Air T Details Post Buyout Growth Plans for Regional Express

By Andrew Curran.

The would-be buyer of Australia’s Regional Express (Rex) says it intends to restore the insolvent airline to its pre-pandemic “classic Rex” status. Air T Inc., a US aviation business, recently signed a sale and implementation deed to buy Regional Express Holdings Limited some 16 months after it filed for voluntary administration.

The NASDAQ-listed company says Rex, a commuter airline that connects regional and remote towns to larger capital cities, is a high-quality carrier that it will support, not control. If it receives approval to buy the airline, Air T says Rex will remain a stand-alone, independent entity.

 

“Air T was drawn to Rex because of its strong management team, skilled workforce, and its legacy of reliable service to rural communities,” reads an Air T statement released late last week. “Our immediate focus is on growth, what we call the “Return to Classic Rex” initiative. We are entering growth mode, not contraction. We will be hiring and investing, not cutting.”

 

Air T has not disclosed the dollar value of its offer. However, early reports suggest that there will be zero returns for shareholders and little more for creditors. The company has also reportedly tied its down the line payments to Rex hitting certain future revenue and profitability targets.

Air T is playing down this aspect of their offer. Instead, it is highlighting what it brings to the table.

Specifically, the company says its immediate priorities are to restore all Rex's Saab 340s to service, rebuild the regional route network, hire additional pilots and engineers, and invest in operations and long-term fleet sustainability.

Rex operates a fleet of 56 aging Saab 340s. But the aircraft type has proved increasingly problematic for the carrier in recent years. The Saab 340 is no longer produced, and parts have become harder to source. Pilots and certified engineers have also become scarcer. As a result, increasing numbers of Rex’s aircraft have gone out-of-service, adversely impacting the airline’s schedules, revenues, and reliability.

Air T says they can sort this. It and its subsidiary company, Worthington Aviation, are among the world’s largest suppliers of Saab 340 parts and maintenance support.

“We have the expertise and resources to keep the fleet flying safely for another 10 to 15 years. Worthington Aviation has supported Rex’s Saab fleet for nearly 20 years, and that partnership will now deepen even further.”

Additionally, Air T says all existing routes and essential services will continue. Rex’s leadership and operational team, in which Air T has “high confidence” in, will remain in place, as will all current employees.

 

“As the Saab 340 fleet returns to service, Rex will expand its workforce in both operations and engineering,” Air T’s statement continues. “Air T’s philosophy is about growth, not downsizing for the sake of downsizing.”

 

Rex owes its approximately 4,800 creditors around AUD500 million (USD327.3 million). The Australian Government is the largest secured creditor, having extended the airline loans to keep its operations going, as well as buying debt from Rex’s biggest pre-administration creditor. 

Air T has not said whether it will repay the federal government loans made to Rex. “Specific terms of any financing or restructuring agreements remain confidential,” Air T’s statement adds.

Air T’s offer, which remains subject to creditor and regulatory approval, will prioritise operations over repaying out-of-pocket creditors. The company says it is “committed to maintaining Rex’s operations on a sound and sustainable financial footing.”

Despite its likely poor return, Air T notes that the government has “been firm but fair in ensuring that the interests of Australians and regional communities are protected.”

Allowing Rex to fold would be politically untenable for the government, given the airline's role in connecting regional and remote towns to bigger centres.

“Rex is here to stay and grow,” Air T says. “Our goal is for Rex flights to remain reliable, regional connectivity to be strengthened, and the return of the full Saab 340 fleet to increase service frequency across key routes.”

While Air T’s buyout offer remains subject to approval, the company says it expects to seal the deal by the end of the year.

Photo: Aero South Pacific.