REX: On the tail of ex-Virgin Australia 737-800’s

Earlier in the year, we reported that Regional Express, better known as REX, a regional airline in Australia, was looking at developing capital city routes up and down the easter seaboard of Australia. That’s the ‘golden triangle’ of Brisbane, Sydney and Melbourne.

To execute that move, REX entered a trading halt while it proposed raising some money to fund new jet aircraft for the routes.

Government funding

Some have been as ungenerous to point out that REX, with a deputy Chairman with National Party connections has received AU$67.6 million of the federal government’s largess during this pandemic period, arguably more government grant funding than Qantas and Virgin combined. There have been further suggestions that without this funding, and the capital raising, REX could not be making this play for capital city to capital city flights.

Hey Virgin, got a spare Boeing 737 or 10?

With Virgin downsizing its fleet for its re-boot as a primarily domestic and regional operator – at least for the moment, it is planning on returning some of those workhorse B737-800’s back to the lessors. And REX is at those lessors doors asking if they have a spare 787 or ten?

Using 737’s makes sense, as both Qantas and Virgin Australia, REX’s competitors on these capital city routes use the same aircraft on the ‘golden triangle”. Choosing 737’s ‘levels’ the playing field, at least as far as hardware is concerned.

2PAXfly Takeout

The aviation industry has a difficult road ahead when it comes to sustainability. It’s going to require a relative revolution in technology, with ‘electric planes’ or hydrogen planes, or some form of jet engine that doesn’t require a carbon based fuel. And that is going to require the development of an alternative to jet engines probably.

It’s a big ask. It will take time to develop.

This move to home grown and manufactured SAF is a first step – maybe even a baby step in a very long road of innovation. In the long run, US$200 million won’t even touch the sides.

There is still a lot to unfold in REX’s plans for this expansion, although this places a bit of a jigsaw corner piece on the table of their future plans.

Australian domestic flying has been devastated by state border closures, with no end in site. Both major airlines Qantas and Virgin Australia have drastically reduced their number of flights and are limping along with the help of government subsidies and JobKeeper programs for their staff.

REX in contrast is looking at expansion.

Sure, it has probably picked up those 737 leases for a comparative song, given the state of the airline industry worldwide. However, that aircraft model is soon to be superseded by an airworthy 737 MAX.

Setting up new routes, and effectively a new domestic business in this pandemic climate is a fairly expensive and ballsy thing to do.

The Australian domestic market has only really ever supported a maximum of 3 domestic carriers. Two full service (Virgin and Qantas, and one discount (Jetstar). Tiger airways never really made money, so I am pretty downbeat on my predictions for the success of REX and its planned inter-capital city adventure.

Let’s watch a few other jigsaw pieces fall into place first. A good piece to have would be the end of this pandemic, but that might be an elusive piece to find.