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.
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?
Membership is free and takes no more information than commenting as a guest. Earn status points for good contributions, and see fewer ads as your status grows.