Virgin Australia Rejects Rex Deal Over Aging Fleet Costs

Virgin Australia has ruled out acquiring Rex – Regional Express due to the high costs associated with renewing the regional carrier’s aging fleet. Speaking at a CAPA aviation event in Cairns, Virgin Australia CFO Race Strauss said the investment required to modernize Rex’s aircraft would not meet Virgin’s financial criteria.

“They’ve got a significant capital cliff that whoever takes that business needs to address,” Strauss stated. “Looking at the numbers, that’s going to give an airline like us, which applies a very disciplined framework, an economic issue that’s not going to hit the hurdles.”

While praising Rex’s business model as “very robust,” Strauss noted that Virgin might have considered the acquisition if the fleet renewal burden was not part of the equation.

According to ch-aviation data, Rex’s fleet includes 22 Saab 340Bs averaging 34.1 years in age, 35 Saab 340B(Plus) aircraft averaging 29.2 years, and three Westwind 1124 jets over 44 years old. Rex and its subsidiaries, including Pel-Air Aviation and the Australian Airline Pilot Academy, also operate King Airs, Piper Warriors and Seminoles, and Cessnas.

Parent company Regional Express Holdings entered administration a year ago after financial losses tied to its failed foray into narrowbody operations with Boeing 737-800s. Although the Australian government has pledged to intervene only as a last resort, the airline’s administrators have been granted additional time to secure private investment.

Virgin Australia’s decision narrows the list of potential buyers for Rex, which continues to seek a viable path forward amid mounting operational and financial challenges.

Related News: https://airguide.info/category/air-travel-business/airline-finance/

Sources: AirGuide Business airguide.info, bing.com, ch-aviation.com