Rex enters trading halt ahead of announcement

[SYD]

Oh, I think they had a thinly veiled swipe at QF

Rex also said appetite for domestic business travel had been down in recent months, as companies were instead footing the bill for exorbitant international air fares

“Business travel in the months of May and June have significantly reduced due largely to corporate travel budgets being exhausted following exponential increases of international fares,” Rex said.

The key points I read was “worldwide pilot shortages” preventing schedule and expansion plus logistics issue with the SAABs (code for they’re old and f…d).

 

[Mattg]

Oh, I think they had a thinly veiled swipe at QF

Rex also said appetite for domestic business travel had been down in recent months, as companies were instead footing the bill for exorbitant international air fares

“Business travel in the months of May and June have significantly reduced due largely to corporate travel budgets being exhausted following exponential increases of international fares,” Rex said.

Wow. Or maybe business travellers are choosing airlines other than Rex due to its lack of a frequent flyer program and corporate contracts?

 

[jase05]

The key points I read was “worldwide pilot shortages” preventing schedule and expansion plus logistics issue with the SAABs (code for they’re old and f…d).

The SAAB issue is going to be a massive concern going forward. What are the replacement options?

 

[CaptJCool]

well, the network ...

Where We Fly

there's no canberra - Sydney flights.... but regional cuts also occurred...

Rex Airlines cuts regional flights in four states blaming pilot, engineer and parts shortages

A company spokesperson says the changes are "minor," but remote communities affected by the cuts say they will have a "compounding effect" on education, health and culture.

www.abc.net.au

Rex Airlines warns of $35m loss due to ‘supply chain shocks’

Company says it has been forced to make significant reductions to its flight schedule in recent months

www.theguardian.com

Wow. Or maybe business travellers are choosing airlines other than Rex due to its lack of a frequent flyer program and corporate contracts?

Rex Business Flyer

Lounge Benefit
Membership:
All members are given a four-digit Lounge Access Code and have their fingerprints enrolled in the fingerprint scanner. To gain access to the Lounge, you must key in your Lounge Access Code, place your enrolled finger on the scanner and the doors will open if verification is successfu


so their Revenue Received in Advance must have dived - it was reported as at December 2022 at $58 million (compared to say for example the billions of QF) https://www.rex.com.au/AboutRex/InvestorRelations/_lib/pdf/HY/HY_FY2223.pdf

https://cdn-api.markitdigital.com/apiman-gateway/ASX/asx-research/1.0/file/2924-02637797-2A1434052?access_token=83ff96335c2d45a094df02a206a39ff4

the loss appears to result from financial services (convertible notes and warrants - see slide 14

It seems to be the experience of them all as sales aare currently on in the 3 others and for dates following the July school holidays (still plenty of $150 fares Syd-Melb with QF as there's so many daily flights, and VA's mid-week fares suggest forward tics are on the cool side - no surprise seeing the price gouging thats gone on since lockdowns were over and people have done their family reunions) I would note a cursory look around weekends and sporting events there;s likely more sales of the cheap seats as people have already booked interstate matches so fares are inflated a touch.

 

[docjames]

Reading the asx release, they point to the revenue from the Saab operation as up (v FY19) and positive EBITDA in that area.

Which I read as they’re losing way more than expected from the 737 operations. Coming as no surprise to most here presumably.

The “business travel” bit is a bit of a distraction from the core issue which is the jet operation isn’t delivering enough revenue to pay its way.

 

[eastwest101]

Once PAG get their 2 board seats, sanity might prevail and PAG might start thinking about what to do with Rex and the main issues of competition for staff, replacement and/or life extension of the Saab 340 fleet, and terminating or expanding the B737 fleet or more corporate transaction stuff like splitting the business up into a regional Saab 340 business and selling/merging the charter and jet part elsewhere.

 

[dajop]

Australian aviation is littered with the carcasses of organisations who somehow thought they were special enough to compete based only on flying aircraft on routes that people want to travel on.

Yet it’s clear if you can’t afford to invest in loyalty program you shouldn’t be investing in an airline that wants to compete with JQF or VA.

You can operate speciality high margin routes … yes. Maybe even Bonza can work by not taking on JQF or VA head to head, but if you’re flying MEL/SYD just forget it.

 

[Mattg]

Reading the asx release, they point to the revenue from the Saab operation as up (v FY19) and positive EBITDA in that area.

Which I read as they’re losing way more than expected from the 737 operations. Coming as no surprise to most here presumably.

