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Speaker 1: the news from the Australian. From the Australian, here's what's
Speaker 1: on the Front. I'm Claire Harvey. It's Thursday August one.
Speaker 1: A convicted child sex offender has been spared deportation under
Speaker 1: Australia's new visa rules, in what looms as the first
Speaker 1: test for new Immigration Minister Tony Burke. Philippines man Earl
Speaker 1: Sanchez was last year convicted of sexual intercourse with a
Speaker 1: child between the ages of fourteen and sixteen, but a
Speaker 1: tribunal says he can stay despite the government's attempts to
Speaker 1: deport him. That exclusive is live now for our subscribers
Speaker 1: at the Australian dot com dot au. If you've got
Speaker 1: a mortgage, heave a sigh of relief. Inflation grew by
Speaker 1: three point eight percent in the year to June, but
Speaker 1: that might just spare us another rate rise when the
Speaker 1: Reserve Bank Board meets on Tuesday. Passengers are already grieving
Speaker 1: for Rex, the airline that's gone into administration amid board
Speaker 1: chaos and financial losses. The Albanezi government is under pressure
Speaker 1: to bailout or take an equity stake in Rex, but
Speaker 1: it's warning there will be strings attached today, how Rex
Speaker 1: flew into the storm and whether taxpayers should come to
Speaker 1: the rescue. Friday afternoon in the Australians newsrooms is tense.
Speaker 1: We've got a giant paper to publish, the Weekend Australian,
Speaker 1: and an always hungry website and app where we need
Speaker 1: to be breaking big news all the time. Joanni Bishan
Speaker 1: edits our business call them Margin Call, which is a
Speaker 1: must read for anyone in industry or government. It's a
Speaker 1: mix of entertaining gossip about powerful people and also hardcore
Speaker 1: news which regularly breaks in the column. On Friday, he
Speaker 1: got a call tipping him into a potentially massive scoop.
Speaker 2: It was quite early on Friday afternoon, and I received
Speaker 2: a call, as one usually does in this industry, with
Speaker 2: some information that at first quite alarmed me. The information
Speaker 2: was that Rex was in serious financial straits, that consultants
Speaker 2: were getting under hood of the airline so to speak,
Speaker 2: and even more concerningly, that it was possibly heading into
Speaker 2: financial ruin such that administrators were about to be appointed.
Speaker 2: Now my reaction to that was, well, I don't think
Speaker 2: that's true. I think it's possible that they brought in consultants.
Speaker 2: A lot of companies do that. But the idea that Rex,
Speaker 2: which was operating flights at that time, had planes in
Speaker 2: the sky at that very moment, would be going into
Speaker 2: administration with a matter of days or a matter of weeks,
Speaker 2: it sounded fanciful. In the end, I made a decision
Speaker 2: to write the story, but took a very cautious approach
Speaker 2: to mentioning the A word. I did end up using it,
Speaker 2: but Eve and I was quite skeptical whether we'd end
Speaker 2: up actually going down that route. And three days later,
Speaker 2: on Monday, the company entered a trading halt, and here
Speaker 2: we are, they're in administrations.
Speaker 1: After March of Aki. Rex is Australia's third airline after
Speaker 1: Quantus and Virgin It flies a bunch of regional routes
Speaker 1: like Perth to Monkey Mayer where tourists can swim with dolphins,
Speaker 1: Brisbane to Thaga, Minda, Cairns to Dumagy, Sydney to Narandra.
Speaker 1: Our reporter Lillie McCaffrey has been speaking to Rex passengers.
Speaker 1: I'm really sorry to hear this happened to Rex.
Speaker 3: They're a fabulous little local airline.
Speaker 4: We rely on them a lot, and I'm really sorry
Speaker 4: for all the stuff too.
Speaker 1: It's such a shame. It's just really sad.
Speaker 4: I really hope that the government or get behind them
Speaker 4: and support them to get them back up and running.
Speaker 4: I mean, Australia is regional, so we need support in
Speaker 4: that area. You know, they have supported quantas in the past.
Speaker 4: Everybody knows about that.
Speaker 3: I just hope that for the guys that you know
Speaker 3: work for X, they're able to find like we're able
Speaker 3: to save for REX, and that you know they'se guys
Speaker 3: are able to get work or still have work.
Speaker 2: There's genuine sadness in the community. I think it almost
Speaker 2: is a piece of critical infrastructure or an essential service
Speaker 2: for people living in the regions. But I've noticed from
Speaker 2: the commentary, on the stories I've written and on talkback
Speaker 2: as well, people don't want to see this airline go under.
Speaker 2: Neither as the Prime Minister anyone in government. The last
Speaker 2: time I flew REX, I went from Sydney to Adelaide
Speaker 2: and back. It was quaint, it was fun, it wasn't
Speaker 2: a packed flight, which is always pleasant, food was good,
Speaker 2: and I remember thinking this was actually a really puzz experience.
