Today REX Airlines began to abandon Northern Rivers regional airports - yet again

 

On 31 May 2022 Regional Express (REX) airlines confirmed that it was withdrawing airline services from Lismore and Grafton on 1 June 2022 and from Ballina on 2 July 2022.

At the same time it announced cessation of service to Kangarooo Island.

Very predictably this withdrawal again - as it has so often in the past - coincided with the cessation of federal government funding which heavily subsidizes REX.

The phrase 'shakedown merchant' comes to mind.

REX Airlines Sydney-Grafton-Lismore route to remain open until September 2021?

 

It would seem that the Clarence Valley’s only airport at Grafton may have received a temporary reprieve.

On 22 February 2021 Regional Express Airlines (REX) announced for a second time in a little over eight months that it would be abandoning its passenger service into Grafton Airport, this time commencing 23 March 2021.

Again leaving the Clarence Valley without a passenger airline service.

Now that Lismore City and Clarence Valley Councils have been successful in getting an extension of the Regional Aviation Network Support program for the next six months - alas not the twelve months they lobbied for - it is expected that REX will continue to fly the Sydney-Grafton-Lismore route.

However, REX is yet to issue a media release confirming that it has altered its plans to abandon its passenger service to Grafton on 23 March.

Given the airline's established modus operandi I would not be surprised to learn that it is approaching both local governments to see if it can squeeze more airport fee or other concessions from them before it commits to flying in for another six months.

REX Regional Express Airlines walks away from its Clarence Valley airline route for a second time, yet again trying to blame others for its decision

“Rex will stand by all regional communities that have stood by Rex during this global and national crisis” [Rex Express Holdings Deputy Chairman and former Nationals MP for Hume, the Hon John Sharp AM, company media release, 29 April 2020]

Stirring words in that quote at the top of this post, however the reality was somewhat different for two regional communities on the NSW North Coast - Clarence Valley and Lismore City.

Lismore Airport services a city and population on the banks of the Wilsons River and is a gateway for both business travel and holidaymakers.

While Grafton Airport in the Clarence Valley is predominately used by state authorities and local government.

Having received financial assistance from Clarence Valley Council as well as nearly $24 million from the federal government’s $198 million Regional Airline Network Support Program (RANS), $53.9 million from the $100 million COVID-19 Regional Airlines Funding Assistance Program (RAFA), Jobkeeper workforce wage subsidies, and  unspecified funding through Australian Airline Financial Relief Package (AAFRP), Regional Express Airlines (REX) suddenly decided to cease flights into Grafton Airport on 3 July 2020.

Apparently it had decided it wished to expand its presence on other routes where it could compete with a pandemic-weakened Qantas Airlines.

It reversed its decision to abandon Grafton Airport in August 2020 – promising to operate return services three days a week, on Monday, Wednesday and Friday on a Sydney-Grafton Lismore route commencing 17 August 2020. 

Coincidentally REX's re-entry followed on the heels of negative publicity and media reports that Clarence Valley Council had begun looking for another airline to take its place.

Now seven months after its return, the predominately foreign-owned REX is withdrawing from its Sydney-Grafton-Lismore route as of 23 March 2021.

This time all but admitting that having milked the federal government for as much funding as it could, it was again abandoning both Grafton and Lismore just days ahead of the cessation of the emergency regional airline funding streams it had previously accessed.

In a media release dated 22 February 2021 REX stated:

Rex will, from April, commence new services to ports where Virgin Australia has retreated, leaving Qantas as the sole or dominant operator. The new services are from Sydney to:

 Coffs Harbour (330,000 passengers pre-COVID)

 Port Macquarie (190,000 passengers pre-COVID)

and will be available for sale from tomorrow.”

“Other routes under active consideration where Qantas is the sole or dominant carrier include:

 Sydney - Tamworth (175,000 passengers pre-COVID),

 Perth - Geraldton (110,000 passengers pre-COVID),

 Melbourne - Devonport (146,000 passengers pre-COVID), and

 Sydney - Canberra (930,000 passengers pre-COVID).”

