Sale of Australia’s Rex Postponed Amid Search for Buyers and Boardroom Strife
The sale of the regional operations of Rex – Regional Express (ZL, Wagga Wagga) has been deferred as the company navigates bankruptcy proceedings and the complex dynamics of its boardroom. Two weeks after halting its Boeing 737-800 operations, Rex, under the administration of Ernst & Young (EY), has attracted significant interest from potential buyers, with a deadline set for non-binding bids on August 14.
EY has facilitated access to a data room for potential buyers interested in Rex’s regional operations, which include service to airports across every mainland state and a fleet of 57 aircraft, primarily Saab 340Bs. However, challenges such as maintenance issues, supply chain disruptions, and pilot shortages have left twenty-two aircraft out of service.
The airline’s financial woes include debts of approximately AUD500 million (USD331.3 million) owed to around 4,800 creditors. These debts largely stem from its unsuccessful expansion into intercity domestic routes, competing against giants like Qantas and Virgin Australia, which reportedly drained about AUD1 million (USD660,000) weekly from Rex’s finances.
Despite the interest from various parties, including PAG Asia Capital—which had previously bankrolled Rex’s jet operations with AUD150 million in convertible notes—no firm buyer has emerged. PAG’s initial enthusiasm for converting its debt into equity has cooled, although it has provided a short-term loan to maintain regional services.
The scenario is further complicated by government considerations, with the Australian transport ministry engaging in discussions about possibly supporting the airline, which plays a crucial role in regional connectivity. Such support might include taking an equity stake, especially as the potential cessation of critical regional flights poses a politically sensitive issue with an election looming in early 2025.
Boardroom tensions have also surfaced prominently, with ousted chairman Lim Kim Hai criticized for his management style, which some have described as autocratic. These internal conflicts, coupled with strategic missteps, have significantly impacted the airline’s stability and attractiveness to potential buyers.
As EY works with investment bank Houlihan Lokey to navigate the sale process, the focus remains on securing the future of Rex’s regional operations and ensuring continued service to critical routes across Australia. The outcome of the non-binding bid process, due shortly, will set the stage for the next phase of this high-stakes restructuring effort.
Sources: AirGuide Business airguide.info, bing.com, ch-aviation.com