The federal government has called in a cohort of heavy-hitting corporate advisors as it weighs up a potential bailout of embattled regional airline Rex.
The cash-strapped carrier has grounded its entire fleet of Boeing 737s on inter-city routes but is keeping regional services running after the appointment of administrators Ernst & Young (EY) Australia.
Rex has faced government criticism for targeting well-served capital-city routes in competition with dominant operators Qantas and Virgin, with any potential taxpayer stake in the airline or other bailout option to focus on its ability to service the regions.
The federal transport department on Aug. 2 confirmed to AAP it had appointed a string of external advisors as it worked through support options for the airline.
Norton Rose Fulbright will act as an external legal advisor, McGrathNicol has been engaged for financial advice and O'Connor Marsden will handle probity.
Transport Minister Catherine King has said all options were on the table when asked if the government could take an equity stake in Rex or offer it another taxpayer-backed financial lifeline.
“We have said very clearly, for regional consumers, regional communities, Rex is often the only airline that is flying in and it is vitally important,” she said on Aug. 1.
About a third of Rex’s 2000 employees are expected to lose their jobs with the cancellation of inter-city flying.
Prime Minister Anthony Albanese bristled when asked if Rex’s demise was a “public policy failure” as suggested by former Australian Competition and Consumer Commission chair Rod Sims.
Albanese blamed Rex for expanding outside its core business of providing regional services, despite data showing the airline’s presence on some major routes had reduced fares by about 40 percent.
Sims told AAP the prime minister’s response ignored the benefits the extra competition could bring consumers.
“We should have a focus on creating the conditions for lower capital-city prices,” he said.
“To want the aviation market to stay as it is, with Qantas dominant on capital-city routes and Rex always confined to regional routes, is to create a lazy and high-cost-for-consumers industry structure.”
The Australian Travel Industry Association supported Sims’ call for industry reform, suggesting two decades of analysis showed airlines were cancelling flights for purely commercial reasons.
With Melbourne to Sydney flights the fifth-busiest domestic route in the world, association chief executive Dean Long said Australia’s aviation industry could support more than two airlines.
“Rod Sims is right in his comments, and he’s not alone—when you have routes with this amount of traffic on them, you can sustain three players in the aviation market,” he said.
“The current public-policy settings operate to reduce the likelihood of a competitive domestic aviation market in Australia.”
In February, Rex reported a net loss of $3.2 million (US$2.1 million) for the first half of the 2023/24 financial year as it burned through money spent on its major-city services.
