The Write Direction: Resurrection of REX

WITH the expectation of good news for regional and rural residents, I thought that I would look more deeply into the possible resurrection of REX Airlines.

The federal government has been propping up the airline in order to ensure regional and remote communities remain serviced by viable aviation options. Their main action was to buy $50 million of debt and then lend Rex up to $80 million of carry-on finance.

The reason was to keep it going until a buyer was found.

From the buyout currently being determined, no return to shareholders is expected.

That is the risk involved in this game.

The Transport Minister’s endorsement of the acquisition is a positive step in bringing the airline out of voluntary administration.

It is thought that the government had entered discussions with AIR T around the restructuring of financial arrangements if this leads to its acquisition.

I have a good understanding of the pressures currently being faced at REX.

I held directorships in eight companies, being invited onto their boards due to my positive form when it came to turning them around from cash burns caused by deteriorating conditions in regional economies.

In the end, difficult decisions must be made, firstly to stem the loss flow but then to set new directions for a positive future for the company.

These difficult decisions nearly always delivered job losses and cost-cutting measures which those involved didn’t like or appreciate; they were unfortunately critical for the entity’s survival however.

Whilst we took great pride in restructuring failing businesses for everyone’s long term future, those of us who made these calls nearly always lost friends and became unpopular.

I am sure that this will have the same outcome for the REX restructuring. Shareholders will lose their investment, staff will be dismissed or have their jobs reassessed, and some subcontractors may not get paid for past work as the losses need to be mitigated before the structure can move forward.

REX has old Saab 340 aircraft that need replacing and old ways that need to be redirected in the modern, changing and unstable environment in the aviation industry.

By John BLACKBOURN