Regional Express (REX) shares crashed 11% to a low of 79.5c yesterday and closed not much higher on 80.5c after the company’s lurid warning in a profit downgrade on Friday night.
Rex said first half profits will slump due to fewer business travellers, and urged the Federal government to intervene to help an aviation industry that is ‘‘financially haemorrhaging and approaching collapse”.
Rex chief operating officer Garry Filmer was reported as saying that regional airlines were harder hit than Qantas (QAN) and Virgin (VAH), which he said would both post big half-year losses.
"The entire aviation industry is financially haemorrhaging right now and approaching collapse. Regional aviation is even harder hit [than large domestic airlines] as the profit margins are slimmer,’‘ he said in the statement.
”We have already seen the collapse of two of Australia’s oldest regional carriers during this financial year, Aeropelican and Brindabella.”
Mr Filmer urged federal Transport Minister Warren Truss to make ”immediate and forceful efforts” to fulfill his pre-election commitments to regional aviation.
”The Abbott government to date has not made any significant inroads to reversing the devastation inflicted to the economy by the previous government,” he said.
”Many regional carriers have little time left before they face the same fate as Brindabella. For many parts of regional Australia, this would spell the end of regular air services forever and it would be ironic if it were the Nationals that presided over this outcome.”
REX 1Y – Rex Facing Turbulence
The airline is majority-owned by a group of Singaporean businessmen, and its deputy chairman John Sharp is a former Howard government transport minister and senior National Party politician.
Rex’s warning came only days after Virgin Australia was forced to confirm it would post a first half half-year loss of more than $49 million, when restructuring and other costs are taken into account.
Rex warned that pre-tax profits will fall by around 60% to about $5 million for the six months to December after business travel slumped sharply in the half year.
Leisure travel also declined slightly during the first half.
The other major development in regional areas of NSW especially, is the emergence of significant drought in more and more areas.
In the past that has cut regional air travel as well, for business and leisure as farmers and small towns have less money to spend.
