REX to lease jets to target low fare market

A massive fare war is on the radar in Australia after Regional Express (REX) announced it is going to the market to raise A$30 million to lease a limited number of jets to compete with Qantas, Jetstar, and Virgin Australia. The airline will target Australia's so-called golden triangle of Brisbane-Sydney-Melbourne. In a release, the Board of REX said it approved an initiative to raise a minimum of A$30 Million, which the Board now believes will be all that is needed for the launch of limited domestic operations, through one or more of the following avenues: sale-and-leaseback arrangement, equity injection and convertible notes. READ: Bain wins Virgin Australia in high drama “Discussions with interested parties including lessors and private equity funds have not been finalized and the Board will reconvene within three weeks to decide on the structure of the fundraising and the maximum amount that will be raised. Where necessary, the Board will seek shareholder approval for the fundraising,” the statement said. It added that “the Board has authorized management to commence preparations in earnest for the operation of an initial fleet of five to ten narrowbody jet aircraft to be based out of Sydney and/or Melbourne to service the golden triangle (Sydney-Melbourne-Brisbane). It said that the Board has confirmed 1 March 2021 as the targeted start date for domestic operations, subject to fund availability and regulatory approval. Rex’s Deputy Chairman, John Sharp, said, “Rex has the biggest regional network in Australia and we are the only carrier in Australia that has been able to successfully navigate the turmoil and shocks over the last two decades with uninterrupted operational profits since 2003.” “With Rex’s expansive regional network of 60 destinations, existing infrastructure in all these capital city airports, superior efficiencies and unbeatable reliability, it will simply be an incremental extension for Rex to embark on domestic operations especially since one out of every ten flights in Australia was already a Rex flight during the pre-COVID days. “Leveraging on Rex’s existing infrastructure and overheads, our cost base for the domestic operation is estimated to be at least 35% below Virgin’s Australia’s (pre-COVID) with 50% lower additional headcount needed proportionately.” “Rex’s domestic operations will be priced at affordable levels but will also include baggage allowance, meals on board, and pre-assigned seating. Booking channels will include both Rex direct and Global Distribution Systems (GDS). Lounge membership will be available for subscription. It will be a hybrid model that Rex has so successfully pioneered over the last two decades for its regional operations,” said Mr. Sharp. Regional Express (Rex) is Australia’s largest independent regional airline operating a fleet of 60 Saab 340 aircraft (pre-COVID) on some 1,500 weekly flights to 60 destinations throughout all states in Australia.