Rex flags $18m loss from lockdowns

The regional airline will move to temporarily stand down part of its workforce this week.

By David Flynn, August 10 2021
Rex flags $18m loss from lockdowns

Five months after launching its Boeing 737 jet service between Sydney and Melbourne, and entering a dogfight with incumbents Qantas and Virgin Australia in the process, Regional Express is forecasting a loss of $18 million across the 2020-2021 financial year.

While Rex quickly expanded its intercity jet network to include Adelaide, the Gold Coast and Canberra, and expand its fleet to six leased Boeing 737s – all previously flown by Virgin, and still retaining the same business and economy seating – a series of rolling lockdowns and border closures has cruelled the carrier's early optimism.

"The lockdowns that eventuated in New South Wales in June and the ensuing border closures have significantly impacted revenue" the airline said in a statement released to the ASX today.

"Furthermore, no measures were taken initially to mitigate the losses as the lockdown was perceived to be temporary and of short duration. Consequently, the losses for the month of June increased substantially and Rex now believes that the statutory losses for the full FY21 will be $18m."

Rex had previously revised its market guidance to a pre-tax loss of $15m on June 9, after forecasting a "breakeven situation" on May 10 but saying it was "one of the rare airlines in the world able to achieve this incredible outcome during the pandemic whilst at the same time funding the expansion of the business into the domestic airline market."

The airline says it will now move to temporarily stand down part of its workforce, with full details to be released in the coming days.

Qantas last week announced it stand down 2,500 staff due to the impact of the Sydney lockdown, which triggered a knock-on effect on air travel across Australia.

Pilots, crew and airport workers will be placed on furlough for at least two months, the airline said, and in May forecast an annual loss of more than $2bn for FY21.

Virgin Australia has to date not announced any stand-downs.

As previously reported, in late July Rex suspended all Boeing 737 flights with immediate effect, while also reducing the frequency of its regional services.

Domestic air travel was until recently showing solid signs of recovery, to the point where Qantas was projecting it would fly at 90% of pre-Covid capacity across the April-June quarter, a surge of cases involving the highly infectious Covid-19 Delta variant turned that trajectory into another nosedive.

According to the Bureau of Infrastructure, Transport and Regional Economics (BITRE), one in every four domestic flights was cancelled in June – a total of 9,406 flights, reportedly the highest number since records began.

Sydney, Melbourne and Brisbane all found themselves in lockdown at some stage during June, and Sydney's lockdowns are widely expected to continue into at least September.

More to follow...

David

David Flynn is the Editor-in-Chief of Executive Traveller and a bit of a travel tragic with a weakness for good coffee, shopping and lychee martinis.

24 Aug 2011

Total posts 954

Hmmm.  NSW didn't go into lockdown until 26 June so I can't imagine the FY21 result will be too affected by it.  The effect of the current east-coast lockdowns will belong much more in FY22.

That's a fair point, although on June 9 they were already looking down the barrel at a $15m loss which mounted up from other lockdowns, so that $3m must have come from somewhere, maybe Rex thought things might turn around a bit and based their forecasts at the time on that, then by the time Sydney happened they had to revise everything.

05 Mar 2015

Total posts 318

Rex must be burning through the cash they got to launch the B737 jet service, and I think a very fair question to ask is if Rex's B737 jet service will survive to see its first birthday in March 2022? I think not.

26 Mar 2020

Total posts 29

I think NSW will come out the other side of this stronger and be one of the first states to obtain 70% and then 80% vaccinations and join the rest of the world much faster than the rest of Australia.

I have a feeling the other states will lag behind in vaccine rates and still remain in a Zero Covid dilemma while NSW presses ahead toward early 2022 (with an open economy during active outbreaks). 

In terms of domestic aviation for Rex - having Sydney closed off to the rest of the country will have significant ramifications. 

Qantas - Qantas Frequent Flyer

01 Aug 2013

Total posts 21

It will be interesting to see what other states will do if NSW does go down that path and break away from the rest of the states, could mean borders closed to NSW from the rest of the country and bigger implications for the Aviation industry with major lost income.

Joe
Joe

03 May 2013

Total posts 623

Hardly needed a crystal ball to predict this. That said I do feel for Rex.

XWu
XWu

09 May 2020

Total posts 431

I suspect they didn’t expect to make a profit but didn’t expect to be this bad

While a new REx freq Flyer program is not going to attract top tier Qantas or virgin flyers, they really to try to build up a new core of REx loyalists from regional travellers by getting their FF program launched during the current shutdown of interstate travel.

Particularly when VA is still not back in several regional destinations (and possibly not ever for some of them) although in general REx were not in direct competition with VA for regional centres pre COVID-19 

Qantas - Qantas Frequent Flyer

25 Sep 2013

Total posts 1268

Rex will not survive.


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