Australian government warned regional carriers face bankruptcy

Australia’s biggest independent regional airline is about to announce “drastic schedule reductions” and has called on the federal government to waive charges and provide loan guarantees to help smaller carriers avoid bankruptcy. Regional Express says financial modeling based on a “conservative” 25 percent reduction in passengers over the next six months will still mean the measures it is putting in place to reduce costs and conserve cash will be grossly inadequate. It says the impact of the coronavirus crisis is several orders of magnitude greater than anything it has faced before. READ: Qantas and Virgin Australia signal further flight cuts as waivers extended. “With only 0.001% of the Australian population with known infection so far, Rex, like most businesses in Australia, is already seeing the severe impact of the drop in business due to COVID-19 – just this past Friday we saw our passenger numbers dropping 13 percent year-on-year,’’ Rex chief operating officer Neville Howell said in a letter to Deputy Prime Minister Michael McCormack. “One cannot even begin to comprehend what the economic impact would be if the infection rate rises to high double digits.” The letter pointed to the failure of UK airline Flybe, warnings that Norwegian Air has only weeks of cash reserves and comments by the International Air Transport Association that the travel meltdown could lead to multiple airline failures in two to three months. “Australia will surely not be spared the carnage and Australian regional carriers will be the first to be impacted due to their limited financial resources,’’ Howell said. “Rex does not believe that Rex, and all other regional carriers, will be able to pull through this crisis without significant assistance if the Health authorities’ projections prove accurate. “If regional carriers collapse, so will many regional communities for which the air service is their lifeline.” The airline called for all air navigation charges, the fuel levy as well as passenger and baggage screening costs to be waived for a year. But it warned the measures would not be enough. “Regional air carriers, by nature of the business they are in, usually have limited balance sheets,’’ the letter said. “In these unprecedented circumstances, they will need additional lines of credit from the banks which will be almost impossible to obtain. "Rex therefore calls on the Federal Government to provide a sovereign guarantee for any new line of credit or banking loan taken out with the banks to enable regional carriers to continue operations through to the end of the pandemic.”