Regional Express (Rex) Airlines has grounded its jet flights between Australia's major cities after entering voluntary administration.
Rex has run with the tagline 'our heart is in the country' ever since its establishment after the collapse of Ansett Airways in 2002. This is because it is often the only airline flying in and out of remote locations.
Though these routes only account for about five per cent of domestic passengers, the flights provide essential connections between the regions and the cities.
Dr Ian Douglas from UNSW Sydney's School of Aviation says while Rex's intercity flights are grounded, the remote routes are still flying—which is important for the health care of many Australians.
"If Rex completely fails then one of the consequences is that it puts remote medical care at risk," Dr Douglas says.
He says cutting flights to Australia's smaller regional centres isolates communities.
"Rex has an important role in keeping the country more connected, which helps us all thrive economically and socially.
"If Rex's regional business doesn't survive, there won't just be a knock-on effect with higher ticket prices for consumers."
Regional airlines are a lifeline connecting rural and regional locations, replacing journeys that would otherwise take hours—or days—by car or train.
"There are many areas where Rex is the only airline operator. Without them, access is cut to health and education services, as well as tourism and industry."
What went wrong?
Rex was reported to be losing $1 million per week with its Boeing 737 jet business flying capital city to capital city.
The airline launched return services from Sydney to Melbourne in March 2021 and its network expanded steadily since. A new route between Melbourne and Perth was launched as recently as last month.
In the past week, nearly 20 per cent of Rex employees lost their jobs because of the cuts to these services between major cities.
"While Rex expanded their services beyond regional routes, the expanded network didn't provide enough scale or frequency to be commercially viable," Dr Douglas says.
"They were flying some major routes seven or eight times a day. But the two major carriers, Qantas and Virgin, were running up to four flights an hour at peak times," he says.
The news of Rex entering voluntary administration follows the collapse of budget carrier Bonza in April. And before that, domestic failures include Impulse, Tiger Air, Air Australia, Ozjet, two iterations of Compass—and the much larger Ansett Airways.
"The domestic market is hard to crack," Dr Douglas says.
There were also allegations Qantas and Virgin were deliberately blocking rival services at Sydney Airport at peak times.
In addition, Dr Douglas says there were early warning signs about the company struggling back in June, when the former executive chair Lim Kim Hai stepped down.
Lim is a major shareholder of Rex. Since stepping down, he launched a process to remove several directors, including former transport minister John Sharp, from the board.
What next?
When Virgin Australia went into administration during the COVID-19 pandemic, the company survived by streamlining its core services and trimming its fleet to a single aircraft type.
Virgin reinstated its domestic operation with more than 30 aircraft.
Rex only had nine 737 jets operating its flights between major cities.
There is speculation that overseas private equity firm PAG could become the new owner. The firm had previously funded the expansion of Rex to cover its routes between capital cities.
While the Federal government says it wants to make sure there is a stronger aviation sector by ensuring Rex continues to operate its regional routes, they have yet to commit to funding it. But the government will soon release its Aviation White Paper, setting long-term policies for the industry.
Dr Douglas says the likelihood of Rex completely folding is low—he says he expects the airline will continue to operate its regional services.
"Several state governments as well as the Federal government have indicated that it can't be allowed it to fail," he says.
"They want and need to save the connectivity to the regions.
"Nobody is saying we should just let Rex die."
Key Facts:
A UNSW academic says the embattled carrier Rex Airlines is crucial in connecting essential services to regional Australia—and that this should help the company survive administration.