The “business travel” bit is a bit of a distraction from the core issue which is the jet operation isn’t delivering enough revenue to pay its way.

Well, the monthly media releases announcing that last month’s jet operations were profitable have stopped.

 

[BAM1748]

I'm thinking the jet age has not gone so well for John Sharp and friends, egos bigger than their bank accounts.

 

[HS-TQE]

I can't see Bain Capital being interested in REX's dramas. Bonza really is the only other 'merger' partner for them. The question is which Private Equity firm will be the acquiring party, REX's PAG or Bonza's 777 Partners?

Alternatively the Regional and FIFO/Jet ops could be split into two by the current set of Singapore owners and PAG. An independent Alliance (assuming the block of the proposed QF takeover stands) are also alternative merger partners for REX's NJE FIFO subsidiary

 

[moa999]

Also probably not good for VAs float - reminding investors that aviation is difficult, and it's not hard to go from postive to loss making.

 

[prozac]

Could be anything from seeking foreign trained pilots to man new class aircraft to a capital raising.

 

[docjames]

I’m surprised a JV cant be worked out where REX continues regional flying (with ATR upgrades on the better volume routes, and by reducing number of flights for the Saabs extending their lifespan for the thinner routes), and with access to VA’s loyalty program (otherwise why bother), and a win for VA as it picks up the jet services (+/- the jet leases) and gets more punters into Velocity.

But, as others have noted, egos being one major barrier to that.

 

[Mattg]

I’m surprised a JV cant be worked out where REX continues regional flying (with ATR upgrades on the better volume routes, and by reducing number of flights for the Saabs extending their lifespan for the thinner routes), and with access to VA’s loyalty program (otherwise why bother), and a win for VA as it picks up the jet services (+/- the jet leases) and gets more punters into Velocity.

But, as others have noted, egos being one major barrier to that.

I feel like the current management of Rex would probably rather run the existing airline into the ground than admit defeat and partner/merge with VA.

 

[HS-TQE]

I’m surprised a JV cant be worked out where REX continues regional flying (with ATR upgrades on the better volume routes, and by reducing number of flights for the Saabs extending their lifespan for the thinner routes), and with access to VA’s loyalty program (otherwise why bother), and a win for VA as it picks up the jet services (+/- the jet leases) and gets more punters into Velocity.

But, as others have noted, egos being one major barrier to that.

The ex VA jets at REX were reportedly the least reliable in the fleet in their time at VA. Can't see VA bothering to spend money basically to take back leases to some reported hanger queen's.

 

[henrus]

Also probably not good for VAs float - reminding investors that aviation is difficult, and it's not hard to go from postive to loss making.

To be fair VA doesn't have a fleet primarily of aircraft where production stopped in 1999 and their primary aircraft (the 737-800) average age is 2.5 times younger then Rexs average saab age.

VA's oldest 737-800 is 20 years old with new replacements in the form of the 737 MAX ordered plus 737-800 parts are also readily available with ~6000 in service compared to just 190 saab's still operational.

The 190 operational is from planespotters.net so this excludes the parked count so they list Rex having 39 in service meaning Rex makes up 20% of all operational saab's in operation today. If rex being the largest saab operator can't find parts then it doesn't bode well for the 190 aircraft in operation to stay in the air much longer.

Combine this with the fact that they have no replacements ordered and it's easy to see why investors are concerned.

 

[docjames]

The ex VA jets at REX were reportedly the least reliable in the fleet in their time at VA. Can't see VA bothering to spend money basically to take back leases to some reported hanger queen's.

They have a number of others (not just ex-VA), however VA have fleet on order so i don’t think it’s physically about the jets (more the routes and volume - and trained crews) - hence the +/- (the leases are the least important - although Rex would have to find a way to exit them if VA wont take them over).

 

[HS-TQE]

They have a number of others (not just ex-VA), however VA have fleet on order so i don’t think it’s physically about the jets (more the routes and volume - and trained crews) - hence the +/- (the leases are the least important - although Rex would have to find a way to exit them if VA wont take them over).

REX has some ex-Singapore/Silk 737s on the way plus the odball ex-Jet/Samoa 737 aircraft that's currently in service with a different interior.

 

[moa999]

REX has some ex-Singapore/Silk 737s on the way plus the odball ex-Jet/Samoa 737 aircraft that's currently in service with a different interior.

More 737s aren't exactly going to help if they are Losing money quickly with the existing 737 fleet.

 

[anyonebutqantas]

They might have to ask GippsAero to design and build a bespoke replacement for the Saabs.