“We will be launching services to these cities once a partnership agreement is concluded with the local councils or airport owners.”

“Our plans to commence domestic jet services on the Sydney-Melbourne route on 1 March are still firm barring further border closures.”

In another media release dated 1 March 2021 REX stated:

Adelaide and the Gold Coast as they have been chosen by Rex to receive domestic jet services just in time for the Easter rush.

Rex today announces that it will commence new services between Melbourne and Adelaide from 31 March, whilst the Gold Coast will receive services from Melbourne commencing 29 March and from Sydney commencing 1 April 2021…..

“I wish to thank both Adelaide Airport and the Gold Coast Airport who have worked tirelessly with us to make this happen in such a short time frame.”

One has to wonder how long the honeymoon will last for Coffs Harbour, Port Macquarie and Gold Coast airports and, whether airport managements realise just how many times REX will seek financial concessions from local government to keep flying these routes.

In the Clarence Valley the honeymoon is long over and personally I'm hoping we have finally seen the last of REX.

BACKGROUND

According to Regional Express Airline’s 2019-20 Annual Report its largest shareholders are:

MR KIM HAI LIM with18,998,346 fully paid ordinary shares – 17.25% of total shares issued

BNP PARIBAS NOMINEES PTY LTD with 16,234,094 fully paid ordinary shares – 14.74% of total shares issued

THIAN SOO LEE with 7,722,181 fully paid ordinary shares – 7.01% of total shares issued

JOO CHYE CHUA with 7,454,362 fully paid ordinary shares – 6.77% of total shares issued

MING YEW SEE TOH & HUI ING TJOA with 7,454,362 fully paid ordinary shares – 6.77% of total shares issued

MS HUI LING TJOA with 5,755,513 fully paid ordinary shares – 5.22% of total shares issues.

REX Regional Express airline announces reinstatement of passenger service to Grafton NSW - accompanied by a thinly veiled threat aimed at the people of the Clarence Valley

Rex Regional Express Airlines, media release excerpts, 6 August 2020:

Rex to Resume Flights to Grafton

Regional Express (Rex) announces today that it will resume flights to Grafton with effect from Monday, August 17, 2020.

Rex notified the Clarence Valley Council of the withdrawal of services on June 4 2020,….

Upon the intervention of the Member for Page, Mr Kevin Hogan, Rex accepted the apologies of the council and accepted Mr Hogan’s assurance that the remarks of the said councillor were condemned by the vast majority of the community.

Rex will operate return services three days a week, on Monday, Wednesday and Friday.

Rex Deputy Chairman, the Hon John Sharp AM, said, “Although Rex has always taken the view that elected representatives speak on behalf of the community, Rex is giving the benefit of the doubt to the community of Grafton and is accepting at face value the assurance from the Federal Member for Page. Rex will be watching the developments at Grafton closely.”

Mr Hogan said, “I am extremely pleased that Rex have reconsidered and are now reinstating this important service for our community.”

“I have continued to work with Rex, Clarence Valley Council and the Deputy Prime Minister to resolve this issue.”

Deputy Prime Minister and Minister for Infrastructure, Transport and Regional Development Michael McCormack said the resumption of REX flights to Grafton was a step in the right direction for the industry….

“The reintroduction of the flight from Sydney to Grafton is a great step forward for the region to reboot the economy in what has been a difficult year for everyone.”

Clarence Valley Council Mayor Jim Simmons welcomed the announcement and restated the importance of this service.

“I would like to personally thank Kevin Hogan for continuing to advocate for this important community service,” Cr Simmons said.

“Flights into Grafton are vitally important for our local economy and connects our region to major population centres.

[my yellow highlighting]

When Rex commences flying into Grafton Airport again it will have been absent from the Clarence Valley for 39 days since 3 July.

