Regional Express Airlines says it will push ahead with plans to launch jet services between Sydney, Melbourne and Brisbane as a direct competitor to Qantas and Virgin Australia.
The ASX-listed airline said on Monday it will raise $30 million either by selling and leasing back aircraft, from an equity injection or by issuing convertible notes to execute on the idea first floated in May.
Rex – a regional airline with a fleet of 60 Saab 340 turbo propeller aircraft – said it will use the funds to establish a fleet of five to 10 jet aircraft based in either Sydney or Melbourne to service the lucrative “Golden Triangle” between Australia’s three largest cities.
The company said there was “strong interest” shown by parties to participate in its fund raising, with an offer from lessors to buy 15 of its jets for $30 million, prompting its board to authorise management to start preparing to commence domestic jet services on March 1 next year.
Rex’s entry onto domestic capital city routes will bring fresh competition to dominant player Qantas and its budget arm Jetstar, and could influence the relaunch plans for bankrupt rival Virgin Australia.
American private equity firm Bain Capital signed an agreement last week to buy Virgin and relaunch it out of administration as a stripped back and simplified business.
Rex’s deputy chairman John Sharp said that the airline already had a network of 60 destinations and infrastructure at Melbourne, Sydney and Brisbane airports.
“It will simply be an incremental extension for Rex to embark on domestic operations,” he said.
Rex’s domestic services will be a “hybrid model”, with affordable fares that also include baggage, meals, pre-assigned seating and members-only lounges, Mr Sharp said.
When Rex first floated the idea in May, it said it would fund the plan through a $200 million capital raising – which was twice the size of its market capitalisation at the time.
The ASX put Rex in a trading halt after it trumpeted the idea through the press without telling investors first, and later sent the company a stern “please explain” about its continuous disclosure obligations.
Rex said in March that it was on the brink of collapse as the COVID-19 crisis took hold, and threatened to cease all flying to regional destinations unless federal and state governments bailed it out.
The company has since received almost $81 million in grants through various federal aviation industry support packages, according to the government’s GrantConnect website.
This story originally appeared in the Sydney Morning Herald. Read the original story here.
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