Regional Express fails to formally advise ASX of inoperable planes

[Melburnian1]

Under the ASX company listing rules, entities are required to advise of any material changes to operations that in the Directors' view would affect profits (or losses.)

Rex has not done this, as far as I can ascertain, in relation to its two recent "incidents" (one of which involved loss of a propeller) and subsequent withdrawal from service of several SAAB340Bs.

I would have thought this would materially affect profit - and in an adverse way.

Surprising.

 

[andmiz]

Everyday operational issues hardly 'materially affect profit'. (Yes I'm using 'everyday' quite loosely). But its definitely not a material change.

 

[Melburnian1]

Everyday operational issues hardly 'materially affect profit'. (Yes I'm using 'everyday' quite loosely). But its definitely not a material change.

It's at least 10 per cent of the fleet out of service, and no date for their return unless this has occurred under the radar.

I reckon it's 'material.'

The article in today's aviation section of 'The Australian' raising questions about the elderly Rex fleet adds fuel to the fire. This was a topic I initiated discussion on in AFF a few months ago.

Former Emirates pilot Byron Bailey says in the article that the large number of rotations that the Rex SAAB340Bs undertake (many short flights) means that the planes are even 'older.'

 

[gaz0303]

The Australian article was slightly unfair. Surely Rex should be compared to its regional peers - QFlinks Dash8-200 and 300s, Fly Corporate etc. Some old Dash8-200s getting around the Qf network.

On the material effect comment, losing some aircraft may be counterbalanced by some higher loads and now more profitable routes.

 

[Melburnian1]

The Australian article was slightly unfair. Surely Rex should be compared to its regional peers - QFlinks Dash8-200 and 300s, Fly Corporate etc. Some old Dash8-200s getting around the Qf network....

Doesn't Rex compete on some routes with QF's Q300s and Q400s as well as VA Regional's ATRs?

 

[Quickstatus]

Though Rex made an operating profit last year, some writedowns pushed it into the red. Some of the loadings on Rex flights are around 40-50% for a 34 seater according to daughter who flew in the Friday evening delays over SYD. One would think a Friday evening flight would be near full. Even the 5pm was about 16 pax. (WGA-SYD). I have no reason to suspect this is abnormal. A fully depreciated aircraft properly maintained might be very inexpensive and might be able to sustain loads such as this. I've always wondered if the QF747 put out to is its pasture might have similar utility as a low cost standby. Generally speaking an old well maintained aircraft can be safely and reliably operated - see the DC3 still flying all over the world. I suspect that's how Rex makes its profits even with low loadings.
On the other hand, the Rex business model is its Achilles heel. Significant reinvestment and a rethink of strategy will be eventually required because unlike other airlines who are constantly renewing their fleet or have a renewal pipeline stretching into the next decade or two , Rex has no current strategy of renewal or at least have not enunciated it to the market maybe because the big issue (elephant in the room) is that no one is designing or building a 20-40 seat aircraft. There is simply no replacement for the Saab in that seat category. In fact some older Saabs were quickly sold by Rex. There is demand for 20-40 seat aircraft but no manufacturer
Rex has been flying under the radar while the spotlight has been on the big 2. It has been profitable which keeps the spotlight away as well. Recent events may change things

 

[Melburnian1]

If I recall, Rex's median load factor is only about 57 per cent. Its fares are extremely high while on many routes it faces competition from private cars and NSWTrainLink, or in Victoria V/Line.

Whenever I travel to Mildura on V/Line the connecting road coach from Swan Hill station to Mildura is full or extremely close to it, and it runs at least three times a day. It isn't worth travelling by air from Melbourne to Albury when the XPT train (NSWTrainLink) can get one there in about three and a half hours, and that's a route on which Rex has no competition from VA Regional or QantasLink.

Rex must get a fair bit of its passengers from local and state government departments or authorities, and some from agricultural businesses, but not huge numbers from the general public travelling for leisure.

With three - not two - recent 'incidents' and media attention in two articles in 'The Australian' yesterday - one in the general news pages that rehashed the more detailed article in the aviation pages - it's probably wake-up time for the shareholders at Rex.

 

[Quickstatus]

There is a country link between WGA and sydney. I suspect WGA is a intermediate stop.
It's a 0000-0630 from WGA to Syd and 2030-0300 the other way. Y can be as low as $40 each way, sleepers for the 0000 is $250.

Rex only needs to undercut the majors by a few dollars .

M1 your inbox is full

 

[jb747]

I use Rex a lot. I tried V/Line....never again.

 

[Quickstatus]

Do you have a view on the age of these aircraft? and the 6-7 cycles per day contributing to wear and tear higher than say the double decker. And on the other hand the air pressure differential compared to the double decker is not as great at altitude. To me a well maintained "old" aircraft is just as good.

 

[eastwest101]

Apparently 5 aircraft out of a fleet of 52 (they inspected everything to be sure) - no big deal because the suspected failure is related to a batch of parts and that's why only 5 aircraft were out of service for parts replacement.

