REGIONAL airline Rex failed to disclose it was losing millions of dollars monthly despite stating it was optimistic the company would have positive operating profits for the financial year ending June 2023, a regulator alleges.
The Australian Securities and Investments Commission has initiated legal proceedings in the Supreme Court of New South Wales claiming Regional Express Holdings Limited and four directors failed to provide accurate and timely information to the market, contravening continuous disclosure obligations.
The corporate watchdog is attempting to have four directors disqualified over the alleged corporate governance failures.
It’s alleged directors at the troubled airline failed to reveal an expected $35 million shortfall until days before the financial year ended despite stating Rex was “optimistic the group will have positive operating profits for the full FY23 barring any further external shocks.”
Consultancy firm EY was appointed as administrators at Rex in July last year, with the company’s shares suspended from trade.
The Federal Government granted an $80 million lifeline to keep regional services operating with the convening period for the Rex voluntary administration extended to June 20 this year.
An earlier breach of disclosure obligations, relating to the expansion from regional services into domestic operations that eventually forced Rex into administration, led to a $66,000 fine in 2021.
The company blamed a “global shortage of pilots and engineers, along with supply chain shocks post-COVID” for disruptions that forced significant reductions in scheduled flights.
Nominally a regional carrier, the airline made an aggressive push to compete on key capital-city routes against industry heavyweights Qantas and Virgin in 2021.
It has struggled financially since, reporting a bottom-line net loss of $3.2 million for the first half of the 2023/24 financial year.
The Transport Workers Union said the alleged contraventions created more uncertainty about the airline’s future and further necessitate the government taking an equity stake.
“It is crystal clear we cannot let Rex fail,” national secretary Michael Kaine said.
Formed in 2002, Rex is Australia’s largest independent regional airline and makes about 1050 flights a week on 45 routes including daily flights between Mildura and Melbourne.
