Regional Express (Rex) is looking at starting a service between Sydney, Melbourne and Brisbane using jet aircraft and is also contemplating the ultimate replacement of its widely used Saab turbo props with ATR42 and ATR72 aircraft.
The Rex board has said that it plans to raise a minimum of $30m, for the launch of limited domestic operations, through one or more of the following avenues: sale-and-leaseback arrangement, equity injection and convertible notes.
"Due to the strong interest shown by various external parties to participate in the fund raising, including lessors willing to provide $30m for 15 of Rex's fleet of 60 unencumbered Saab 340 aircraft, the board has now formed the view that funding will be forthcoming for the minimum target sought," the company said.
The board has authorised management to start preparing for the operation of an initial fleet of five to 10 narrowbody jet aircraft to be based out of Sydney and/or Melbourne to service the golden triangle (Sydney-Melbourne-Brisbane).
A date of March 1, 2021 has been identified as the start date, subject to fund availability and regulatory approval.
Rex has been in talks with turboprop manufacturer Avions De Transport Regional (ATR) about sale and leaseback opportunities for the Saab 340s it currently uses.
The talks include looking at replacement of the current fleet with ATR42 (48 seats) and ATR72 (78 seats) aircraft and the opportunity to establish full flight simulator in Sydney at ATR's cost to train Rex crews and other third party operators.
ATR's export credit agencies BPI France and SACE are throwing in a sweetener with the possibility of an 18 month grace period on the principle repayment which Rex said could provide a "great tool to minimize financial risk during a fleet transition period".
The ATR turboprops have already been in use by Virgin Australia, Skywest and Air New Zealand. In October 2019 the company announced it would have the new ATR 42-600S available in the second half of 2022. With the 'S' representing STOL (Short Take-Off and Landing), this new version of the ATR 42-600 offers take-off and landing capabilities on runways as short as 800m with 40 passengers on board in standard flight conditions
"Rex has the biggest regional network in Australia and we are the only carrier in Australia that has been able to successfully navigate the turmoil and shocks over the last two decades with uninterrupted operational profits since 2003," Rex's deputy chairman, John Sharp, said.
Mr Sharp said one out of every 10 flights in Australia was already a Rex flight during the pre-COVID days.
"Leveraging on Rex's existing infrastructure and overheads, our cost base for the domestic operation is estimated to be at least 35 per cent below Virgin's Australia's (pre-COVID) with 50 per cent lower additional headcount needed proportionately.
"Rex's domestic operations will be priced at affordable levels but will also include baggage allowance, meals on board and pre-assigned seating," Mr Sharp said.