Domestic aviation in Australia is about to get more exciting; with Regional Express today announcing plans to operate domestic flights between Sydney, Melbourne and Brisbane, to take on Qantas and Virgin Australia.
By raising a minimum of $30 million through sale-and-lease-back arrangements, equity injection and/or convertible notes, Rex plans on operating their first domestic flights on the 1st of March 2021 using a fleet of five to 10 single-aisle jets.
Rex also notes in their press release that they have received large amounts of interest from external parties, including lessors that are willing to provide the $30 million for 15 unencumbered Saab 340s. Further discussions will continue in the upcoming weeks about the maximum amount that will be raised.
Based in Mascot, New South Wales, Rex operates the worlds largest fleet of Saab 340 turboprops to 60 destinations. Since their formation in 2002, the simple, yet powerful, airline has become crucial to those living in regional cities needing daily or leisurely access to state capitals.
The move to expand into domestic operations comes as Virgin Australia saw its near end as a result of COVID-19 and outstanding financial woes. Although the airline has seen through its administration process with an American investment firm, Bain Capital, the airline faces major changes. As a result of this, Rex has been given an opportunity to pounce on three of the most lucrative domestic routes in Australia.
“…we are the only carrier in Australia that has been able to successfully navigate the turmoil and shocks over the last two decades with uninterrupted operational profits since 2003.”Rex Deputy Chairman, John Sharp
Detailing their operation, deputy chairman John Sharp mentions that Rex’s cost base for domestic flights is estimated to be at least 35 percent lower than Virgin Australia; with 50 percent lower additional headcount needed proportionately.
Benefiting Rex in this situation is the presence of existing infrastructure at Sydney, Melbourne and Brisbane airports, meaning that the domestic addition is merely seen as an incremental extension by Sharp.
Sharp also adds that the domestic flights would operate under a hybrid model, with affordable fares that include baggage, in-flight meals and pre-assigned seating. For customers looking to pay a subscription, lounge membership will be available.
As part of today’s announcement Rex signed a non-binding memorandum of understanding with ATR, to determine an attractive product out of the ATR42 and ATR72 to replace the ageing Saab 340 fleet.
As for domestic operations, the two likely candidates for Rex are the Airbus A320 and Boeing 737 series; both of which can be acquired easily and for cheap in today’s COVID-stricken aviation environment.
What are your thoughts on this announcement from Rex?