Coincidentally Rex's re-entry follows on the heels of media reports that Clarence Valley Council had begun looking for another airline to take its place.

It certainly hasn't escaped North Coast Voices' notice that REX shares stopped climbing in July and the volume of shares traded also fell.

Perhaps this airline's bully boy tactics have not instilled confidence in the market place. Just as going straight to the Murdoch media by way of email copy to The Daily Examiner before Clarence Valley Council had time to consider the email's contents failed to impress more than a few people in the Clarence Valley.

ASX Chart, 8 August 2020

  

REX Regional Express Airline ditched its promise to keep flying into Grafton Airport during the COVID-19 pandemic because it wanted to fight a trade war with Qantas at other airports & didn't want to waste its few dollars on the Clarence Valley. However, Clarence Valley Council is about to tear itself apart rather than face that truth.

REX Regional Express airline has previously admitted that due to the impact of the COVID-19 pandemic it was on the verge of bankruptcy in March 2020, that keeping all air routes open would create a potential financial loss in the vicinity of $10 million a month and, that its current focus (after receiving est. $53.8 million in an untied federal government grant) was on pursuing a trade war with Qantas in which it was putting on extra non-profitable flights into certain airports where it will openly compete with the larger airline.

Rex's skeleton air service into Grafton Airport was always going to be a casualty of the airline board's current grandiose plans.

Even S&P Dow Jones Indices' removal of Rex from the S&P/ASX Index All Ordinaries list effective 22 June 2020 recognised the less than stellar financial outlook for this company.

However, Clarence Valley Council cannot see past the 'fig leaf' excuse Regional Express Holdings gave for terminating what it has previously deemed unprofitable flights into the Clarence Valley from 3 July 2020.

Instead Council will play out the old political animosities held by a clique of male wannabees who never made it past local government.

The Daily Examiner, 16 June 2020, p. 1:

A threat of legal action by a Clarence Valley councillor has led to the cancellation of an extraordinary council meeting in Grafton this afternoon. 

Clarence Valley Mayor Jim Simmons said a decision to cancel the meeting was made on receipt of a letter from solicitors representing Cr Debrah Novak. 

The meeting had been called to demand Cr Novak apologise to regional air carrier REX Airlines for comments she made about the airline during last month’s council meeting. 

Cr Novak said Rex management needed to “pull its finger out”. 

On June 4 the council received correspondence from REX saying that despite council waiving 100 per cent of the head tax it collected from the airline, it would cease to operate its Grafton service from July 3. It cited “hostility” from councillors as its reason for cutting the service. 

Cr Simmons said the letter called for an injunction against holding the meeting because the matter should have been dealt with during the May meeting and not have been brought up at a separate meeting. 

The mayor said he had a similar misgiving and had contacted the NSW Office of Local Government for advice. 

“I expect I’ll get that advice tomorrow morning,” Cr Simmons said. 

But he said Cr Novak was not off the hook and the matter would most likely appear as a report from general manager Ashley Lindsay at next week’s council meeting. 

“It might have to be in a different format, but there are still issues here the council must deal with,” he said. 

Meanwhile business groups have expressed their dismay at REX’s decision and Cr Novak’s role in it......

Rex Express Chairman Lim Kim Hai likes to dish it out but does not respond well to even mild criticism

Grafton Airport in the Clarence Valley is predominately used by state authorities and local government. 

Rex Express is also the only commercial air passenger service into the Clarence Valley even if it is virtually only a skeleton service and, it is heavily subsidised by federal and state governments during the COVID-19 pandemic to the tune of at least $77.9 million.

ABC News, 16 October 2018

The executive chairman and largest single shareholder in Rex Express Holdings Ltd is Lim Kim Hai (left) and apparently at his instigation Rex is cutting Grafton Airport from its NSW routes from 3 July 2020 - allegedly on the grounds his feeling have been hurt.

