IT APPEARS as though regional Australia is getting a little edgy about the future of Rex, and for good reason, after the Federal Government was forced to pour a further $80 million of rescue funding into the embattled carrier to keep it afloat this week.
In making the announcement, Federal Transport Minister Catherine King did not give too much away in terms of how long it would take for Rex to get back on its feet and be a viable operation again, only stating the administration process was “progressing”.
That progress has so far seen Rex divest assets to free up cash and pay creditors, including its Pel-Air Aviation subsidiary, which it sold to Toll Aviation, while experts believe its recently listed flight school in Wagga Wagga could fetch as much as $17 million.
Whether this government funding will equate to nothing more than a finger in the dyke measure remains to be seen, however what is clear is just how vital the services Rex offers is to residents in regional Australia and domestic tourism operators.
Alongside the announcement of $80 million in rescue funding was an extension of the Regional Flight Booking Guarantee, first introduced to keep vital regional air links going in August.
Under its terms, the guarantee secures refunds and chargebacks for travellers in instances where a Rex flight is cancelled, cannot be rescheduled, and the Rex Group is unable to provide a refund.
Rex’s administrator, EY, also confirmed it wants to extend the runway back to profitability, formally applying to the government for the administration process to be extended to at least 30 June 2025.
While some residents and travel stakeholders acutely reliant on Rex’s regional services for survival can breathe a sigh of relief after the latest tranche of support funding, the exhales are a little sharper and closer between at the headquarters of some smaller regional airlines.
One of those smaller operations is Sharp Airlines, whose CEO did not pull any punches when talking to the AFR this week, describing the government’s funding as a “real kick in the guts”.
Sharp Airlines was one of the carriers that proposed taking over Rex’s services.
“EY will not enter into a discussion with industry as to how to support these regional and remote communities,” CEO Malcolm Sharp fumed.
“[Minister King] won’t enter a discussion with industry either…the industry can provide solutions at no cost, but now the government’s throwing $80 million at them.
“I just don’t get it,” he concluded.
Virgin Australia is the carrier at the big end of town rumoured to be in the mix to buy Rex, jumping quickly to the carrier’s aid when it collapsed and was dealing with a stream of stranded travellers.
No word yet though on whether that will transpire.
In an update published yesterday, the Australian Airports Association (AAA) released analysis it claimed “underscored” the risk to regional Australia if Rex were to go under.
The report powered by Lime Intelligence data showed:
- 42 regional routes are solely serviced by Rex
- The airline flies 20 regional routes serviced by more than one airline
- Rex continues to carry around 75,000 passengers each week
Of more concern are the following routes that are only serviced by Rex:
- Melbourne – Mount Gambier
- Sydney – Parkes
- Esperance – Perth
- Adelaide – Broken Hill
- Sydney – Narrandera
“This new analysis from the AAA really highlights why the exit of Rex could be so significant for both its employees and customers,” AAA CEO Simon Westaway said.
“Rex is still carrying tens of thousands of passengers to and from regional communities each week, allowing residents to visit loved ones and attend important medical or business appointments,” he added.
Under the weight of all of this is, of course, the reality that less competition in the domestic market means higher airfares.
A report this week released by the ACCC showed average airfares on major city routes have increased by 13.3% to 30 September, following Rex’s exit from the Golden Triangle on 31 July.
During the same period, the number of available seats between metropolitan cities also fell by 6%, while passenger numbers remained largely the same.
In shades of the bad old days under CEO Alan Joyce, Qantas came out swinging after the report’s release, claiming the metric used by the ACCC was not a fair representation of average airfares.
Like many of the Flying Kangaroo’s pugilistic rebuffs, this response appeared tone deaf in a country still struggling with the cost of flying, coupled by a housing and cost-of-living crisis.
But away from aviation, there were plenty other stories making waves this week, namely a global report from CLIA which showed that cruise tourism made its “highest-ever” global economic impact last year, generating US$168.6 billion in economic activity for countries around the globe.
We hope that the NZ Government sat up to take notice of the landmark report, which for fairly inexplicable reasons, has been doing its darndest to disincentive the cruise sector across the Tasman through pervasive fees and levies.
So bad is the situation, the New Zealand Cruise Association (NZCA) last week warned the industry was in reverse.
“While cruise tourism is thriving in the rest of the world, New Zealand is going backwards and local communities are facing a 20% reduction in visitor numbers over the coming season,” NZCA CEO Jacqui Lloyd said.
In other news, Flight Centre Travel Group (FCTG) revealed it will aim to open 35 new stores over the next year as it seeks to restore its retail network to pre-pandemic levels.
In an update delivered at its AGM, the business also revealed that further investments will see it spend around $100 million on capital expenditure needs, including in technology and systems which are likely to see major updates conducted across the group.
Shareholders were also provided with a preliminary trading update, with CEO Graham Turner stating the company was aiming for a full-year profit before tax of between $365 million and $405 million.
Unlike the share price drop the business experienced after releasing is financial results earlier in the year, the market responded well to the update, with the share price piling on value over the course of the week.
And finally, another story we have been following closely is the listing of the of the Voyages-run Ayers Rock Resort, which this week appears to have been narrowed down to two serious contenders.
One is Journey Beyond, which would be an obvious fit for the brand that already boasts an array of blue-chip outback tourism product.
It’s important to note that JB has declined to comment on the speculation.
The other possible buyer is the Airport Development Group, which confirmed to us this week it is vying for the iconic Uluru property.
In a possible shot across the bow at the US-backed Journey Beyond, a spokesperson stated it strongly believes such a “treasured Australian asset” should remain in Australian hands.
“ADG represents the investments of everyday Australians…and would embrace the responsibility of safeguarding this culturally significant icon.”
There were plenty of other huge stories to break in the wonderful world of travel, so make sure to go back and check out last week’s issues of Travel Daily and Cruise Weekly if you haven’t already.
Have a great weekend everyone.
