Amid the COVID-19 pandemic, many airlines have been forced to reduce their schedules and hold off their expansion plans. Contradicting these cliches of the industry currently, Regional Express plans to start expansion in Australia in 2021, flying between Australia's main cities, according to multiple sources.
To do this, Regional Express will raise $200 million dollars in capital. This could be raised via the selling of new shares of stock on the Australian Stock Exchange(ASX). Additionally, Regional Express(REX) has been in discussion with investment banks and private equity funds for funding.
If Regional Express raises the liquidity, Regional Express will look at starting direct service between Australia's main population centers, Sydney, Melbourne, Brisbane, Perth, and Adelaide. Currently, Qantas, its low-cost subsidiary Jetstar Australia, Virgin Australia, and its lowcost subsidiary TigerAir Australia control these markets.
REX is mainly capitalizing on a rare opportunity presented by the pandemic. Virgin Australia is currently in voluntary administration and on the verge of collapse along with its subsidiary TigerAir Australia. Virgin is currently looking for investors in their venture known as Mark II. With pressure from Qantas, who recently threatened to push fares to as low as $19, Virgin Australia is facing even more heat from REX, deterring potential investors from the headwinds.
In 2002, Virgin Australia(at the time known as Virgin Blue) stepped into the market to take advantage of Ansett Australia's bankruptcy. REX is doing the same, allowing itself to enter the market with minimal pressure from both carriers especially Virgin Australia and its struggle to survive.
In order to fly these routes, Regional Express would lease 10 single-aisle narrowbody aircraft, probably either the A320 or 737 families. This would add on REX's fleet of Saab 340s, the largest in the world. REX currently has more than 55 Saab 340's with most of the fleet currently grounded due to the COVID-19 pandemic.
REX would offer service that its deputy chairman John Sharp told The Australian Financial Review described as "halfway between a full-service carrier and a low-cost-carrier." The model would be similar to JetBlue and Norwegian. Currently, the carrier is looking at premium service rather than business-class service, though this could change.
Before the pandemic, REX focused mainly on Australian regional routes, with some subsided by the Australian government. These were flown from large cities in Australia(Sydney, Melbourne, etc.) to smaller towns. These services allowed key connections between these towns with very little other transportation options with larger cities. Most of these were tag-on services between different towns flying from base to base, with little to no competition.
What are your thoughts on REX's move? Would you fly REX? Leave your thoughts in the comments below.
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