Source: Australian Ministers 1
BEN MURPHY, HOST: Regional Express Airlines, also known as REX, has found a US buyer after the carrier went into voluntary administration last July. Administrators confirmed that they had entered into a sale and implementation deed with Minneapolis-based company AirT. Catherine King is the Federal Minister for Infrastructure, Transport and Regional Development. Good morning.
CATHERINE KING, FEDERAL MINISTER FOR INFRASTRUCTURE, TRANSPORT, REGIONAL DEVELOPMENT AND LOCAL GOVERNMENT: Good morning. Ben.
BEN MURPHY: Thank you so much for joining us. You said yesterday the government has welcomed this news. Why is this a positive thing for Australia?
CATHERINE KING: Well, we’ve been at pains throughout the course of the last year while REX has been in administration to want to make sure that REX continues as a service provider to regional Australia. And that’s been incredibly important to the government. It’s why we stepped in to assist the administrators to really take the time that they needed to actually get a commercial outcome here. So getting a buyer for REX is important. Now it’s not finalised yet. They’ve entered into a deed of sale. It is, of course, as the law requires, now subject to a creditors’ meeting, and creditors will need to determine whether they accept this bid. But we’re a fair way down the track, but that’s now the next stage. So we’re a bit constrained about what we can say at this stage. But it’s now made public by the administrators that this sale and implementation deed has been entered into and now the creditors will have to vote on that, and let’s go from there.
BEN MURPHY: Well, would it be safe to say that there were concerns there would be no interest in buying REX, as it’s been 15 months since they went into administration?
CATHERINE KING: Well, it’s certainly taken time, and there were some real challenges with REX. Obviously, their fleet is made up, they own a lot of the Saab aircraft, they’re now ageing, and getting access to parts for that is really challenging. And obviously, there was decisions made by the previous board of REX that have really made it a fairly challenging operation to turn around. And so having that time, and what the administrators asked us for. They needed time. We wanted to keep the airline flying. The customer guarantee, I’m so grateful to all of the people who’ve continued to put their faith in REX and fly with them. That’s been really important to just be able to keep the business going so we could get time to actually get the right buyer in place. And the administrators have had that time because the government stepped in to allow that to happen.
BEN MURPHY: We’re speaking with Catherine King this morning, the Federal Minister for Infrastructure, Transport and Regional Development, and we’re very thankful she was able to squeeze us in on such short notice. Catherine, here in Mildura, there are lots of concerns about the cost of flights and access. Do you think that the ownership might open doors for cheaper flights or more flights even?
CATHERINE KING: Well, I think a couple of things. One is this buyer has access to, it runs a huge fleet of Saabs itself. It also has access to a significant number of parts. So it’s able, hopefully, to get a few more aircraft operating across REX’s fleet. So that will be a good thing. The other is, obviously, we want to keep that sort of competitive tension. And really the only player in town to compete, frankly, with Qantas has really been REX. And we need that sort of market concentration for regional to actually be able to provide that competition so let’s hope so but we’re a way out from any of that yet. We’ve got to get through this creditors meeting and then obviously the business needs to consolidate and be able to make sure that it can continue to operate in Australia. And then our view very firmly has been that we’d be looking at expansion.
BEN MURPHY: Do you think there’s anything the government can do to ensure the viability of regional airlines going forward? Like if the company needs to cut costs, do you think flights to locations such as Mildura could be at risk? And if so, how can we protect that?
CATHERINE KING: Well, these are always, of course, because these are private companies, there are commercial decisions at play. And really the biggest issue in regions is often demand and just the demand versus the cost. And so obviously there are a number of state governments, for example who do subsidise intrastate flights because the Commonwealth doesn’t do that. We sometimes assist with interstate so there are some states who do that for medical purposes. I think Victoria does do some of that and so there is money that flow through regional airlines, but it really is one of the things we’ve discovered through this process is it’s very mixed across the country. And so we’ve asked the Productivity Commission particularly to look at, again, is there anything that could be done to look at regional competitiveness, to look at that price costing, to really shore up regional aviation overall. And they’ll announce the terms of reference for that shortly. But that’s certainly one of the things that’s become apparent through the REX process, that it is a bit patchwork in terms of what states offer what to sort of assist, particularly medical flights and things like that. Some states like Western Australia, for example, subsidise the fly-in, fly-out workforce for regional flights, and they do that substantially through individual contracts with airlines. So some states do that and other states don’t do that as well.
BEN MURPHY: I think it’s one of those things that’s definitely quite stressful for a lot of people that live here. Like, Mildura has been left feeling a little bit short-changed recently with no promises for a passenger train. Qantas has pulled out of its staff base. Flights tend to be expensive. Is there any hope for people here the future of transport here in the Mallee?
CATHERINE KING: Yeah, absolutely. I think the first thing is that, you know, REX, really, in essence, without our intervention, you know, I don’t think REX would be flying today. And I think that’s been really important. I think we didn’t also want to, didn’t we just want to throw money at it. We needed to try and make sure that we’ve got really substantial, it is an investment the Commonwealth has made to keep the administration going, to put in place a customer guarantee, to make sure that we can continue to get that service opportunity and I think it’s really important that, as I said, to have faith that REX is flying. It’s going to continue to fly. It’ll continue to fly to the regions and be Australia’s regional aviation backbone alongside a lot of other smaller regional airlines that also do fly into areas and that there’s confidence that, you know, we do have a regional carrier here in Australia. And as I said, we’ve still got a little way to go with the creditors having to have to make a decision about this, but it’s been important to get the time to actually try and get the right outcome for regional Australia here.
BEN MURPHY: Catherine, just quickly, REX was previously Singaporean and Australian owned and based in Mascot, New South Wales. The new owners are based, or the possible new owners are based solely in America. Is that a bit of a loss for Aussie business?
CATHERINE KING: No, because it’s all, they’ll be an Australian-owned entity. That is one of the requirements. They’re an Australian-owned entity subject to Australian law and Australian employment law. So they’ll still, it’ll be an Australian company, sorry, an Australian company, still owned and still operated, obviously, under Australian law. So all of the employment and those sorts of things will continue. But again, creditors will need to have a look at the terms of the deed and the implementation and make a decision from there.
BEN MURPHY: Well, I think that’ll calm a lot of stress and concerns that people have. Thank you so much for your time, Catherine.
CATHERINE KING: Yep, you’re welcome.