Home' Asian Aviation : AAV April 2012 Contents REX warns on
Australian regional carrier REX warns that the
twin effects of global economic slowdown
and what it calls Australia's "draconian"
policies on regional aviation will "wipe
out" most regional air services and warns
the group may divert resources to the more
lucrative mining charters.
REX Group executive chairman Lim Kim Hai
made the warning after announcing that Rex's
regional airline operation is seeing passenger
numbers continuing to decline, a trend that
started with the global financial crisis.
"The drop in REX's passenger numbers
during this period was almost 4% in
comparison to the previous year. At the
same time, the cost per ASK (Available Seat
Kilometre) increased by over 8% primarily
due to soaring fuel costs." Lim added.
"Adding to the woes of regional air
services are the Federal Government's stifling
measures to be introduced from 1 July 2012
in the form of the Carbon Tax and other tax
and cost increases on regional operators.
The impact of these new measures on Rex
alone will be in excess of A$6 million (US$5.4
million) per annum," said Lim.
"The airline environment worldwide is
becoming toxic. In the space of the few
weeks since the beginning of the calendar
year we have already seen 4 fairly sizeable
European airlines folding. Other strong
carriers have recently reported drastic plunges
in profits in excess of 50% (Singapore
Airlines and Cathay Pacific) or even losses (Air
France). In Australia two carriers have folded
and Qantas has once again seen a loss in its
results after deducting contributions from its
Frequent Flyer programme. Virgin Australia
reported a doubling of its profits but only
managed to eke out a 2.5% net return on
"REX will be monitoring the situation
closely and in the absence of a more
favourable environment will be compelled to
divert its resources from marginal regional
routes to more lucrative mining charters in
order to protect shareholders returns."
The REX Group saw pre-tax profits of
A$18.5 million for the six months to December
with on a turnover of A$139 million.
This was largely driven by its subsidiary
Pel-Air as a result of strong demand for
charters from the mining sector and
commencement of the Ambulance Victoria
contract in the period. All other subsidiaries
also showed improved results, says REX.
- Colin Baker
The shareholders of Philippine carrier Spirit
of Manila Airlines (SMA) which suspended
operations in August 2011 hopes to secure
funding to relaunch later this year as a
regional low cost carrier.
According to an SMA official who held
20 per cent stake in the airline, the four
shareholders are seeking funds from a
consortium of Filipino banks for the carrier to
Negotiations with a potential unnamed
foreign investor are also being finalised.
No date has been firmed up for the
relaunch but the fourth quarter of 2012
or early 2013 is being targeted. SMA will
operate regional flights within four hours
of flying time from Diosdado Macapagal
International Airport (DMIA) in Clark, its
The airline will decide on the aircraft type
after it has secured the necessary funding.
It expects to initially operate two jetliners
expanding to five by 2014.
The shareholders have abandoned the
earlier plan to tap the labour traffic out of
the Philippines with flights to the Middle
The official said it would be more feasible
tapping the labour traffic and leisure
market to Singapore, Malaysia, Taiwan,
Hong Kong, Korea and Japan. According
to the Philippines department of Labour
and Employment an estimated 1.34 million
Filipinos work in the six countries.
SMA which started operations in December
2010 with two leased MD-83s and one 737-
300 aircraft, operated only one route, Clark-
Taipei, offering twice weekly flights.
It had secured the rights to operate
international flights to Dubai, Kuwait,
Macau, Bahrain and Taiwan, and within the
Philippines to Cebu, Kalibo and Davao but
lack of funds crippled the airline's plans to
SMA had put in place an ambitious plan to
lease three 747-400s and three 767-300ERs
but this all fizzled out just as fast as they
were conceived. -- William Dennis
Spirit of Manila Airlines plans for relaunch
REX Group executive chairman Lim Kim
Hai has threatened to replace regional
services with mining charters if Australian
Government policies don't change
"REX will be monitoring the situation closely and in the absence of a more favourable environment
will be compelled to divert its resources from marginal regional routes to more lucrative mining
charters in order to protect shareholders returns." Lim Kim Hai, executive chairman, REX Group
8 AsianAviation | APRIL 2012
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