Regional Express airline already have a large footprint in the regional centres like Mount Isa but they may be about to take on the lucrative capital city market too.
After settling in on its COVID routes in late April and then telling the ASX in May of their intentions to explore the feasibility of commencing domestic operations, Rex now say they have been engaged in confidential exploratory discussions with various parties to assess the availability of funding for starting it up.
Rex said they now believe they could successfully embark on domestic operations and have approved an initiative to raise a minimum of $30 million, which they say all that is needed for the launch of limited domestic operations, through one or more of the following avenues: sale-and-lease-back arrangement, equity injection and convertible notes.
"Discussions with interested parties including lessors and private equity funds have not been finalised and the Board will reconvene within three weeks to decide on the structure of the fund raising and the maximum amount that will be raised," Rex said in a media statement.
"Where necessary, the Board will seek shareholder approval for the fund raising."
Rex said lessors were already willing to provide another $30 million for 15 of Rex's fleet of 60 Saab 340 aircraft and they are preparing for the operation of an initial fleet of five to ten narrow-body jet aircraft to be based in Sydney and/or Melbourne to service the Sydney-Melbourne-Brisbane triangle.
"The Board has confirmed 1 March 2021 as the targeted start date for domestic operations, subject to fund availability and regulatory approval," Rex said.
The news comes days after Bain Capital were confirmed as the buyers of Virgin Australia.
Rex, meanwhile, has also signed a Memorandum of Understanding with French-based Avions De Transport Regional the world's largest manufacturer of turboprop aircraft, for a range of "potential commercial co-operation that would complement Rex's domestic operations".
Deputy Chairman, John Sharp, said Rex has the biggest regional network in Australia.
"With Rex's expansive regional network of 60 destinations, existing infrastructure in all these capital city airports, superior efficiencies and unbeatable reliability, it will simply be an incremental extension for Rex to embark on domestic operations especially since one out of every ten flights in Australia was already a Rex flight during the pre-COVID days," Mr Sharp said.
"Leveraging on Rex's existing infrastructure and overheads, our cost base for the domestic operation is estimated to be at least 35% below Virgin's Australia's (pre-COVID) with 50% lower additional headcount needed proportionately."
"Rex's domestic operations will be priced at affordable levels but will also include baggage allowance, meals on board and pre-assigned seating. Booking channels will include both Rex direct and Global Distribution Systems (GDS). Lounge membership will be available for subscription. It will be a hybrid model that Rex has so successfully pioneered over the last two decades for its regional operations."
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