Regional Express: future strategy

[Melburnian1]

Three years ago I asked how Rex (ZL) coped with its ageing fleet.

At the time, the median age of its SAAB340Bs was just under 22 years. It is now 24.6 years. VH-EKD is more than 29 years old.

Net profit in 2017-18 rose to just under $17 million, assisted by new routes gained in states like WA and Queensland. The airline has 'partnership agreements' with lots of rural councils that I assume involve some sort of subsidy from the council. Some State Governments also pay subsidies to Rex.

The share price is $1.46, good compared with what it has been at times. Directors increased the dividend from 8 to 12 cents.

However, the annual report (mentioning that Rex has 57 SAABs, but the Airfleets website says 55) lacks a comment about future strategy apart from how the aircraft are owned not leased, and how the company has exited loss making routes like Taree to Sydney.

Granted it has a good number of spare parts purchased that should help keep costly exposure to the US dollar down, butt what is it doing about its ageing aircraft?

As with any transport equipment, good maintenance is the key. Just because a train, bus or plane is 'old' is not necessarily a reason to scrap it.

However, AFF member bajar previously mentioned that SAAB was gradually exiting aviation, so that may be a concern.

The cost of new aircraft must be high. Will Rex need these in the next five years?

 

[Melburnian1]

..They have a very aggressive government relations strategy that appears to be working.

Agree, and probably helped enormously by The Hon John Sharp's huge experience in government (even though quite a few years ago.) He knows the ropes and presumably with the others who have aviation experience, knows how to negotiate profitable contracts.

However the company remains fairly heavily exposed to the vagaries of agribusiness. With (for instance) northern NSW and southern Queensland in drought, plus some other parts of Queensland, and resultant lower crop yields and perhaps cattle numbers, this may be a contributing factor to how Regional Express expects profits in 2019-20 to be 15 to 20 per cent lower. At least they've given the sharemarket timely guidance and not left such statements until much later.