Regional Express (Rex) has warned of a worse than predicted annual loss as lockdowns and border closures within Australia curb hopes of any short-term recovery. With the airline extending the grounding of its Boeing fleet to mid-September, Rex is now flagging an annual loss of US$13.23 million.
Rex’s expected annual loss to increase
Rex was never expecting to post an annual profit this year. In the 12 months to June 30, 2021, the airline had predicted a loss of approximately US$11 million. But a deteriorating operating environment at the tail end of the financial year is expected to blow out that forecasted loss.
“The lockdowns that eventuated in New South Wales in June and the ensuing border closures
have significantly impacted revenue,” Rex said in a statement. “Furthermore, no measures were taken initially to mitigate the losses as the lockdown was perceived to be temporary and of short duration.”
With the remaining seven Australian states expected to ban travelers from New South Wales and its capital of Sydney for the remainder of 2021, there is nothing temporary about the pain Rex and other Australian domestic airlines are feeling right now.
Sydney is normally Australia’s busiest airport and a key hub for virtually all domestic airlines. The airport is Rex’s home base and busiest port.
Rex quietly extends suspension of Boeing 737 flights
In addition to its regular turboprop regional operations, Rex began flying Boeing 737 aircraft on some mainline domestic routes in Australia in March. In July, Rex grounded those planes for a few weeks. The airline has since quietly extended that grounding until mid-September. Reading the tea leaves in Sydney in mid-August, a mid-September restart looks ambitious.
Reliable sources suggest Rex is paying around US$44,000 per month to lease each of its six Boeing 737s. As recently as late June, Rex said it anticipated receiving two more 737-800s this month and another two towards the end of the year. Simple Flying has approached Rex to ascertain the current status of those deliveries.
Meanwhile, Rex isn’t alone bleeding money. Buoyed by a strong Easter and open internal borders, competitor airlines like Qantas, Virgin Australia, and Jetstar were heading back towards 2019 flying levels as recently as May.
On what is normally Australia’s busiest airline route and typically among the world’s top three routes measured by passenger numbers, just four return flights will run between Sydney and Melbourne on Thursday. Jetstar will operate two. Qantas and Virgin Australia each have a single service.
On Thursday, there are three return flights between Sydney and Brisbane. Virgin Australia is operating one and Qantas two. A single return Qantas flight runs on the number three route between Melbourne and Brisbane on Thursday.
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Employee stand-downs at Rex imminent
Last month, Rex’s John Sharp said internal border closures had curbed Rex’s business by 80%. “We’ll have people we’ll have to pay people who we can’t generate income from,” he warned.
Last week, Mr Sharp criticized Qantas’ haste in temporarily standing down workers following the rollout of government income support for domestic aviation workers. On Tuesday, Rex confirmed it would also implement temporary stand-downs.
The Australian Financial Review is reporting this will occur on Monday, August 16. Citing a staff email, workers including flight crews, ground crews, call center, office, and operations employees will all temporarily lose their jobs. The airline will make an announcement later this week on the number of employees to stand down.
Meanwhile, Virgin Australia is also widely tipped to temporarily stand down employees. That airline is playing its cards close to its chest. Virgin Australia is said to be talking to unions to smooth the process, but it is understood around 1,000 workers will find themselves temporarily out of work.