This is the latest example of how this somewhat aggressive businessman responds to even the mildest of criticism of the company he heads.



The Daily Examiner, 13 June 2020, p.10:

Clarence Valley Council has called an extraordinary meeting to deal with the fallout from Rex’s shock decision to quit the region. 

In a report to be tabled at the meeting on Tuesday, council general manager Ashley Lindsay detailed correspondence he’d had with national airports manager for Regional Express, David Brooksby. 

“He advised that executive chairman Lim Kim Hai took great offence to Cr Novak calling on Rex to ‘pull their finger out’,” Mr Lindsay said. 

“Unless a public apology is provided by Cr Novak, he would not reconsider his decision for Rex to cease services to Grafton effective 3 July.” 

The move comes as Regional Express Airlines offered a little more on its decision to cancel the Grafton route with a message to councillors, the community and local media. 

“Council has chosen to discuss the Rex matter in open session and some councillors have voiced pejorative remarks about Rex with the full expectation that these remarks will be reported in the media,” the statement said. 

“As elected representatives, they need to know that their official statements will have consequences and they need to take full responsibility for these consequences. The community and the media should turn to these representatives for comments and their plans for the future.” 

The issue arose at the May council meeting when councillor Debrah Novak used strong language toward Rex while speaking against a motion to issue it a $8908 credit note for 2021. 

In response to those words, Rex announced it would cease services to Grafton from July 3. 

Ms Novak had since posted a statement via her Facebook page and spoken to media outlets, clarifying that her comments were underpinned with “no malice or contempt”. 

Ms Novak, whose post referred to other financial dealings and business decisions Rex has made in the recent past, suggested there was a cultural misunderstanding in part due to its foreign ownership. 

She said the term ‘pull your finger out’ was an “Australian colloquialism” that she had heard “most people use in my lifetime and in council”. 

“How locals or international people interpret what I say is not my responsibility and I will not be apologising.” 

Mr Lindsay in his report before the council said her comments in the previous meeting had fallen foul of council rules and the officer recommendation was for her – and the mayor on behalf of the council – to apologise to Rex and to Lim Kim Hai. 

“I have reviewed the recording of the meeting and I believe Cr Novak has breached Council’s Code of Meeting Practice during her debate on this item (6a.20.011),” he said. 

“Cr Novak’s commentary on REX and their board was contemptuous and in accordance with Clause 15.12 (c) of the Code of Meeting Practice Council can call on Cr Novak to “retract and apologise without reservation” to REX and in particular the apology should be to REX’s executive chairman Lim Kim Hai.” ......

A decision on the matter will be made in the meeting, at 1pm on June 16.

One has to supect the reason given for the airline's decision to withdraw services, when much harsher criticism was levelled at its business practices in The Australian newspaper on 27 May 2020:

"But the response did not satisfy Senator Sheldon, who wrote to ASIC chairman James Shipton requesting an investigation. He said the level of detail provided by Rex to the media could reasonably be expected to affect the share price. 

“Rex’s plans to expand into markets in direct competition with Qantas and Virgin, after having received a disproportionate share of government financial support, are inappropriate and exploitative,” wrote Senator Sheldon over the $54m paid to Rex out of a $100m regional aviation assistance fund. 

“Their failure to inform the ASX of these plans per the ASX listing rules flies in the face of Australian corporate standards. If Rex or any officer of Rex has contravened the Act, I further request that ASIC take appropriate enforcement action against them.”

The chairman does not appear to have overreacted to the NSW senator's comments as he has to the shire councillor's remark.

Lim Kim Hai is not adverse to hitting out at what he perhaps sees as easy targets and the following is a previous example of the Rex Express chairman's response to criticism:

Area News, excerpts from page one articles in 27 and 30 June 2012 newspaper
issues: 

# "A VISITING cardiologist has threatened to abandon his Griffith clinic because of "arrogant and offensive" treatment by Regional Express (Rex). 

