FOLLOWING from Qantas’ very public troubles and the news of Virgin’s impending $49 million loss, regional airline Rex has warned Australia’s entire aviation industry is on the brink of collapse.
Rex, or Regional Express Group, is the largest regional airline operating locally. It released a statement to the ASX which said its first half year financial results had plummeted. Rex expects its profit before tax would only be 40% of the same period last financial year.
Rex chief operating officer Garry Filmer said: “The entire aviation industry is financially haemorrhaging right now and approaching collapse.”
Mr Filmer said regional aviation was particularly hard-hit and has seen an average of one airline collapse every year for a decade. Aeropelican and Brindabella both folded in the past year.
Mr. Filmer called on the Abbott Government to do more to ensure the future of the industry, including fulfilling his pre-election promises. The Coalition promised to abolish the carbon tax which it said was punishing the aviation industry but has not been able to pass the legislation through parliament.
The Abbott Government had also committed to the reinstatement of the En Route Rebate Scheme, a targeted program to support low volume and new routes to small and remote communities.
For consumers, a less robust and competitive aviation industry could lead to higher prices. Ironically, cheap fares is partly responsible for the industry’s current predicament with prices staying relatively stable over the past 10 years while costs have gone up, leading to smaller margins for the airlines.
According to Mr Filmer, while leisure and discretionary travel had slightly declined, the bottom is falling out from business-related travel to regional areas.
“Many regional carriers have little time left before they face the same fate as Brindabella,” Mr Filmer added. “For many parts of regional Australia, this would spell the end of regular air services forever and it would be ironic if it were the Nationals that presided over this outcome.”
It’s another blow for Australia’s beleaguered aviation industry whose most recent struggles include a further 1,000 job losses at Qantas and an expected loss of $300 million for the July to December half year.
The national airline has been pleading for financial help from the federal government, arguing it does not play in a free-market environment against chief rival Virgin, who has foreign backing and renewed investment from Air New Zealand, Etihad and Singapore Airlines.
However, Virgin is also in a volatile position, announcing earlier this month it was expecting a $49 million loss in the six months to December. The announcement followed an earlier $98.1 million loss in the 2013 financial year, which led to a $90 million cash injection from its owners.
Photo: News Limited