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…..