Rex plots path back to profit as airlines ride out COVID turbulence

Regional Express has announced its domestic operations were profitable in September, becoming the latest airline to plot a path back to profitability after the aviation sector was grounded by COVID-19.

All three of Australia’s airlines have made optimistic declarations over the past fortnight despite a bleak broader economic outlook marred by high inflation, rising interest rates and the soaring cost of jet fuel. Their optimism has been largely fuelled by strong consumer demand, as Australians continue to pay top dollar for flights.

Rex executive chairman Lim Kim Hai said it was “truly unprecedented” to turn a profit so soon after the restart of operations and said the carrier was “actively looking” for another two Boeing 737-800 aircraft to expand its domestic routes.

Rex announced it would expand its operations to domestic services between Brisbane, Sydney and Melbourne in November 2021, but says its growth was largely hampered by COVID-19 lockdowns until February of this year.

“ True to form, our domestic jet network passenger numbers for the first three months of this financial year grew by 60 per cent, 34 per cent and 77 per cent respectively when compared to June 2022,” Lim said, adding the airline’s revenue growth also suggested significant yield improvements, growing 84 per cent, 47 per cent and 137 per cent over the same three months.

Rex operates a fleet of 61 SAAB 340s and 7 Boeing 737-800s to 58 destinations across Australia. Last month, Rex became a 50 per cent shareholder of charter and freight operator National Jet Express following its $48 million purchase of fellow fly-in, fly-out service Cobham in July.

The Rex announcement follows Sunday’s profit declaration from Bain Capital owned airline Virgin Australia. Virgin was bought out of administration by the private equity giant for $3.5 billion in November 2020 and has undergone an extensive restructure which removed more than $300 million from its annual costs.

There is market speculation of Bain looking to list Virgin on the ASX as soon as 2023, in what would be a highly anticipated share market float. Virgin did not provide any detail regarding its profit forecast as it’s a private entity.

Qantas shocked analysts earlier this month by declaring it would return to profit in the first half of this financial year, six months ahead of expectations. The carrier forecast an underlying profit before tax of between $1.2 billion and $1.3 billion for the first six months of its financial year, despite the burden of higher jet fuel prices and the high inflation’s impact on consumer spending.