The Commonwealth will retain its security over Rex’s fleet of Saab 340 regional airliners. Photo: Screenshot/SydSquad Live.
The Federal Government has said it will support a proposal by a US-based company to acquire the struggling Regional Express Airlines, or Rex.
The airline entered administration in July 2024 after the failure of its inter-city jet services and with $50 million in debt, but has continued to operate under administration with government backing pending a buyer being found.
Airline administrators Ernst & Young announced last month they had found a buyer for Rex, entering into a sale and implementation deed with Minneapolis-based Air T.
At first glance, Federal Minister for Infrastructure, Transport and Regional Development Catherine King said the government welcomed the announcement as a positive step towards bringing Rex out of administration.
“This will allow Rex to keep flying and maintain critical aviation links for regional communities,” she said on 25 October, adding that, “As the sale process led by the administrators is still underway, the Australian Government will not comment further at this time.”
On Tuesday 4 November the government outlined the details of the financing it will provide to the administrators to support Air T Inc’s proposal.
It said it would restructure the $90 million of debt Rex owes the government, saying it will be carried forward while a new commercial loan of $60 million will also be provided to the airline. This is in addition to the $50 million Air T will pay towards the recapitalisation of the business.
In exchange for the financing, it says Air T has committed to preserve what the government determines is essential regional aviation connectivity and to improve governance arrangements.
The additional funding will allow more aircraft to return to service which will in turn provide increased frequency of flights across the Rex network.
Air T has undertaken to stabilise and improve Rex’s performance by addressing a maintenance backlog that has seen some 30 of Rex’s fleet of 58 Saab 340s grounded in recent years. Through its US network, Air T has access to an extensive network of part suppliers to service the aircraft.
Air T will be required to commit to increasing the number of aircraft in service from about 30 to 44, and to offer an increase in services.
The government says Air T has publicly stated its intention to retain the existing airline management team and hire new staff, including pilots and engineers, and to add Australian independent directors to the new Rex board.
As collateral for the debt, the government will retain its security over all of Rex’s Saab 340 aircraft and simulator, meaning the aircraft cannot be sold without the government’s permission.
Importantly, the government said no Commonwealth funding had been provided for fleet renewal. Production of the 36-seat Saab 340 ended more than 25 years ago, and the airline’s fleet currently averages about 30 years of age. There are few aircraft available on the used market, so Air T will need to look at a newer type to replace these ageing aircraft in the next few years.
With no aircraft currently available in the 36-seat market segment, a larger aircraft such as the 44-48-seat ATR 42-600 may need to be looked at.
In a parallel but separate announcement to the Air T deal, the government also said it would establish a $5 million program for local government and regional and remote airports that supported Rex through administration by providing pauses in leasing arrangements and other relief.
This new program will mitigate financial barriers to these organisations continuing to provide essential services to their communities. Eligibility will be based on the amount owed to the organisation by the Rex regional business when it entered voluntary administration.