Dr Charles Thorburn, who has been travelling from Sydney for more than 20 years to conduct an outpatient clinic at Griffith hospital, was so incensed with the declining service of the Griffith-Sydney flights he wrote a complaint letter to Rex chairman Lim Kim Hai. 

But in an extraordinary response from the Singapore-based chairman, Dr Thorburn was questioned and ridiculed, in a letter critics have seized on as evidence of Rex's contempt for its customers. 

"If, as you say, you find the conditions unsatisfactory, why did you accept them in the first place?" the letter, written on instruction by Mr Kim Hai, read. 

"I would be curious to know if you would reimburse any of your patients who do not get well after seeing you?" 

The chairman's goading continued after Dr Thorburn asked for data on how often the Sydney-Griffith flights were delayed or cancelled. "We are not providing you with the statistics you are requesting for (sic)," he said. 

"Perhaps in the medical profession you are used to dispensing information on how long you make your patients wait or how often you misdiagnosed." 

He went on to say Rex was "still much better than all the airlines in Australia and most of the airlines in the world". 

The exchange comes at a time when a new airline is poised to break the company's monopoly stranglehold on the city, set to operate the Griffith-Melbourne leg dumped by Rex this month. 

An incredulous Dr Thorburn said he was now seriously considering pulling the pin on his long-standing Griffith outpatient clinic. "If the service does not improve, I really need to assess whether I will continue to fly down to Griffith," he said. 

"I found the letter I received arrogant and offensive and quite extraordinary." 

He has since written to Rex board members individually to demand an apology and express his disgust at the treatment. Dr Thorburn's original letter was prompted by a chaotic return flight from Griffith on May 25....... 

# "Local leaders have demanded Rex issue an immediate apology to a visiting cardiologist rebuked by the airline’s chairman during a public relations crash-landing last week. 

Leading Sydney cardiologist Dr Charles Thorburn has threatened to boycott Rex and end his 20-year relationship with Griffith after a valid complaint letter to the airline’s Singapore-based boss was met with an “arrogant and offensive” response.....

BACKGROUND

Wednesday, 10 June 2020

Rex Express walks away from its Clarence Valley airline route trying to blame others for its decision

Rex Express walks away from its Clarence Valley airline route trying to blame others for its decision

“Rex will stand by all regional communities that have stood by Rex during this global and national crisis” [Rex Express Holdings Deputy Chairman and former Nationals MP for Hume, the Hon John Sharp AM, company media release, 29 April 2020]

Stirring words in that quote at the top of this post.

The facts on the ground are somewhat different.

It appears that Rex Express Holdings* directors Kim Hai Lim, John Sharp, Neville George Howell, Christopher Hine, Thian Soo Lee, Ronald Bartsch, James Davis and at least one senior company executive David Brooksby are so offended by having their company's begging letters actually answered with increased funding/concessions from Clarence Valley Council that they have decided to remove the Clarence Valley’s only commercial air link with the outside world.

Council’s financial assistance was in addition to Rex Express receiving nearly $24 million from the federal government’s $198 million Regional Airline Network Support Program (RANS) and $53.9 million from the $100 million COVID-19 Regional Airlines Funding Assistance Program.

According to Rex Express on 20 April 2020 the RANS program is to ensure “regional airline carriers will be provided assistance to maintain a minimal weekly schedule to regional and remote ports”. The COVID-19 Regional Airlines Funding Assistance Program is intended to assist airlines "to remain financially viable through the unprecedented downturn in aviationdue to the impact of the COVID-19 pandemic".

Under revised RANS guidelines, Rex was eligible to receive funding to operate 2-3 return services a week to all destinations on the Rex Express network for up to six months. Rex’s application for the ports it wishes to provide services to has been approved and was signed off on 23 April 2020.

So it seems that the airline had a government funding offer to fly the Clarence Valley route until at least late September 2020.

