Home' Asian Aviation : AAV Feb 2014 Contents 24 AsianAviation | FEBRUARY 2014
Lim Kim Hai is an unusual figure in the airline
industry. For a start his airline, Australia's
Regional Express (Rex) consistently makes
money - it has been profitable since 2003-4
and, Lim notes, has been the most profitable airline in
Australia for the last two years. Although Lim would be
the first to admit that that is a somewhat hollow boast.
He is also one of the few airline heads not to
live in the county where his airline is based - he
resides in his native Singapore. Lim is very much
an industry outsider - his background is varied, but
he is essentially an entrepreneur, with investments
in various sectors including biomedical companies,
property and mobile technology.
Lim first became involved with Rex in 2002 as a
passive investor. However, after six months he left
the board in February 2003. "I could see it was going
pear shaped," he says. By June that year, Rex ran
out of working capital and the minority shareholders
asked him to come back as executive chairman. It
scrapped a A$1 million pre-tax profit in his first year
at the helm, and has accumulated around A$230
million in pre-tax profits up to the present day.
Lim's turned his lack of industry experience to his
advantage, questioning orthodoxies wherever he saw
them - something he continues to do to this day.
At a time when most airlines are increasing the
proportion of their fleet that is leased, REX is buying
aircraft that it currently leases. It plans to buy the
25 Saab 340s that it doesn't already own (out of
a total fleet of around 50) by the end of the June
financial year as they gradually go off lease. Saab
Aircraft Leasing is the sub-lessor for these, which are
ultimately owned by a range of financial institutions.
At a time when many airlines are outsourcing their
spare part needs, REX is doing the opposite. It
recently decided to purchase the entire Saab 340
stock from Pinnacle Aircraft Parts, which is getting
out of the Saab sector. REX's total spares stock is
now over one million parts.
Both these deals had something in common.
"Bulk purchases such as these are done at a steep
discount. Investments like these actually bring returns
in the short-and-medium term," says Lim.
As well as the steep discounts, there was another
motivation for the parts deal, says Lim. "We take on-
time performance very seriously. We want to be able
to keep our aircraft flying, and so we've gone down
the path of making sure we're totally self-sufficient."
These and various other investments are part of
an A$50 million (US$45 million) capital expenditure
programme designed to help mitigate the effects of
an economic downturn in Australia that has led Rex
to issue a profits warning.
In the meantime, Rex is again going against the
grain on its fleet. At a time when many airlines are
racing to invest in brand new aircraft, Rex is sticking
with its Saab 340s. The 50-strong fleet has an
average age of around 20 years, with the range from
newest to oldest around five years either side of that.
Lim is in no rush for fleet replacement - he expects
to get at least another ten years out of them - and
hopes for even more. "Saab has committed to
another 20 years of maintenance, because they have
won some military tenders for the same platform,"
"We do not see any sharp increase in MRO costs
- an aircraft which has gone beyond 15 years of
age would have had most parts replaced and-or
serviced. The only thing that is not replaced is the
Fuel costs make up just 17% of total costs - which
puts Rex at a distinct advantage, and means that the
need for a more modern aircraft is not so obvious.
Another part of the A$50 million investment is
going towards an avionics upgrade for the Saab
fleet. Thomas Global Systems is supplying a new
all-LED display avionics system. "We've worked on
it for two years, got the prototype ready and are very
satisfied. We're now going through the certification
process and will then we'll roll it out across the fleet,"
says Lim. The new plug-and-play units, which include
some mandatory updates, are replacing Rockwell
Lim doesn't completely rule out getting a new fleet
at some point over the next ten years, but stresses
that he doesn't see anything today that would warrant
the effort and investment.
"If our platform was no longer able to do job - we'll
look at another platform. As it stands today, I would
probably be taking a smaller version of the other
existing platforms, such as a [Bombardier] dash 8
or ATR 42."
But to really tempt him, airframe makers would
need to update their product lines. "This is my hope
- someone will build a good turboprop of the size I
require, more efficient, with better avionics. These
other aircraft, the dash 8 and ATR 42, do not bring
much of an advantage in terms of avionics or fuel
consumption. There is no point in going to another
platform, unless its due to obsolescence. My hope
is that someone comes up with a very modern, very
fuel efficient aircraft with excellent avionics - that
could be something I could transition. Right now,
there is nothing on our radar."
The A$50 million package also funded a Saab
340 full flight simulator (FFS) built by FlightSafety
International - the last one the US simulator and
training provider built and the youngest of its type in
the world. REX already has three non-motion Saab
340 simulators, and will continue its long standing
relationship with the Ansett Aviation Training facility
in Melbourne to use their Saab 340 FFS.
Regional Express chairman Lim Kim Hai
relishes his reputation as an industry
maverick, writes Colin Baker
"In certain ways its getting more
dangerous. Because you see carriers
that sign up for 200-250 aircraft.
These carriers, in some cases,
weren't around ten years ago"
LIM KIM HAI,
executive chairman, REX
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