With a fleet size that size I wouldn't be surprised if they had 5 spare aircraft available at SYD alone, or with the age of the fleet they probably would have 5 aircraft awaiting various low to high priority fixes of faults that aren't Minimun Equipment List critical at any one time. My observations are that any particular plane in SYD probably only does 3-4 sectors per day on average. They also do have more aircraft than what they need to operate the schedule, which isn't surprising as Saab 340Bs are now cheap, easy to acquire and fairly reliable so they own their aircraft rather than lease them, so they don't have to fly the wings off them like some of other larger Australian carriers, in order to pay back the lease costs. Seen the monthly lease costs of a B737 or an A320? With low fares and thin profit margins it only takes one or two empty planes or cancellations due to lack of crew or technical fault and the lease is costing you more than your profit margin.

Others points are correct in that there is nothing currently being planned or sold to replace the Saab 340 market, so its either look after them and continue to fly them, or turn your whole business upside down and replace with larger ATR42/72 or Dash 8 type aircraft - which have totally different acquisition costs and economics.

 

[Melburnian1]

Apparently 5 aircraft out of a fleet of 52 (they inspected everything to be sure) - no big deal...My observations are that any particular plane in SYD probably only does 3-4 sectors per day on average. They also do have more aircraft than what they need to operate the schedule...

eastwest101, I looked up a couple of aircraft randomly.

VH-KRX appears to have completed six sectors on 31 March and five (including a diversion to BNK because LSY was inoperable due to flooding) on 1 April 2017. The FR24 records had the aircraft in two places at once on 30 March so I did not use that day as the database must be incorrect.

VH-KDV seems to have undertaken seven sectors on 29 March, an incredible nine on 30 March, seven on 31 March and four on 1 April (not being used since noon today, 1 April.) That is 27 sectors in three and a half days and even if it is an outlier, it is still a lot of takeoffs and landings.

This is only a small sample of the fleet, but both seem to be based in NSW at present. If their usage is typical then more than four sectors a day are being flown on average by each aircraft.

Rex must be sensitive about questions about 'replacement' of the aircraft because it did not answer that when asked by 'The Australian' reporter.

 

[Quickstatus]

I reckon the SAABs do on average 6-7 sectors a day. That's not to say every one of the aircraft in the fleet do it but when on the job they do.

 

[Melburnian1]

No one will disagree that transport equipment, if well built and maintained properly, can last - look at vintage and veteran cars, many steam locomotives or aircraft based at Temora NSW - but when three 'incidents' occur in a short space of time, Quickstatus' suggestion that 'things may now change' (to paraphrase) may come into play with the beady eyes of regulators giving Rex some focus.

 

[mannej]

No one will disagree that transport equipment, if well built and maintained properly, can last - look at vintage and veteran cars, many steam locomotives or aircraft based at Temora NSW - but when three 'incidents' occur in a short space of time, Quickstatus' suggestion that 'things may now change' (to paraphrase) may come into play with the beady eyes of regulators giving Rex some focus.

Just as the spotlight went onto QF after QF32, if not the regulators the media at least.

They had a field day when the 747 picking up some of the QF32 passengers the next day had issues.

 

[moa999]

It's at least 10 per cent of the fleet out of service, and no date for their return unless this has occurred under the radar..'

Even if it's five planes, that's less thsn a1% annual revenue impact per month it occurs, which I wouldn't think meets any definition of material

 

[Melburnian1]

Following last week's article in 'The Australian' aviation section (a Friday feature past the business pages), Deputy Chairman of Rex, John Sharp, who was once Federal Minister for Transport has written a very defensive article in 'The Australian' today (Friday April 7) asserting that Rex's punctuality compared to VA Regional and QantasLink is one of the factors that shows Rex is 'more reliable.' He is confusing 'punctuality' (timekeeping) with 'reliability' (cancellations.)

He also says Rex only had two recent incidents, not three, and says that flying is safer than driving (which is true, but already very well known.)

John Sharp also suggested that age was not the defining factor in accidents and referred to a near catastrophic incident involving a QF A388 in support of that contention.

The tone of the article tells me that Rex is quite worried about reputational damage, even though the community may fairly quickly forget, for instance, the 'propeller incident.'

He criticises former Emirates pilot Byron Bailey as one who spoke outside his area of technical expertise. Strictly in one sense that is true, but pilots interact with an aeroplane's workings and innards and must have some knowledge about how things work.

 

[Melburnian1]

Are these five planes back operating passenger flights?

 

[Mattg]

Are these five planes back operating passenger flights?

Yes, it would appear that even the accident aircraft is back in service.

 

[jb747]

Yes, it would appear that even the accident aircraft is back in service.

I wouldn't have been surprised if it was back within a couple of weeks. From the images I saw, there didn't appear to be any damage outside of the engine/prop, so not a huge job to fix. Getting approval from the ATSB/CASA might have been the biggest holdup.