How does Regional Express cope with such an ageing fleet?

[Melburnian1]

Probably like a few AFFers who have always been city-based, I have occasionally flown on Regional Express over the years when I don't want to travel by car or train for trips such as Griffith or Wagga to Sydney.

I note from www.airfleets.net that the average age of REX's SAAB 340 fleet is now 21.8 years. One registration that I clicked on is almost 26 years old.

In an almost decade old article, a comment that the SAAB aircraft have 'an economic life of up to 20 years' was made:

http://www.rex.com.au/NewspaperClip/OtherArticles/AustralianAviationNov2006.pdf

At face value, this seems to be contradicted by the average age of the fleet.

At this age for this type of aircraft, is the availability of spare parts gradually becoming a problem, or is it still not and aided by occasional cannibalisation of withdrawn aircraft from REX or other similar smaller operators?

 

[Bajar]

I recall reading in their annual report that REX have an arrangement with SAAB for maintenance as they now have the largest operational SAAB fleet in the world. Of deeper concern is SAAB's ability to continue to support this, as I had heard they are slowly exiting the industry.

 

[Melburnian1]

Bajar, many thanks. Presumably Rex is benefiting from the lower aviation turbine fuel prices (just as motorists are) and my general impression is that it is a well run airline that sticks to its knitting and has a loyal base of fairly frequent travellers, with the airline even managing to successfully compete against QantasLink and Virgin Australia Regional on routes such as MEL - MQL where driving or travelling by V/Line train and coach are also competitors.

However with agriculture a bit of a mixed bag (for instance, a poor grain harvest in Victoria is likely) this cannot help Rex's passenger numbers and there must be a degree of price sensitivity in the market.

With a few exceptions, the population in rural Australia away from the cities and coastline is not growing to the same extent as our two biggest cities. Yes, Dubbo, Tamworth, Wagga Wagga and the like may be 'sponge cities' but some of their growth must be coming from continuing to 'soak up' smaller towns, the latter tending to gradually wither away.

Which begs the question - can the company afford in due course to renew the fleet - a not insubstantial cost given the number of aircraft in the fleet?

 

[Bajar]

I doubt they can. They don't seem to have much in the way of a business strategy other than "let's just ride it out", but as a shareholder I am keeping a close eye on it all. They have just received a QLD government contract to operate a heap of regional services which is probably propping up their bottom line significantly.

 

[docjames]

It would also be interesting to know the fleet utilisation (ie. no. of hours flying per aircraft per day) as (if low) this may extend their serviceable life and allow time in the schedule for "enhanced" routine maintenance.

 

[Melburnian1]

docjames, I don't believe that Rex have many - or perhaps 'any' - flights at unsociable hours such as our four major domestic airlines' transcontinental redeyes.

Like us all except Bajar, I need to read the latest annual report as this may give us a clue as to fleet utilisation hours.

Most of Rex's sectors are fairly short in aviation terms if I am not mistaken. On the one hand that presumably imposes stress and hence maintenance requirements due to the number of takeoffs and landings, but it also means that the aircraft spend a greater percentage of the day on a tarmac rather than in the air, presumably.

Most amusing that an AFFer names 'eastwest101' is reading this thread as I speak. Blast from the past.

 

[hummel]

Government subsidies? Owned by a small (maybe one?) group? Low overheads than the big airlines.. and at the end of the day.

Who is their competition?

 

[eastwest101]

It would also be interesting to know the fleet utilisation (ie. no. of hours flying per aircraft per day) as (if low) this may extend their serviceable life and allow time in the schedule for "enhanced" routine maintenance.

They usually seem to have a spare aircraft or two in their major bases SYD, MEL, ADL and TSV and in the rare occasion where a particular plane goes bung they are able to find a spare aircraft, air crewing seems pretty tight though, but that is a more widespread thing in Australia with VA and JQ also running pretty skinny/unforgiving rosters in the last few years.

 

[Melburnian1]

The 2014-15 Annual Report refers to a $6 million government grant which (looking at another page) was basically the company's net profit:

www.rex.com.au/AboutRex/InvestorRelations/img/AR_FY1415.pdf

The company also refers to how fuel hedging will assist it financially in 2016, but on the RPT routes there must be a very good chance that revenue will be static or on some routes even drop given the varying state of consumer confidence in rural Australia. The chairman refers to trading conditions being 'uncertain' and interestingly in his preface referred to a terrorist attack in Australia.

I just can't see that the company is earning a sufficient amount to replace its RPT fleet with new aircraft (as distinct from its contract fleet, which has some newly acquired planes) in the years ahead. However I am not an expert in that field, so it would be great to hear from those with knowledge of this technical area - dry leasing versus purchase for instance.

On quite a lot of routes, they have a monopoly. Any competition comes from the private car and to a lesser extent from trains and road coaches. Where routes are not a Rex monopoly, Virgin Australia Regional and QantasLink can be competitors. Perhaps leisure travellers and farmers 'staying home' because they don't want to spend the money to travel and accommodate themselves in an hotel is a large business risk for Rex, as is slow or no population growth in areas of Oz 'away from the big smoke.'

Their fares can be expensive per kilometre, so there must be some consumer resistance. Many local and state government employees would use the RPT and subsidised routes, but that might not fill all (or sufficient) of the seats each flight. Notably they 'amalgamated' (inserted an intermediate stop) in a couple of the NSW RPT routes, which increases elapsed journey times for travellers.

 

[Bajar]

They are leasing with acquisition, currently. Page 47 details that all aircraft that went under lease in 2014 will be acquired at the conclusion of the lease in 2017.

 

[Alanslegal]

Who is their competition?

Have flown from SYD-BHQ several times this year with them and looks like again coming Monday week. The SYD-BHQ-SYD flexible fares work pays for is >$1200 return. That's a crazy amount of money when you could almost go to Europe in business class one way (on points) The "sale" fares are like $800 return, now that's still crazy (given I could go to Singapore two times flying Scoot).

 

[eastwest101]

Have flown from SYD-BHQ several times this year with them and looks like again coming Monday week. The SYD-BHQ-SYD flexible fares work pays for is >$1200 return. That's a crazy amount of money when you could almost go to Europe in business class one way (on points) The "sale" fares are like $800 return, now that's still crazy (given I could go to Singapore two times flying Scoot).

Realise it may not be under your control, but if it is, have a look at going via ADL, even with flexible fares its sometimes much cheaper to fly VA or QF to ADL and then use Rex for ADL-BHQ legs if the times suit you.....

 

[hummel]

Have flown from SYD-BHQ several times this year with them and looks like again coming Monday week. The SYD-BHQ-SYD flexible fares work pays for is >$1200 return. That's a crazy amount of money when you could almost go to Europe in business class one way (on points) The "sale" fares are like $800 return, now that's still crazy (given I could go to Singapore two times flying Scoot).

Exactly, and while companies will pay they will stay the same. I had to pay $1500 for a one-way Y ticket back from MNL a month ago.. it hurt.

 

[Bajar]

This is probably their one strength in their business model - in that they have a monopoly for people needing to travel to regional areas rapidly. My Mum flies ex. Taree to Sydney which can tip the $400 end of the spectrum (nearly $700 following the Brindabella Airlines collapse in 2013). Depending on her needs, she alternates between buses to Newcastle and flights. Shame, really.