Speaker 2: I should really fly the airline more. It was also
Speaker 2: cheaper than the mainstream airlines at flight Adelaide. So yeah,
Speaker 2: it's quite sad news that this has happened. I don't
Speaker 2: think anyone wanted this.
Speaker 1: Funnily enough, REX arose out of another airline crisis in
Speaker 1: two thousand and one and SET collapsed. The federal government
Speaker 1: made a multimillion dollar cash bailout of anset's regional subsidiaries,
Speaker 1: and a group of Australian and Singaporean investors got together
Speaker 1: to buy them and start a new airline. They called
Speaker 1: it Regional Express REX. So YOI, it seems like REX
Speaker 1: is really teetering on the brink. They've grounded flights between
Speaker 1: the major cities, and those flights seemed to be part
Speaker 1: of Rex's problem, don't they.
Speaker 2: Yeah, well, it looks like rex's problem wasn't so much
Speaker 2: the regional side of its business. That side of the
Speaker 2: business was traveling quite well back during COVID during the pandemic.
Speaker 2: At the start of twenty twenty one, REX basically got
Speaker 2: one hundred and fifty million dollars from an outfit called
Speaker 2: Pacification Group.
Speaker 3: It's an investment firm.
Speaker 2: They use that money to buy seven three seven planes
Speaker 2: from Virgin and their idea was they were going to
Speaker 2: launch this expansion into the capital city market or what's
Speaker 2: commonly known in aviation circles as the Golden Triangle. That's
Speaker 2: the prized busiest routes between Sydney, Melbourne and Brisbane.
Speaker 3: Australia's friendliest and most reliably airlied now brings you to
Speaker 3: Sydney three times a day fly Rex. They keep fares low.
Speaker 3: REX our heart is in the country.
Speaker 2: Sounded like a great idea at the time. It hasn't
Speaker 2: quite gone to plan. They've been up against Quantus, Virgin, Jetstar.
Speaker 2: Their market share hasn't hit the double digits. The losses
Speaker 2: have been severe, something in the order of a million
Speaker 2: dollars per week on that route, the Golden Triangle route.
Speaker 2: And I guess we all sort of knew that Rex
Speaker 2: wasn't doing that well. Its results have always told that story.
Speaker 2: What we didn't know was that there had been consultants
Speaker 2: who had been brought in over the past couple of months,
Speaker 2: and that was done by Pacification Group, that's the company
Speaker 2: that invested the money with rexbec in twenty twenty one,
Speaker 2: the hope, of course, was to try and figure out
Speaker 2: how to separate the two sides of the business or
Speaker 2: stanch the outflows of the money on those capital city routes.
Speaker 3: Hasn't worked. What's interesting about it is that no one
Speaker 3: saw this coming.
Speaker 1: So there's one issue, which is that it entered a
Speaker 1: very competitive market in that Golden triangle that you described.
Speaker 1: But there's also been board kind of wrangling going on
Speaker 1: at Rex. What does that boiled down to? That conflict?
Speaker 2: So the corporate regulator ASSIK began asking questions of Rex
Speaker 2: about certain potential conflicts of interest that arose with a
Speaker 2: certain board member. The sum of it was that the
Speaker 2: executive chairman, a guy who had been leading the company
Speaker 2: for twenty one years, he was basically hot swapped for
Speaker 2: the deputy chairman, John Sharp. He's a former Transport minister
Speaker 2: and the Howard government. And again this came absolutely out
Speaker 2: of the blue. So you suddenly had this long standing
Speaker 2: executive chairman, he's turfed out. In comes the deputy chairman,
Speaker 2: and within about a week or so the guy had
Speaker 2: been turfed out. He lobbed a requisition with the market
Speaker 2: basically saying well, I want four of these directors gone,
Speaker 2: I want two of my guys put on the board instead.
Speaker 2: So you've had this boardroom bus stuff for reasons which
Speaker 2: weren't really made clear to the market.
Speaker 3: Now this has happened.
Speaker 2: Basically, you've had a combination of a governance problem happening
Speaker 2: at the top. You've had a financial issue happening at
Speaker 2: the bottom with this Capital City triangle expansion. And whether
Speaker 2: the two are related, I mean that would seem plausible,
Speaker 2: but certainly the airliners hit troubled straights.
Speaker 1: Now the Transport Workers Union wants the government to take
Speaker 1: a financial stake in REX. So it's this real sort
Speaker 1: of fundamental question about what we want from aviation. You know,
Speaker 1: do we consider it basically public transport it's something that
Speaker 1: we expect the government to ensure gets delivered. Or do
Speaker 1: we regard it as something that private companies can offer
Speaker 1: if they want to. How do you think we sort
Speaker 1: of navigate our way through those questions?
Speaker 3: Well, we always do navigate these questions, don't we.
