Rex shrugs off crouching Tiger

The Straits Times, March 2, 2007
Steve Creedy, Regional carriers


THE nation's biggest independent regional carrier does not believe it will end up competing against Singapore-backed Tiger Airways and says the arrival of the new airline could even be a plus.

Although Tiger has said it wants to target regional destinations when it starts services, Regional Express managing director Geoff Breust said the startup was probably considering bigger regional centres such as the Gold Coast and Darwin. "I don't believe they'll even entertain any of our ports," Mr Breust said.
"In reality, the only place they could get an A320 in on our network is Ballina, and we already have Virgin and Jetstar there."

The Rex chief said flying an A320 to other regional centres on Rex's network would probably require work to improve airport infrastructure.

He was certain Tiger had no plans to invest heavily in regional NSW airports. "So I don't believe that's an issue at all," he said.

"What I do believe is that in some ways it could be good for Rex because it increases competition and gets more people flying on the domestic and, perhaps, international routes.

"We can complement that, we can add the link to the regional centres."

Rex this week announced a 24 per cent increase in first-half net profit to $11.5 million and said it was on track for a 20 per cent rise in annual profit. First-half revenues rose 20 per cent to $104.4 million.

Passenger numbers rose 20.6 per cent to 703,915, passenger load factors rose 2.2 percentage points to 68.8 per cent and yield rose 6.9 per cent.

Rex executive chairman Lim Kim Hai said Rex had continued to improve despite the drought and a 30 per cent rise in the cost of fuel.

"While the drought has had a major impact on families and businesses in many rural communities, the underlying strength and diverse nature of Rex's own network and activity" had greatly reduced the impact, Mr Lim said.

Rex has phased out its 19-seat Metros and boosted its Saab 340 fleet to 29 aircraft as part of expansion plans that include greater frequency on existing routes, and additional routes such as the new Sydney-Grafton-Taree run.

It has plans to bring in 25 aircraft in the next three years but has yet to decide how many of those will replace existing aircraft.

"While it sounds like it's a huge decision and a huge investment, in a lot of ways it isn't," Mr Breust said. "If there's no plan of development all we do is simply replace and we can sell off the older planes and hand back some of the ones that are coming off leases.

"So the risk associated with the deal is really quite small."

The company is also expanding operations in its wholly owned Air Link and majority owned Pel-Air subsidiaries, adding extra Beech 1900 planes at Air Link and four Metros and a Westwind corporate jet at Pel-Air.

Mr Breust says the airline's growth is likely to remain cautious and it is happy to stay in its regional patch.

"We've got no aspirations to mix it with the big boys," Mr Breust said. "We've got a nice little niche here and our belief is we should just stick with it."