Rex to cease all passenger air services except Queensland

After slating a 45 per cent reduction in flights on Friday, airline Regional Express (ASX: REX) has decided to shut down its expansive Regular Public Transport (RPT) air services in all states except Queensland.

Operations will continue in Queensland because services are underwritten by the State Government.

The closures are expected to take place as of 6 April unless Federal and State Governments are willing to underwrite the losses.

The regional airline emphasises other activities that will not be affected include Ambulance Victoria fixed-wing air ambulance services, charter contracts with mining companies, freight services and pilot training at Rex's acadamies in NSW and VIC.

"Rex is supportive of the strong measures taken by the Federal and State Governments such as the shutting of State borders and imposing a lockdown within the States as well as discouraging all non-essential travel," says Rex's deputy chairman, the Hon John Sharp AM.

"These measures will definitely reduce the number of infections from COVID-19, prevent the health care system from being overwhelmed and save many lives.

"However, tragically for the airline industry, this means that we can expect the year-on-year reduction of passenger numbers to nosedive to around 80 per cent from the 60 per cent we are experiencing today."

He describes this moment as a tipping point in the airline business, "beyond which it will no longer be sustainable to operate reduced services".

"We believe that with only 20% of our passenger numbers left we have reached that point and the Rex Group has decided that the quasi suspension of all services at this stage presents the best option to preserve its cash," says Sharp.

"The Federal Government has acted swiftly by promising a rescue package to the airlines of $715 million.

"However, the direct benefit to Rex from this package is only $1 million a month which is grossly insufficient to cover the $10 million a month we expect to lose running the heavily reduced schedule we announced last week."

The chairman pointed to a rescue package of USD$50 billion in the US for an industry that earns an annual revenue of USD$240 billion.

"Australia's total airline revenue is AUD$23 billion indicating that an equivalent effort in Australia would require a rescue package in the order of AUD$4.6 billion instead of the AUD$715 million proposed.

"Regional air services provide an invaluable and priceless contribution to the socioeconomic well-being of local communities throughout regional and remote Australia.

"State and Local Governments should be leading the charge in extreme times like these to assist regional carriers rather than leaving it to the Federal Government."

Sharp says State governments have not tabled any concrete proposals, although their latest decisions to close borders will "further decimate what remains of regional air travellers".

"Local councils are also a true disappointment with only two councils having proposed any meaningful assistance for Rex," he says.

"If an assistance package of sufficient magnitude and viability can be negotiated by the end of the week, Rex may be able to reconsider its plans to suspend services.

"Failure to achieve any traction in this regard will see regional communities lose their air services for many months ahead and even after this is all over, we are afraid that some of the more marginal communities will no longer have an air service."

Business News Australia