Speaker 2: I Mean, the question comes up perpetually government ownership and
Speaker 2: equity stake nationalized, not to nationalized. We've got the Transport
Speaker 2: Workers Union now calling for the government to take an equity.
Speaker 3: Stake in REX. What does that give you?
Speaker 2: In the words of National Secretary Michael Kine, it gives
Speaker 2: government a seat at the table. To me, that really
Speaker 2: sounds more like it's an umbilical cort a lifeline.
Speaker 3: You know, it's too big to fail.
Speaker 2: If you've got government sitting at the table, there's always
Speaker 2: an opportunity for recovery. I think the tw would say that,
Speaker 2: then you have propositions of a government run airline altogether,
Speaker 2: one that's managed as an essential service for the country.
Speaker 3: Not the worst idea in the world.
Speaker 2: It seems like a lot of people who are commenting
Speaker 2: on this story would like to see that. The counter
Speaker 2: argument to it that hasn't changed. You know, you have
Speaker 2: a nationalized airline. It's costly, it can be in a fiction,
Speaker 2: it can be sluggish with innovation. An equity stake might
Speaker 2: be the halfway point.
Speaker 1: Coming up after the break, Virgin has offered to fly
Speaker 1: REX passengers for free. Nice or opportunistic. Our subscribers were
Speaker 1: the first to know about this story, and a subscription
Speaker 1: is a lot cheaper than a freezing cold sandwich on
Speaker 1: a flight these days. Check us out at the Australian
Speaker 1: dot com dot au. You only ninety four percent of
Speaker 1: air travel in Australia is on either Quantus or Virgin.
Speaker 1: Let's just talk about Quantus for a moment. It's an
Speaker 1: extraordinarily powerful company in the Australian market, isn't it.
Speaker 2: Well, yeah, I mean every MP upon entering Parliament is
Speaker 2: given Quantus chairman's lounge access. Virgin has their own version
Speaker 2: of that, and they provide a similar service to politicians
Speaker 2: entering Parliament too. It's that classic execution of soft power.
Speaker 2: Politicians declare their membership with these clubs within about five
Speaker 2: minutes of walking into Parliament. Some might say it's pretty
Speaker 2: hard to turn down overtures from an airline on any issue.
Speaker 2: When they're comping. MP is a plush seat and glass
Speaker 2: of pinot at Camber Airport whenever they travel. They'll quietly
Speaker 2: get the ear of every politician this way. Others might
Speaker 2: say it's a really savvy way of doing it. It's
Speaker 2: perfectly legal. But of course this is the way the
Speaker 2: airlines have been doing it for years. It's worked very effectively.
Speaker 1: And now, as for Virgin, the other competitor, who also
Speaker 1: plays things pretty hard, they are offering to fly any
Speaker 1: Rex passenger who's been stranded for free, and they're also
Speaker 1: putting it out there that if REX employees want a job,
Speaker 1: they should come and ask for one at Virgin. What's
Speaker 1: going on there?
Speaker 3: The question is why are they doing it?
Speaker 2: Well? On its face, it certainly looks like it's altruistic.
Speaker 2: It's possibly the right thing to do. Who knows, maybe
Speaker 2: the government got in their ear as well. We don't
Speaker 2: see quantas doing it just yet, maybe they will in
Speaker 2: the near future. On the other hand, it's partly tactical.
Speaker 2: Presumably more people using the Virgin airline might discover that
Speaker 2: they actually like it and they want to keep using it.
Speaker 2: Offers have also been made to REX staff potentially if
Speaker 2: they need assistance. You can see how Quantus, Jetstar and
Speaker 2: or Virgin might try and move into this space for
Speaker 2: their own tactic advantage given what's happening to REX. But
Speaker 2: at the moment it's the right thing to do, certainly
Speaker 2: helping out Australians. I don't see how anyone loses out
Speaker 2: of it.
Speaker 1: Quantus and Virgin might argue that this is already a
Speaker 1: very competitive sector. They compete hard with one another. REX
Speaker 1: is a third airline. We've seen other third airlines come
Speaker 1: and go. Would Australians really lose out if REX word
Speaker 1: to go into liquidation, Well.
Speaker 3: I think they would.
Speaker 2: I mean, reducing competition in a competitive market is never
Speaker 2: a particularly good thing for prices, which is what Australians
Speaker 2: care about. But I think more importantly, REX services destinations
Speaker 2: that the others don't.
Speaker 3: And if people in.
Speaker 2: Regional Australia need to get where they need to go,
Speaker 2: while people in the cities want to venture into the
Speaker 2: regions for all sorts of economic and touristic.
Speaker 3: Purposes, it will just be harder for them to do it.
Speaker 3: That's not good for anyone.
Speaker 1: Joanni Bishan's margin call column has the scoops and the skull,
Speaker 1: but check it out right now by joining ours subscribers
Speaker 1: at the Australian dot com dot au