Shares in Regional Express have plunged 15 per cent following the airline’s admission that it is bracing for a $35 million loss due to a sustained slump in corporate travel and a pilot shortage, which forced it to ground some flights.
The domestic carrier released the downgrade on Tuesday evening after entering a trading halt on Monday, with executive chairman Lim Kim Hai blaming the industry’s supply chain issues as the reason for the outlook backflip. Rex had previously expected to make a profit this year.
Regional Express is now predicting a $35 million loss this year. Credit: Sam Dagostino
“The global shortage of pilots and engineers, along with supply chain shocks post-COVID, have disrupted Rex’s network,” Lim said.
Rex had been “forced to make significant reductions to its flight schedules over the last couple of months to match the need for aircraft, pilots and engineers to what is available”.
The airline signed a letter of intent to lease two Boeing 737-800 NGs from Singapore Airlines in February. The first aircraft was due to arrive this month and the second in July, but the airline is yet to comment on whether this timeline will still be met. One of Rex’s existing seven Boeing 737s is out for maintenance, with the rest servicing the “golden triangle routes” between Sydney, Melbourne and Brisbane.
At least one-third of Rex’s 58 Saab 340s are also grounded due to supply chain issues, leading to cuts in the flight schedules to several regional destinations in New South Wales, South Australia, Queensland and Victoria.
Just one day after the downgrade, Rex was awarded best regional airline in Australia and the Pacific at the 2023 Skytrax World Airline Awards.
With about 5 per cent of market share, the airline has a significantly smaller operation than competitors Qantas Airways and Virgin Australia.
Qantas, Virgin and Regional Express all declared a return to profitability in 2022, with Qantas issuing two profit upgrades for the December half of 2022, and Virgin Australia’s owner, Bain Capital, considering returning the airline to the ASX less than three years after it came out of voluntary administration.
Regional Express recorded a $46 million loss in 2022, but released multiple bullish forecasts earlier in the year after beginning 2023 with a string of profitable months. The airline finalised its acquisition of fly-in, fly-out carrier National Jet Express from Cobham last year for $48 million.
The carrier announced an after-tax loss of $16.5 million for the December half, blaming its regional arm for the drag on performance. But the February results announcement was tinged with optimism, with the airline looking to its improved revenue and monthly profitability as signs that a full-year profit for the 12 months to June was in grasp.
“Rex is optimistic the group will have positive operating profits for the full-year barring any further external shocks,” a statement authorised by Lim said at the time.
Shares in the carrier traded 17 cents, or 13.7 per cent, lower at $1.04 as of 10:44am AEST on Wednesday.
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