Regional Express Airlines (Rex) has floated a crazy idea to start flights on domestic trunk routes between Australia’s capital cities, competing directly with Qantas (and possibly Virgin Australia, if it emerges from voluntary administration). Under the proposal, Rex would lease 10 narrow-body jets and operate on key routes such as Sydney-Brisbane and Melbourne-Adelaide.
Rex normally operates services exclusively to regional destinations, using an ageing fleet of Saab 340s. But Rex deputy chairman John Sharp, a former National Party MP, believes the airline would be able to lease Boeing 737s or Airbus A320s cheaply due to the current pandemic. The airline would hire its own pilots, flight attendants and ground staff.
The regional airline expects that they would need a capital injection of around $200 million to launch capital city routes next year. It says that it has already been approached by potential equity partners that could provide this funding.
The Rex board is expected to make a decision in the next 8 weeks. If it decides to proceed, the plan would be to commence domestic operations on 1 March 2021.
But this proposal could hinge on the outcome of Virgin Australia’s voluntary administration proceedings. If the sale of Virgin Australia is successful and normal domestic operations are resumed, there may not be a gap left for Rex to fill on the domestic trunk routes.
“Presently Rex flies from regional centres to all the capital cities in Australia, and the proposition is that we add to that by flying between them, and provide a domestic air service in place of the services that once were provided by Virgin,” Mr Sharp told ABC Radio on Tuesday.
Even if the Virgin Australia sale is unsuccessful, there are rumours that other parties including Indigo Partners could also be interested in starting up operations in Australia. Rex could still have an advantage here as an existing player in the domestic market with an existing Australian Air Operator’s Certificate. But it does not yet have many of the things it would need to expand into jet operations, such as aircraft, pilots, simulators and airport slots.
Less than two months ago, Rex warned the federal government that it would not be able to survive even a few more weeks without a government bailout. Rex and other regional airlines have since been given funding to continue essential air services. Today, the Australian Financial Review reported that Rex has now received more taxpayer-funded assistance during the COVID-19 crisis than both Qantas and Virgin Australia combined.
Regardless of whether this idea ever takes flight, the thought bubble has done wonders for the share price of Regional Express Holdings. After a brief ASX trading halt on Tuesday, the share price shot up from $0.90 to $1.19.
Join the discussion on the Australian Frequent Flyer forum: Rex to fly between Australian capital cities?