday, sources suggest, which would make it the second domestic airline to fail this year in a market dominated by Qantas.

Regional Express Holdings, as Rex is formally known, will appoint Ernst & Young as administrators, according to the people, who asked not to be named. The airline’s shares were halted from trading Monday, pending an announcement. Spokespeople for Rex and EY declined to comment.

Rex, which mostly serves regional and remote towns, had more recently started flights between major cities such as Sydney and Melbourne in a direct challenge to Qantas and ******* Australia.

Already an operator in WA’s regions, Rex launched its first interstate flights out of Perth at the end of June, with direct services to Melbourne and Adelaide.

Melbourne is serviced five days a week, and Adelaide three days a week. The new services bring 120,000 seats all up into Perth.

But the larger rivals overwhelmed Rex in a price war on more popular east coast routes and it struggled to consistently make money.

Prime Minister Anthony Albanese said Rex provided a vital link between regional centres and capital city transport hubs.

“It is important for those local economies,” Mr Albanese said.

“So we want to see the aviation industry in Australia continue to be one that provides that service and that access.”

Transport Minister Catherine King said the Government was taking “very seriously” news the regional carrier has stopped trading on ASX.

Ms King told Sunrise on Tuesday there “is a range of reasons why trading halts are put on companies”, adding she was seeking more information.

“It’s an incredibly important airline, and in many cases, the only airline going into a range of smaller country towns and are heavily reliant on it, King Island, for example,” she said.

“We are treating this very seriously and being very vigilant about what is happening and keeping an eye on the situation hour by hour.”

The appointment of Ernst & Young likely marks the end of Rex’s short-lived attempt to enter Australia’s main aviation market. Rex shares have fallen 35 per cent this year, slashing its market value to just $63 million.

More broadly, Rex’s struggles — after more than 20 years of operations — reflects an aviation industry still grappling with the effects of the pandemic. Manufacturing woes at Boeing and supply chain ruptures have made new aircraft hard to find, while falling fares are putting pressure on profitability.

Australia has already seen one airline fold this year, the start-up Bonza. Liquidators at Ernst & Young also took over Air Vanuatu in May after costs spiralled out of control.

The future of Australia’s regional air transport network is now in doubt. Dozens of rural communities rely on Rex’s fleet of propeller-driven aircraft to connect to larger cities or to catch onwards flights overseas.

The process of administration is designed to resolve a company’s future, either by securing a deal to save the business or by achieving the best outcome for creditors.

In Rex’s case, ****** private equity firm PAG had provided as much as $150m in funding, convertible into equity, for Rex’s domestic jet operations.

That could put PAG at the centre of any negotiations over the airline’s future. Rex said in 2020 that PAG could potentially end up with almost half of the airline’s equity if the debt is fully converted.

Bloomberg

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