Rex asks ASX for trading halt

Rex asks ASX for trading halt

Regional Express has halted trading until Thursday morning and has warned of "a national emergency of epic proportions" if regional airlines are allowed to go under.

On Tuesday the company requested the ASX halt trading pending an announcement in relation to a revised profit guidance.

In a letter to the Deputy Prime Minister Michael McCormack, Rex said the COVID-19 outbreak came on the heels of the devastating bushfires and the historic prolonged drought from which regional airlines and communities are still reeling.

The company said that despite being a resilient company that has fought its way through many adversities such as the GFC, record high fuel prices and the drought, COVID-19 on top of the drought and bushfires could prove to be too much. The company has flagged that routes will be cut.

Mayor Kristy McBain said regional air transport plays a huge role in local economies, "and Rex plays a huge role in a number of regions where they operate".

"We need the Commonwealth government to step up to support these transport operators and tourism businesses, particularly in regional areas already feeling the pinch following the bushfires."

Rex said its board had initiated a suite of measures to reduce cost and conserve cash and would soon announce "drastic schedule reductions as well as dropping some routes altogether".

"However the board's financial modelling, based on a very conservative projection of a 25 per cent reduction in passengers in the next six months, shows that all the extreme measures we are putting in place will still be grossly inadequate as the impact of this crisis will be several orders of magnitude greater than the worst we have experienced in the past.

"Rex, like most businesses in Australia, is already seeing the severe impact of the drop in business due to COVID-19. Just this past Friday we saw our passenger numbers dropping 13 per cent year-on-year."

The company said it cannot survive the next six months of the global emergency if the forecast of worldwide health experts materialises.

"If Rex, with all its strengths, were to collapse, probably following the collapse of all other independent regional carriers, and maybe even a domestic carrier, there will be utter chaos and mayhem on many regional and rural communities that depend on regional air services to be their socio-economic lifeline.

"The crisis we are facing is a national emergency of epic proportions not seen since World War II and is not expected to abate for at least nine months," the company said.

On March 17 Qantas has announced the slashing of 90 per cent of its international routes and grounding of over 150 jets.

On February 28 Rex announced that profits were down for the first half of the 2020 financial year at $6.9m on a turnover of $166.2m, down from $9.8m for the prior period.

At the time executive chairman Lim Kim Hai said although earnings were down 30 per cent he believed the group remained fundamentally strong to weather the temporary setback.

"The devastating bushfires of the last three months and the COVID-19 outbreak since the end of January did not appear to have a very big impact on regional travel on Rex's network," he said.

But less than a month later Rex says things are at a crisis level and "if the pandemic continues to grow at the exponential rate of the past week then impactful actions need to be taken in the next two weeks to prevent irreversible damage being done to most regional carriers" the company said.

Merimbula Tourism manager Chris Nicholls said he didn't believe any potential cutbacks to Rex's operation would dramatically affect tourist arrivals in the region, given a larger proportion arrive via vehicles with caravans and so on.

"However, it would be a terrible impost on the business sector, certainly a huge impact there, and you'd hate to see it happen."

Rex is asking the government to intervene. It wants to see lines of credit extended, reduced infrastructure costs and taxes cut.

The company pointed out air transport was vital, but "without a lifeline from governments we will have a sectorial financial crisis piled on top of the public health emergency".

It said smaller regional carriers have only weeks of reserves left.


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