Rex Airlines Warns Of $35m Loss Due To Supply Chain Problems

(CTN News) – The expectations of Rex Airlines for profit this year have been dashed, with the regional carrier reducing its rosy forecast to warn that it will incur a $35 million loss in the midst of a boom in the aviation industry.

In addition to the global shortage of pilots and engineers, the airline also attributed the revised financial results to “supply chain shocks” following the peak of the pandemic.

In recent months, Rex has been forced to reduce its flight schedule in order to match its requirements for aircraft, pilots, and engineers with what is available.

In response to the post-pandemic spike in travel demand, rival Qantas is on track to post a multi-billion dollar profit this financial year, and Virgin Australia will also post a bumper result.

In spite of this, Rex Airlines ageing fleet of 36-seat Saab 340 aircraft, which it uses for regional routes, remain grounded and the significant maintenance work in the face of engineer and part shortages has prompted it to cease regional operations.

Moreover, Rex Airlines pointed out that domestic business travel has declined in recent months, as companies are paying exorbitant international air fares instead.

The number of business travelers in May and June has significantly decreased due in large part to the fact that corporate travel budgets have been exhausted following the exponential increases in international fares,” Rex Airlines stated.

Consequently, Rex Airlines expects a loss of $35 million across its group for the current financial year. This figure does not reflect “unaudited revenue” from regional operations, which is above pre-Covid levels, and the corresponding net income for the year is positive.

In February, Rex, which forecasted a profit for the 2023 financial year, halted trading on the ASX ahead of announcing an updated financial outlook.

Based on its expansion into domestic jet operations and fly-in-fly-out contracts won by its subsidiaries, Rex stated in a statement to the ASX it is “optimistic” about its operating profit before taxes for the 2024 financial year and beyond.

By 2020, Rex will fly seven Boeing 737 aircraft between capital cities in an attempt to capture a share of the lucrative air travel market.

The airline has recently announced new routes between Sydney and Adelaide and Melbourne and Hobart at the same time that it has halted other regional routes that affect places such as Wagga Wagga, Broken Hill, Whyalla and Mildura.

It has been claimed by the airline that larger operators, such as Qantas, hoard peak takeoff and landing slots at Sydney airport, preventing it from launching new services between capital cities.

In the past month, the Australian Competition and Consumer Competition Commission has criticized the legislation allowing airlines to hoard slots at Sydney airport, and Rex Airlines has called for immediate reforms to address the issue, with the deputy chairman, John Sharp, indicating that the issue cannot be delayed until next year’s publication of the Albanese government’s aviation white paper.

Rex will have to replace its ageing fleet of 59 Saab 340 aircraft in the near future, as maintenance and spare part shortages have already created headaches for the airline. However, no obvious modern replacement is available.

SEE ALSO:

MasterCard Files A Trademark Application For Its Crypto Solutions