By Renju Jose
SYDNEY (Reuters) -The Australian government said on Tuesday it would provide up to A$80 million ($52.6 million) to airline Regional Express Holdings to keep its regional routes running during an extended voluntary administration process.
Terms of the financing package were not disclosed.
Transport Minister Catherine King said the funding was “another demonstration of our commitment to maintaining regional aviation access, recognising the important role that Rex plays in regional communities right across Australia.”
Rex in July entered voluntary administration, Australia’s closest equivalent to Chapter 11 bankruptcy, cut hundreds of jobs and closed its subsidiary that operated Boeing 737 flights between Australia’s major cities.
Traditionally focused on servicing Australia’s regional areas with small planes, Rex in 2021 began larger jet flights on the big city routes dominated by Qantas Airways and Virgin Australia but failed to dent their market share.
The company has continued using its fleet of ageing Saab 340 turboprop aircraft for regional flights after calling in administrators.
Administrators at Ernst & Young Australia said in a statement that they intended to apply to the court for an extension of the voluntary administration to June 30.
Employees of the regional business who were made redundant will be paid their entitlements.
The government aid and an extension of voluntary administration would help the airline increase operational aircraft, Ernst & Young said.
Rex’s exit from the lucrative “golden triangle” among Sydney, Brisbane and Melbourne pushed up average airfares on those routes by more than 13% and reduced passengers’ choices, the competition regulator said on Tuesday.
This may have significant longer-term impacts on the domestic aviation sector, the competition commission said.
Currently, there is no domestic route serviced by more than two major airlines, with Qantas and Virgin Australia handling 98% of domestic passengers, it said.
($1 = 1.5214 Australian dollars)
(Reporting by Renju Jose in Sydney; Editing by Jamie Freed and Cynthia Osterman)
