Regional Express to become government-owned airline if ...

The federal government will acquire Regional Express if the collapsed airline fails to find a buyer — a move which would make it the first nationally-owned carrier in three decades.

Regional Express entered voluntary administration in July last year, after it failed to expand its services to competitive capital city routes.

Administrators from EY were appointed to oversee the business, also known as Rex, but have so far been unable to secure a buyer for Australia's third-largest airline.

The announcement comes ahead of a second attempt to sell the airline, with the government offering to work with bidders to ensure a "successful sale" that would provide reliable regional services.

However, if there was no buyer found for the company, the government would consider "contingency options", including "potential Commonwealth acquisition".

"When markets fail or struggle to deliver for regional communities, the government has a role to ensure people do not miss out on opportunities, education and critical connections," Transport Minister Catherine King said in a statement.

"We are recognising that [today] and stepping in to keep these routes in the air."

Ms King had previously not ruled out nationalising the regional airline to save it from collapsing, after the government spent $50 million in January to become Rex's largest creditor and have a greater say in its future.

Last November, the government spent $80 million to ensure Rex's regional flights would still operate until June 30 this year.

Is Rex about to be nationalised?

With the federal government now becoming Rex's largest secured creditor, experts are asking whether the airline may end up in public ownership.

The government has also intervened to ensure Rex will have access to its regional flight slots at Sydney Airport until October 24, 2026 by waiving the "use it or lose it" rule.

"Regional Australians rely on these important services and the Albanese government [is] making sure communities outside capital cities aren't short-changed," Ms King said.

Should Rex be nationalised, it would be the first time since 1995 that the federal government would own a stake in an airline after it privatised Qantas through a public share sale.

Speaking at Merimbula Airport in NSW, Prime Minister Anthony Albanese said, across the ditch, Air New Zealand was 50 per cent owned by the New Zealand government.

"Airlines around the world — whether you look at Singapore, BA got bailed out, Alitalia, Lufthansa, as well as of course the Middle Eastern Airlines — are all connected with their governments, whether it be Emirates, Etihad or Qatar Gulf Air … these are all connected. There's a reason for that: because aviation plays a critical role in communities," he said.

"Our preferred option is for a private-sector operator, perhaps another airline. There's a range of options available. There's a range of interest here. We recognise that commonwealth and state governments will have to play a role in providing some support, but that's our preferred option.

Mr Albanese would not say how much it would cost taxpayers if the government bought Rex.

Treasurer Jim Chalmers reiterated the government's preference was for a private sale.

"If a more substantial role for government is necessary, then we'll do the work with the state governments and other stakeholders to see what might be necessary or possible," he said.

'Aviation business is difficult' 

Ian Douglas, an honorary senior lecturer in aviation management at the University of NSW, said the government's willingness to step in and rescue the airline could be the security potential buyers were looking for before making a bid.

"The aviation business is difficult at the best of times. Rex Airlines was operating profitably before the misadventure into the capital city markets [and] realistically the government will have to be there in some way, certainly in a transition, if not permanently, in some of the thin and difficult areas Rex Airlines has been serving," he said.

Dr Douglas agreed with Mr Albanese that there was a role for governments to control airlines, especially in a country like Australia "with a thin population and big distances".

"In Canada, Finland … it is not unusual for governments to provide some financial support. It may be that there are some markets that are so thin they are not commercially viable but are important to be connected."

But the cost of updating Rex's aging fleet, he said, would not come cheap.

"They are not easy, natural replacements. The ATR 42, a larger aeroplane, will need an extra flight attendant and trigger security requirements at remote airports, so it would bring not just the capital cost of a new fleet but operating costs would increase."

Administrators recouping costs

Since being appointed last July, administrators have sold off parts of the broader Rex business to repay creditors.

In October last year, its Pel-Air ambulance service was purchased by Toll Holdings for $47 million.

Its stake in charter flight business National Jet Express was sold for a reported $12 million to former Rex chairman Lim Kim Hai last December.

ASIC to sue Rex Airlines

The corporate regulator ASIC is suing Rex Airlines, alleging the company and four of its directors engaged in "deceptive and misleading conduct" over its profitability.

The company's flight school in the southern New South Wales town of Wagga Wagga was also put on the market last year, with an estimated price of $17 million.

The airline is also facing a legal battle with Australia's corporate regulator, which announced it was suing the company and four of its directors last December.

ASIC alleges that Rex, along with John Sharp, Lim Kim Hai, Lincoln Pan and Sid Khotkar made misleading statements to investors about the airline's profitability.

The four men have indicated that they would defend the allegations, while Rex's administrators have previously stated that it would be inappropriate to comment on the matter as it was before the courts.

Administrators from EY have until the end of June to find a suitable buyer for the business, after the Federal Court granted a second extension to the convening period last year.

Arrivals and departures improve 

According to government data, Rex's performance improved in the months following its administration.

In December, the airline had the third-highest on-time arrival rate at 75.9 per cent, trailing Hinterland and Skytrans but exceeding the industry average of 74.7 per cent.

It also ranked third for on-time departures at 78.6 per cent, above the 74 per cent average, while recording the fourth-highest cancellation rate at 2.5 per cent.

This marks an improvement from July, when Rex entered administration. At that time, its on-time arrival rate had fallen to 67 per cent, below the 71 per cent industry average, while its on-time departure rate was 70 per cent, also below the 72.5 per cent average.