Australia’s Regional Express (Rex) is revising down its breakeven forecasts for the current financial year. Citing state border restrictions and lockdowns, Rex now expects to lose US$11.6 million in the 12 months ending June 30.
Rex revises down its earlier hopes of breaking even
Earlier this year, the airline stepped into the big league, leasing six Boeing 737-800s and taking on Qantas and Virgin Australia on key Australian domestic routes. Previously, Rex had stuck to regional flying using a fleet of Saab 340s.
That expansion, along with ongoing border issues and lockdowns, looks set to plunge Rex’s annual financial results into negative territory. In an update to the Australian Stock Exchange (ASX) on Wednesday, Rex revised down its profit forecast.
“The company is revising its interim profit guidance provided on May 10, 2021, which forecast a breakeven situation for this financial year,” the update reads.
“Rex is now forecasting a full year statutory loss before tax of about $15 million (US$11.6 million).”
Most years, Rex manages to scratch out a profit, with airline having a longstanding reputation for keeping its operational costs down. But the travel downturn disrupted this regular pattern of profitability. In the 2019/20 financial year, Rex posted a loss of US$14.99 million.
In the six months to December 31, 2021, Rex appeared to be back in form, posting a US$7.65 million profit. However, Rex received millions in government subsidies over this period. Without that aid, the financial situation may not have been so sunny.
Rex’s new jet services drag down airline’s financial performance
In the last six months, Rex’s foray into jet services seems to have cost it dearly. Dashing Rex’s May hopes of a breakeven situation on June 30 is a recent lockdown in Melbourne, causing mass flight cancelations.
Before that, Simple Flying understands Rex was happy enough with the performance of its Boeing services. This was despite stories of light passenger loads. Rex had countered that all airlines experienced light loads during off-peak times on certain routes.
But four of five routes Rex runs or plans to run Boeings on pivot in or out of Melbourne. That includes Melbourne – Sydney, Melbourne – Adelaide, and Melbourne – Gold Coast. Flights between Melbourne and Canberra were due to begin on June 10. That service is now pushed back to June 18 because of the Melbourne lockdowns.
The only route Rex runs Boeings on that doesn’t utilize Melbourne Airport is Sydney – Gold Coast. However, Simple Flying is also aware that service has also been impacted by flight cancelations recently.
“The latest border restrictions and lockdowns have severely disrupted Rex’s domestic and regional networks, forcing Rex to cancel a number of flights to and from Melbourne,” the airline’s ASX update said.
Wednesday’s update is a sharp reversal from its May update, where Rex gave itself a self-congratulatory pat on the back, calling its then predicted breakeven an “incredible outcome.”
Despite the impending loss, Rex is continuing to build up its jet operations. The airline has six former leased Virgin Australia Boeing 737-800s. Each of those planes is rumored to be costing Rex just over US$46,000 a month, increasing to approximately US$77,300 a month after the first year. It is a bargain price but remains a substantial ongoing expense. Despite this, Rex has confirmed they will be bringing another four Boeing 737-800s into their fleet over the next few months.
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