So why did Rex Express spit the dummy and pull its Clarence Valley route commencing 3 July?

Admittedly Rex Express as airlines go is only a sprat in the aviation ocean, however it did turn a $17.5 million profit after tax in the 2018-2019 financial year and the board recommended an 8 cents dividend to shareholders.

Perhaps dropping Grafton Airport was because having a leg in again at Ballina Airport since early May 2020, the company board finds that market is more attractive.

Or perhaps it has more to do with the changed financial landscape created by the COVID-19 pandemic and the likelihood that the profit & loss statement it will present shareholders at this November’s annual general meeting - given it stated an expectation of a $10 million a month loss due to reduced flights - will not be welcome.

Total passenger numbers and revenue had been falling in 2019 but the fall was quite marked in January-February 2020 – numbers fell by -4 % in January & -3% in February and revenue fell by -6% in January & -5% in February.

By 17 March 2020 it was reported that Rex Express was anticipating bankruptcy and on 26 March its ASX share price had dropped to 0.400. Share price has since recovered to 1.100 as of Friday 5 June.

The regional airline is also now facing increased competition on some routes from Qantas which is expecting competition from Regional Express in 2021. Rex wants to expand its own operations on competitive/commercially viable routes.

It is possible that Rex Express abandoning its flights into the Clarence Valley will not be the only route it is either jettisoning or downgrading and other low volume regional areas are in the firing line – they just don’t know it yet.

It may be that the fig leaf Rex is hiding behind – alleged hostility during one Clarence Valley Council debate of a motion – is meant to forestall panic in other regions this airline services.

Either way, I have lost count of the times Rex Express has threatened to withdraw or did withdraw its passenger services from airports in the NSW Northern Rivers region. In my personal opinion it is an airline that fails to impress.

Note

* Rex Express is reportedly 58% owned by shareholders in Singapore.

BACKGROUND

The Daily Examiner, 8 June 2020:

Seven-line email to council over ‘hostility’ the reason Grafton stunned by Rex king hit

The words used in a Clarence Valley Council meeting last week are the reason Regional Express airlines will cease flying into Grafton from July 3.

The airline made the announcement to cease flying via a letter to Clarence Valley Council general manager Ashley Lindsay on Thursday afternoon.

A spokeswoman for the airline confirmed to The Daily Examiner that the reason for the cancellation of the route was due to the comments made by councillors in a debate over whether they would provide a credit note for the airline.

When pushed on other reasons for the closure of the route, and whether Rex’s Lismore and Ballina routes would continue, the spokeswoman declined to comment, and said that further questions from The Daily Examiner had been forwarded for consideration.

The motion for providing Rex a credit note of $8908, which was to be used in January 2021, was passed by Clarence Valley Council 7-2 after a debate ensued on whether councillors questioned council supporting the airline.

However in the letter, the company has stated it has rejected the offer, despite asking for it in earlier correspondence.

Written by Rex airports manager David Brooksby, it opens by thanking Clarence Valley Council for offering Rex a rebate of $8908.

“Please note however that given the hostility of the councillors in relation to this matter, and following the call for Rex to ‘pull their finger out’, Rex will reject council’s offer. Full settlement has already been made last week,” the letter reads.

It concludes: “Please also be aware that Rex will cease all services to Grafton with effect from 3 July 2020.” Clarence Valley Council general manager Ashley Lindsay said the decision was “really surprising and disappointing”, and was seeking to talk to Mr Brooksby about the matter.

“Council received correspondence from Rex on March 19 and requested that council provide a 50 per cent reduction of the head tax from April 1 to December 31, 2020,” he said.

“Council in March resolved to give a reduction of 100 per cent unanimously. “We then received further correspondence on April 23 seeking a credit note over landing fees … that could used in January 2021 for their first lot of invoices.

“This was passed 7-2 … and it seems the ‘pull your finger out’ (comment from the debate), that’s what has offended them…..