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The federal government is taking steps to safeguard Rex’s fleet and network in exchange for financial support for its purchase by American firm Air T.
Under the arrangements, Rex’s debt will be restructured, with $90 million owed to the government set to be carried forward in a profit-sharing arrangement, while another $60 million loan will be extended to help with engine care and maintenance in bringing more Saab 340Bs back into service.
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The government is not providing any funding for fleet renewal under the terms of the deal, which would see Air T purchase Rex for $172.5 million and invest $50 million into recapitalising the business, including increasing the number of Saabs in service from around 30 to 44.
The announcement follows the confirmation by Rex administrator EY Australia that ordinary unsecured creditors, including airports and other suppliers, would get nothing under the Air T purchase, which the government, as Rex’s largest creditor, said it will vote to accept.
“In exchange for this financing and to ensure value for taxpayer money, Air T has agreed to a range of commitments aimed at preserving essential regional aviation connectivity and improving governance arrangements,” Transport Minister Catherine King said in a statement.
“This will include returning more aircraft to service and increasing the frequency of profitable flights across the Rex network.
“To safeguard this public investment, the Government will retain its security over all Rex’s aircraft and simulator. This will ensure Rex’s Saab fleet cannot be sold without the Government’s permission and will continue to service communities across regional and remote Australia.”
The government would also set up a new relief program, capped at $5 million, for regional and remote airports that “supported Rex through the administration process”, which are owed between $45,000 and $650,000.
“This new program will mitigate financial barriers to these organisations continuing to provide essential services to their communities. Eligibility will be based on the amount owed to the organisation by the Rex regional business when it entered voluntary administration,” Minister King said.
“This program is a separate Australian Government initiative and is not part of the negotiations with Air T for its acquisition of Rex.”
The scheme has been welcomed by the Australian Airports Association (AAA), with chief executive Simon Westaway having said the peak body has been advocating for relief for regional airports since Rex entered voluntary administration at the end of July last year.
“This announcement demonstrates the Government’s recognition of the importance of regional airports to Australia’s transport network and the communities they serve,” he said.
“Many regional airports operate at a loss, burdened by ageing infrastructure, rising security requirements, regulatory pressures and staffing costs.
“Despite this, airports continued to provide access and services to Rex Airlines and supported them to serve passengers across regional Australia.”
In their report to creditors, the administrators pointed to several factors in Rex’s collapse, including global parts and pilot shortages leading to “suboptimal fleet utilisation”, as well as the airline’s ill-fated attempt to enter domestic trunk services “with an inability to secure frequency”.
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says:As time progresses, I get the feeling that the only winner here will be Air T; – they hold all the trump cards, they are the only bidder and the Oz Govt needs them to support our cousins in the regions, they have the parts and airframes which we will pay for and we via the Govt will pile in more support funding when we can least afford it. The gate is shut and the horse is on a canter into the yonder. It begs the question, why were there no questions asked by the governing bodies of REX’S poor business performance AND that disastrous decision to enter Jet operations, the latter would not have been sanctioned by any respected aviation observer, where was government?