Regional Express Airlines (Rex) announced today that it has fast tracked discussions with Sunshine Express Airlines of Queensland to acquire its entire regional airline operation.
In a joint media release made today, Managing Director of Sunshine Express, Mr Steve Padgett, revealed that Sunshine Express and Rex had been in dialogue regarding the possible merging of the two operations.
“We identified last year that as a small regional airline we have limited economies of scale and a high cost of operation and regulatory compliance. We also needed significant investment in new aircraft and resources to better serve the growing regional Queensland market and to be a viable activity in the long term.” Mr Padgett added that this requirement, had led to the commencement of discussions with Rex about a merged operation.
“The need for greater support became more apparent recently when an accident caused substantial damage to one of our Metro 23 aircraft during routine maintenance by a third party resulting in the aircraft being permanently grounded. This led to a substantially reduced capability to meet our schedules with the high degree of integrity necessary for a regional airline,” Mr Padgett said.
Giving details of the background to the merger, Rex Managing Director, Mr Geoff Breust said that Rex first held discussions with Sunshine Express last year but was reluctant at that time to take on the added responsibility given its own significant expansion plans.
“However, the grounding of the damaged Sunshine Express aircraft and difficulty in finding replacement aircraft resulted in Rex being informed that Sunshine Express’ position was becoming untenable and the future of its services and the 40 staff of the airline were at stake. In discussions between the airlines, Rex and Sunshine Express agreed in principle to merge so that there was a future for the airline, the air services and the staff.
“We at Rex have gone through this experience twice in the last five years and we fully empathise with Sunshine Express and its staff. We believe that they are motivated, loyal and passionate about their work and we feel that they too deserve renewed opportunities, just as what Rex was given after its precarious first ten months of operations,” Mr Breust said.
“Then came QantasLink’s announcement late last Friday of its intention to fly into Hervey Bay and Biloela from Brisbane, flying in competition with its alliance partner, Sunshine Express.
“Rex’s initial reaction was to abandon the whole idea of a merger with Sunshine Express as Rex already has a major expansion and a lot of work on its plate. Nevertheless, we felt that such a reaction was selfish and not consistent with our mission of connecting regional Australia. Taking the easy way out could mean the potential loss of vital air services to seven regional centres from Brisbane and 40 jobs at Sunshine Express. We felt we have an obligation to step up to the mark,” Mr Breust said.
“Rex will consult with all stakeholders involved – Sunshine Express, the local councils representing the communities involved and the State Government of Queensland. If there is a strong consensus and resolve, Rex will take up the challenge to take over and improve on the current network.”
Commenting on QantasLink’s decision, Mr Padgett said that he was very disappointed by this outcome. “QantasLink withdrew from the Wide Bay in 2002. Whilst Sunshine Express has been able to operate the routes profitably, the situation is not much changed today and I do not see any commercial reason for QantasLink to recommence flying from Brisbane to Hervey Bay and Bileola.”
The parties have reached agreement in principle on the key commercial terms of the deal. In the proposed transaction, all the shares in Sunshine Express will be transferred to Rex for a nominal consideration. Following the acquisition, Rex will use its best endeavours to bring in the resources necessary to improve the quality and reliability of the services and to upgrade the services in ports that have potential. These proposed initiatives are intended to provide for the continuation of air services between Brisbane and the regional centres of Maryborough, Hervey Bay, Biloela, Port Macquarie, Coffs Harbour, Armidale and Tamworth.
Mr Breust added, “We have given our commitment to a mixed 34 seat Saab / 19 seat Metro operation just as we have successfully done in other States. We plan to eventually bring two Saab 340s into the Sunshine Express network.”
Rex will spend the rest of the week in consultation with the stakeholders.
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For further information contact:
Sunshine Express: Rebecca Penny, Marketing Manager, 0412 593 260
Rex: Sara-Jane Uden, Corporate Communications Executive, 0402 438 361
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