CAPA LIVE ANALYSIS: Australian Regional Rex Seizes Opportunities

Australia’s aviation market has been deeply affected by the coronavirus pandemic, but there is a strong hope that there will be a resumption of air movements in its domestic market before Christmas.

CAPA-Centre for Aviation managing director Derek Sadubin, speaking at the CAPA Live November event, pointed out that a second COVID-19 virus wave in Melbourne had been brought under control after a 15-week lockdown, which had “paved the way for a resumption of aviation activity, at least domestically.”

Lim Kim Hai, chairman of local Australian operator Regional Express (Rex), said regional government rules meant the impact of border closures was “quite unequal” across the Australian states, with some like Western Australia, Queensland and South Australia experiencing “almost no impact.” He noted Queensland was returning to nearly 90% of pre-COVID passenger levels.

However, southern states, such as New South Wales and Victoria, were experiencing a “huge impact” from the border closures. New South Wales and Victoria constitute approximately 65% of Rex’s total services, making the closures “quite painful,” he said.

Set up by former Ansett Australia employees who acquired Hazelton Airlines and Kendell Airlines and merged the two companies, Rex operates a small fleet of turboprops on regional routes.

Rex is now expanding and looking to add jets to its fleet. Lim said the carrier was “very advanced” in the process of adding Boeing 737NGs, having signed leases for six and taken delivery of the first, for which it is conducting required training.

The carrier intends to launch initial operations with the first three 737NGs on Sydney-Melbourne service beginning in March, after which it will “wait a couple of months, and if we see that things are tracking well, we will start increasing the fleet gradually and constantly,” Lim said.

He added that there were plans to add aircraft at a rate of one every four to six weeks from July onward.

Lim confirmed the aircraft will be configured with a business-class section. The class will be priced “around about the Jetstar” region, to cater to the “price sensitive discretionary traveler” and will “probably be superior” to Virgin Australia but not “as ritzy” as Qantas, he said. The carrier also intends to maintain the lounges it has in three Australian capital cities.

Although Rex will look very different in 2021, the carrier is expanding its domestic offering rather than growing into a new airline type operation.

“We are essentially the same airline, but having different services with different aircraft types, so that’s a little bit different from starting afresh,” Lim said. He noted the carrier has about 80% of the core infrastructure available.

Rex deputy chairman John Sharp said the airline would change to “flying between the cities instead of just to the cities” and would grow “to be a sizeable domestic operator with a fleet of 30, 40 or even more. That’s our ambition.”

Sharp noted “it’s a bit of a buyer’s market at the moment. … We have very good, competitive rates. There’s nobody out there competing for aircraft.

“I’ve never seen interest rates this low. This is the best time ever to start an airline operation in Australia. … Twelve months ago this was a mission impossible; post-COVID-19 it’s a possible mission.”