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...