Yesterday I wrote about how Rex Airlines is in turmoil, as trading of the company’s shares was halted on Monday, pending a further announcement. There’s now a major update, as Australia’s third largest airline has entered voluntary administration, which has immediate implications for the carrier’s operations.
In this post:
Rex Airlines enters voluntary administration
As of July 31, 2024, Rex Airlines has entered voluntary administration, with Ernst & Young being appointed as administrators. The administrators will be tasked with assessing Rex’s situation, and negotiating with shareholders and creditors for the best outcome:
- This could include trying to find new owners for the airline, to keep it operating long term
- If that’s not possible, then assets will be sold off to repay creditors as much as possible, though if liquidation happens, creditors will probably only get back a fraction of what they put into the airline
Only time will tell how this plays out. It’s possible that voluntary administration could save the airline, allowing it to shrink into profitability, and renegotiating terms with partners. For example, Virgin Australia entered voluntary administration in 2020, and emerged stronger. It’s also possible that voluntary administration ends in liquidation, just as we recently saw Australian airline Bonza liquidate.
So, what went wrong at Rex? Long story short, the airline got too ambitious with its growth, and deviated from its core strength. Before the pandemic, the airline operated a fleet of Saab 340 turboprop aircraft, in small markets without much competition. However, in late 2020 the airline decided to pursue a new strategy, and acquired Boeing 737s, with hopes of competing more directly with both Qantas and Virgin Australia, in higher demand markets.
The airline has a fleet of 66 aircraft, including nine Boeing 737-800s and 57 Saab 340s. Unfortunately this growth hasn’t proven to be profitable, and the company hasn’t turned a profit since pursuing this strategy. There just doesn’t seem to be room to compete with Qantas and Virgin Australia in major markets.
One important thing to keep in mind is that Rex provides important air service to many small communities with its Saab 340s, which don’t otherwise have connectivity. The airline flies much smaller planes than you’ll find at Qantas and Virgin Australia, and as a result, the carrier being in business isn’t just about competition.
It can’t be ruled out that the government (either locally or nationally) may step in to try to save the airline, so that communities aren’t left without service.
Rex Airlines cancels 737 flights effective immediately
With Rex Airlines entering voluntary administration, what does that mean for passengers? The first thing to note is that Rex has canceled all Boeing 737 flights as of July 31, 2024, so it’s clear that these planes no longer have a future with the airline (if the airline has a future at all).
Impressively, Rex has announced an agreement with Virgin Australia, whereby the airline will honor all prepaid tickets for Rex flights between domestic capital cities, at no additional cost to passengers.
If you hold a ticket on any of these routes, you can transfer your Rex booking to a similar Virgin Australia flight. To rebook, you can contact the Virgin Australia call center at 13 67 89, or visit Virgin Australia’s website, by August 14, 2024. Those with Rex tickets shouldn’t come to the airport until they’ve made alternative arrangements with Virgin Australia.
Rex has also announced that points in its frequent flyer program are being frozen during the administration process, so you can’t earn or redeem points.
Bottom line
Rex Airlines is in trouble, as the airline has just entered voluntary administration. With this, the future of the airline is uncertain. What is certain is that the airline is cutting all Boeing 737 routes, and will instead focus on Saab 340s. The good news is that for those who have travel booked, Virgin Australia will honor tickets for 737 routes between major capital cities.
It remains to be seen how this process plays out for Rex, and whether the airline has a similar fate to Bonza or Virgin Australia.
What do you make of Rex entering voluntary administration and cutting 737 flights?
The issue with Rex 737 I believe is because they are flying old VA planes same VA routes but more expensive than VA or QF.
It is sad that another airline in Australia has folded.
There however a few other regional airlines. Some have been around for years and some are new.
Air North has been around for years and primarily services the top end of Australia (eg Darwin, Groote Eylandt. Kununarra).
Nexus Airlines is a new airline and services the Geraldton-Karratha-Port Hedland-Broome (ie mostly FIFO workers).
Then there is Alliance airlines which is based in...
It is sad that another airline in Australia has folded.
There however a few other regional airlines. Some have been around for years and some are new.
Air North has been around for years and primarily services the top end of Australia (eg Darwin, Groote Eylandt. Kununarra).
Nexus Airlines is a new airline and services the Geraldton-Karratha-Port Hedland-Broome (ie mostly FIFO workers).
Then there is Alliance airlines which is based in Brisbane but serves a lot of the inland regional areas such as Mt Isa, Newman and Emerald.
I have also taken some less well known charter airlines such as Air Frontier or Chartair (and no it is not luxury travel).
And in an even more of a twist, Virgin are accommodating affected travelers.
https://x.com/RexAirlines/status/1818271607909179562?s=19
Atleast it seems the regional flights are safe.
And Virgin will potentially even taken back some planes from Rex to bolster their fleet.
It all seemed to positive for Rex when Virgin was on the brink...
Australia has a problem. It's like US, where the country is geographically large, but their population is so much lower than the US. US has more than 10x their population, which allows it to sustain multiple carriers.
