The Administration leadership of Regional Express has indicated that “numerous” interested purchasers have come forward for the airline, which is currently facing scrutiny over its financial records. This interest comes as the company gears up to initiate the selling process potentially as soon as the coming week.
On Tuesday, Regional Express appointed EY as voluntary administrators and ceased operations on all major city routes. This decision followed a business evaluation of the publicly traded company by the consulting firm in May.
Sam Freeman, a partner at EY, reported that a “large number” of entities have shown interest in acquiring Rex’s operations through a deed of company arrangement. The expected duration for the voluntary administration is five weeks.
Historically, Rex has operated as a regional carrier. However, in 2021, it branched out to include capital city routes after securing a $150 million investment from PAG Asia Capital. Additionally, Rex owns the charter service National Jet Express, operates two flight training schools, and maintains several contracts for emergency services. “We are confident that the sales process will attract significant interest, as evidenced by the large number of inquiries we’ve received,” Freeman stated.
“We are confident that the sales process will attract significant interest, as evidenced by the large number of inquiries we’ve received.” EY partner Sam Freeman said.
Freeman did not disclose the identities of the interested parties and mentioned that the administrators are not ready to discuss Rex’s financial obligations or the tally of potential creditors.
To ensure the continuation of its regional services during the administration, PAG has provided additional funding to Rex.
Virgin has consented to assume the leases for three of Rex’s Boeing 737-800 aircraft. Meanwhile, there’s ongoing speculation about whether Bain Capital’s airline might be considering the purchase of some or all of Rex’s remaining assets. Virgin’s outgoing chief, Jayne Hrdlicka, has dismissed such notions, emphasizing that the airline’s experience with administration in 2020 has taught it to focus on its core business.
Rex has faced criticism for its decision to expand into major domestic markets rather than investing in updating its regional fleet, which has impacted its profitability. The average age of Rex’s aircraft is 30 years, and analysts suggest that a prospective buyer would need to invest approximately $300 million to modernize the aging Saab 340 fleet.
Since the resumption of flights post-COVID-19, the airline has been hampered by a lack of spare parts, resulting in 25 of its 57 Saab aircraft being grounded at various airports nationwide.
Freeman has countered this critique by asserting that Rex’s fleet is sufficiently robust to handle operational challenges, highlighting the airline’s commendable punctuality and minimal flight cancellations.
“For the current network to function, about 31 aircraft are necessary. Typically, Rex has around 11 aircraft on standby at different locations for quick substitution when needed, and about five undergoing regular maintenance. This significant level of backup redundancy is what underpins its strong operational record,” Freeman explained.
Last September, Rex had to cancel flights on seven regional routes departing from Sydney Airport to destinations like Albury, Coffs Harbour, and Orange, due to persistent issues with its aircraft.
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