REX warns on regional services

Australian regional carrier REX warns that the twin effects of global economic slowdown and what it calls Australia\'s \"draconian\" policies on regional aviation will \"wipe out\" most regional air services and warns the group may divert resources to the more lucrative mining charters.

1st Mar 2012


Australian regional carrier REX warns that the twin effects of global economic slowdown and what it calls Australia\'s  "draconian" policies on regional aviation will "wipe out" most regional air services and warns the group may divert resources to the more lucrative mining charters.

Rex Group  executive chairman Lim Kim Hai made the warning after announcing that Rex\'s regional airline operations is seeing passenger numbers continuing to decline, a trend that started with the global financial crisis.

"The drop in Rex\'s passenger numbers during this period was almost 4% in comparison to the previous year. At the same time, the cost per ASK (Available Seat Kilometre) increased by over 8% primarily due to soaring fuel costs." Lim added.

"Adding to the woes of regional air services are the Federal Government\'s stifling measures to be introduced from 1 July 2012 in the form of the Carbon Tax and other tax and cost increases on regional operators. The impact of these new measures on Rex alone will be in excess of A$6 million (US$5.4 million) per annum," said Lim.

"The airline environment worldwide is becoming toxic. In the space of the few weeks since the beginning of the calendar year we have already seen 4 fairly sizeable European airlines folding. Other strong carriers have recently reported drastic plunges in profits in excess of 50% (Singapore Airlines and Cathay Pacific) or even losses (Air France). In Australia two carriers have folded and Qantas has once again seen a loss in its results after deducting contributions from its Frequent Flyer programme. Virgin Australia reported a doubling of its profits but only managed to eke out a 2.5% net return on revenue."

"Rex will be monitoring the situation closely and in the absence of a more favourable environment will be compelled to divert its resources from marginal regional routes to more lucrative mining charters in order to protect shareholders returns."

The Rex Group saw pre-tax profits of A$18.5 million for the six months to December with on a turnover of $139 million.

This was largely driven by its subsidiary Pel-Air as a result of strong demand for charters from the mining sector and commencement of the Ambulance Victoria contract in the period. All other subsidiaries also showed improved results, says REX.
 

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