Australia’s REX sees blue skies after profit jump.

August 29, 2017

Australia’s Regional Express (REX) is headed for bluer skies after profits rose sharply in 2016-17 and passenger growth recovered.

The Regional Express Group reported a net profit of $A12.6 million for financial year 2017, compared to a 2016 loss of $A9.56m. Operational pre-tax profit jumped from $A4.3m to $A17.8m on turnover of $A281m.

The nation’s biggest independent regional carrier is predicting the current year’s profit will be higher again, with the percentage increase in the mid-teens.

Group passenger numbers increased by 9 per cent thanks to new operations in Western Australia with the airline recording a more modest 3 per cent recovery in passengers across its “traditional” network in the East.

Fiscal 2017 was the first full year of REX operations in WA  and the airline said it was pleased with passenger growth on flights from Perth to Albany and Esperance.

The increased passenger numbers and a 3 per cent improvement in yield brought in an additional $A7m in revenue, while the company also benefited to tune of $A6m from lower fuel prices.

REX executive chairman Lim Kim Hai said Rex had produced a solid result which bucked a trend which saw airlines such as Qantas, Air New Zealand and Singapore Airlines report significant pre-tax profit declines and Virgin Australia posts pre-tax losses of almost $A300m.

Read: Qantas sees strengthening demand as it posts second highest profit.

“I see a bottoming out of the declines we experienced in the prior six years with a modest but clear recovery (3 per cent improvement year-on-year on the traditional network) of passenger numbers in FY17, which no doubt mirrors what is happening in the Australian economy,’’ he said in a statement.

“Early indications from the first two months of this new financial year confirm the trend we saw in FY17.”

“As long as the Australian economy continues this modest recovery, I have confidence that Rex will continue to perform well.’’

The airline, which operates 50 SAAB 340 turboprop aircraft and 1500 weekly flights to 50 destinations, declared a full -franked final dividend of 10 cents per share.

In its outlook, the airline said the first two months of  the 2018 financial year appeared to confirm the trend of modest recovery in passenger numbers.

It expected the fuel price to remain soft and said activity in the mining fly-in, fly-out sector appeared to be firming.

Potential headwinds included a lower Australian dollar if the US raises interest rates and the potential impact on the world economy of protectionist measures from the Trump administration or the situation in North Korea.

“The board believes that the Australian economy will continue on a modest recovery and this will translate to a similar growth in Rex’s passenger numbers,’’ the airline said in its profit outlook. “If this growth materialises, rex sees its profits increasing in the mid-teens in percentage compared to (the) prior year.’’