Even Canada has 50% more people than Australia and has a hard time sustaining Air Canada + the various random competitors. Canada also already has the benefit of centralizing its population along the border, but Australia's cities are...
Australia has a problem. It's like US, where the country is geographically large, but their population is so much lower than the US. US has more than 10x their population, which allows it to sustain multiple carriers.
Even Canada has 50% more people than Australia and has a hard time sustaining Air Canada + the various random competitors. Canada also already has the benefit of centralizing its population along the border, but Australia's cities are much more spread out like in the US.
Regardless, it's already very less than ideal to have only one full service longhaul carrier in QF.
There is plenty of competition for Qantas. Travelers to North America can fly United, American, Delta, or Air Canada. Services to Asia are myriad, and can connect pax to Nth America or Europe. The ME 3 all fly here, and do so with multiple daily frequencies from the large population centres.
If you look at international market share, Qantas is still the de facto number 1.
Local carriers will always be more relevant because it's not about singular routes or just having service to North America, but the entirety of it. Flying domestically, but then also flying from Australia to the US, Asia, Europe, etc.
The US gets ME3 carriers and other foreign airlines, but Delta/United/AA still all meaningfully provide the most service and networks...
If you look at international market share, Qantas is still the de facto number 1.
Local carriers will always be more relevant because it's not about singular routes or just having service to North America, but the entirety of it. Flying domestically, but then also flying from Australia to the US, Asia, Europe, etc.
The US gets ME3 carriers and other foreign airlines, but Delta/United/AA still all meaningfully provide the most service and networks within the US and to the major cities across the world. Qantas is the only one that can do that for Australia right now. Qantas in Australia is very similar to how Air Canada dominates in Canada.
Australia simply doesn't have the population while also being too geographically large to sustain another full service carrier to meaningfully compete with Qantas. When VA was doing longhaul to the US, they had been bleeding money despite having a JV w/ Delta back in the day,
There are abundant interline agreements that make domestic connections a breeze. The main issue is that many Australians are hopelessly ensnared in the Qantas loyalty program.
By partnering with Australia's most Premium™ airline, Delta has ensured that its customers connecting onwards to Rex Australia flights will never have to endure a day-of cancellation ever again. This focus on operational perfection, even with its codeshare partners, is why Delta is the most profitable airline in history,
Boring.
Preach it.
Aren’t they partners with DL? I can’t imagine many DL pax flew them, so there might not be major implications for them.
There had to be at least a few pax connecting from Melbourne and Brisbane in Sydney. I don't know why you'd bother, though - if you're obliged to use a US carrier, you'd just book one of the nonstops on United to avoid the PITA transfer at Sydney.
The flying public can’t seem to support a third airline. The low cost model does not seem to get a strong foothold in Australia & Canada. Airlines keep trying the low or Ultra low cost model to no avail. It must be due to lower populations in their respective countries or folks like paying more to fly. I would have liked to see both Bonza and Rex make it in Australia and Lynx Air and Swoop in Canada.
Rex wasn't a dedicated LCC, though - they had a business class cabin up the front, and positioned themselves as direct rivals to Virgin AU. What they couldn't do, though, was match VAs service frequency. One nonstop in the morning & evening in each direction between Melbourne and Brisbane, for instance, was never going to cut it with high-yield business traffic. Their attempt at Melbourne-Perth offered only one return from the west - a red-eye....
Rex wasn't a dedicated LCC, though - they had a business class cabin up the front, and positioned themselves as direct rivals to Virgin AU. What they couldn't do, though, was match VAs service frequency. One nonstop in the morning & evening in each direction between Melbourne and Brisbane, for instance, was never going to cut it with high-yield business traffic. Their attempt at Melbourne-Perth offered only one return from the west - a red-eye. Ain't nobody got time for that.
While nowhere big as Rex, another Australian airline, Bonza, already shut down earlier this year.
Rex was nice but it didn’t have the schedule, nor a compelling reason to choose them over Virgin or Qantas or Jetstar. Virgin aggressively priced their flights at $5 less than Rex (and to a degree so did Jetstar).
The Aus govt has already said they would assist the regional network if needed.
No one flew them, most didn't even know they existed.
That's the problem.
This is correct. Interestingly they always did very well when they were a regional carrier, with strong brand recognition and intense customer loyalty. Hopefully they'll dump the 737s and get back to their roots/routes.
This is a shame. From all accounts it was really good domestic airline from passenger experience point of view and with great customer service onboard, and remotely. If they could have survived could see them forcing Virgin Australia and Qantas to up their game in this respect
It will be a real shame if Rex can no longer service its regional customers.
We can fly to Sydney in 45 minutes on Rex as opposed to six hours on the one bus a day!
Our local council has just spent a lot of money upgrading our small airport as well.
Our local hospitals rely on a lot of fly in fly out doctors, particularly at weekends. Will they still want to come if they have to drive?
I think the 737 operations were started in the expectation that Virgin Australia would not emerge from bankruptcy, so there was more competition with established brands (and FFP products etc) than REX expected.
FWIW Adminstration is the US equivalent of Bankruptcy under Australian Law. Admittedly no where near as flexible as US chapter 11 bankruptcy law