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Regional Express Holdings’ (ASX: REX) bold push to service capital city routes in competition with Qantas and Virgin has finally taken its toll with the company placed into voluntary administration and flights suspended.
But while voluntary administrators have been appointed to five companies within the Rex Airlines group, regional Saab 340 services to areas such as Ballina, Dubbo, Merimbula, Griffith and Bathurst have not been affected.
The collapse of Rex Airlines, the second major Australian airline to fold in the past three months, comes on the heels of creditors voting earlier this month to liquidate the short-lived startup Bonza Airlines.
According to the Transport Workers Union, the move has impacted 610 jobs at Rex in an industry that has "already taken hit after hit".
Samuel Freeman, Justin Walsh and Adam Nikitins, of Ernst & Young Australia, have been appointed voluntary administrators to the Rex Airlines group and they are currently working with the industry to minimise the impact of grounded flights on passengers.
Flights between major airports have been cancelled and Rex’s domestic fleet of 10 Boeing 737 aircraft have all been grounded.
“Affected customers are being contacted directly by Rex,” say the administrators.
“Regional Saab 340 flights are currently unaffected by the administration and will continue to operate.
“Prepaid ticket holders will continue to have their tickets honoured by the Rex Group on regional routes.”
As they did with the Bonza collapse, Qantas Airways and Virgin Airlines have stepped in to help stranded passengers where possible.
Virgin Australia has offered Rex customers with tickets on flights that have been cancelled due to the administration the chance to transfer their tickets to 13 overlapping Virgin Australia services at no additional cost.
The administrators say that eligible Rex customers who want to take up Virgin’s offer must contact the Virgin Australia Guest Contact Centre by 14 August 2024.
“Eligible customers will be re-accommodated on Virgin Australia flights as close as practicable to their original time of travel,” say the administrators.
Virgin says its team is "moving quickly to support Rex’s customers and people".
"Virgin Australia is also offering support to Rex employees who may be impacted by today’s announcement," says the airline which has urged employees affected by the administration to apply for open positions on its website.
Qantas also says that Rex customers impacted by cancelled flights can contact Qantas and Jetstar to be "reaccommodated on the same route as their original booking at no charge, where we have seats available".
Meanwhile, the administrators warn that Rex passengers who hold affected tickets should not come to the airport until they have rebooked their flights.
“Rex and Virgin Australia are also exploring opportunities to support regional customers, which include Virgin Australia selling Rex’s regional services through codeshare or interline arrangements and making Velocity Frequent Flyer benefits available to Rex’s regional customers,” say the administrators.
Rumours have been swirling since the weekend that Rex Airlines was poised to call in administrators. The company placed its shares in a trading halt on Monday ahead of an announcement, and this morning revealed it has suspended trading of its shares for the time being.
The airline has been up against stiff competition from the Qantas-Virgin duopoly since launching capital city services in 2021.
But after two years of operations, including the entry of Bonza, the Australian Competition and Consumer Commission last year released a report that revealed the new entrants were making little impact on their major competitors.
Rex posted an after-tax loss of $3.2 million in the first half of FY24, down from a $16.5 million loss a year earlier as revenue lifted 6.3 per cent to $353 million.
The company was still pushing to expand its capital city routes as recently as June when Rex began a new Boeing 737 route between Melbourne and Perth five days a week.
Australian Travel Industry Association CEO Dean Long has described the Rex administration as a "significant blow" to the travel sector in Australia.
“Rex Airlines has been a lifeline for much of regional and rural Australia, ensuring these communities stay connected to the rest of the country," says Long.
"Rex’s entry into administration is a significant blow not just for these areas but also for the competitive landscape of Australian aviation.
"We remain hopeful that Rex is able to navigate this challenging period and emerge to trade again. In the meantime, your travel professional is doing everything they can to work through your options.”
Melbourne Airport, which is home to Rex's largest 737 jet base, says it is "deeply disappointed" with the suspension of Rex services.
"The team at Melbourne Airport will continue to work hard to facilitate new entrants to the Australian market because of the benefits they bring to consumers," says the airport in a statement.
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