Rex cuts routes in half for survival
20 March 2020, Written by Matt Ogg
Within two days of claiming it would go bust in six months without government intervention, Regional Express (ASX: REX) has announced a 45 per cent cut to its capacity including the suspension of three routes.
The move comes after chief operating officer Neville Howell penned an open letter to Deputy Prime Minister Michael McCormack on Wednesday calling for support, prior to the announcement of a $715 million rescue package for the airline industry.
Earlier this year Rex - Australia's largest regional airline - flagged exits from Ballina to Sydney and Kangaroo Island to Adelaide, which will conclude on 29 March and 1 July respectively.
In addition, the airline announced today it would suspend the Adelaide-Port August route, as well as Sydney-Armidale and Sydney-Newcastle.
Ad hoc reductions will be put in place for Adelaide-Mildura, while flights from Adelaide to Port Lincoln and Whyalla will also be significantly cut back.
Other routes with massive capacity reductions will be Melbourne-Burnie, as well as flights from Sydney to Albury, Dubbo, Griffith, Orange and Wagga Wagga.
"The operating environment is extremely fluid and we will be monitoring the situation closely. If the situation worsens we may be forced to further reduce capacity in the interests of maintaining essential regional air services," says Rex's general manager of network strategy & sales, Warrick Lodge.
"This capacity reduction alone will not be enough and we have reached out to local councils (airport owners) to seek a reduction in airport charges to keep operating costs to a bare minimum so that the reduced services can be sustainable.
"Rex is appreciative of the heartfelt support of many councils, like Parkes Shire Council, who proactively approached Rex in the spirit of partnership to grant a total waiver of airport charges during Rex's hour of need. Rex promises to also stand by these local councils in their moment of adversity when Rex is solidly back on its feet."
On Wednesday the company explained many of the smaller regional carriers had only weeks of reserves left, and that any damage done over the next two weeks could be irreversible.
"Australia will surely not be spared the carnage and Australian regional carriers will be the first to be impacted due to their limited financial resources," Howell said in the open letter.
"Rex does not believe that Rex, and all other regional carriers, will be able to pull through this crisis without significant assistance if the Health authorities' projections prove accurate.
"If regional carriers collapse, so will many regional communities for which the air service is their lifeline."
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Business News Australia
Author: Matt Ogg