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Friday, Mar 14, 2025

Albanese Government Considers Acquisition of Rex Airlines Amid Financial Turmoil

Albanese Government Considers Acquisition of Rex Airlines Amid Financial Turmoil

The Australian government prepares to intervene in the airline sector, potentially acquiring Rex Airlines, which is facing significant debt and operational challenges.
The Albanese government of Australia has announced its plans to potentially acquire Rex Airlines, a regional carrier that has recently entered administration.

The decision comes as the government seeks to maintain critical aviation services in regional areas, with Rex unable to attract private buyers to restore its operations amidst significant financial challenges.

Rex Airlines, which plays a crucial role in providing air services to regional and remote communities, has reportedly amassed a debt of $500 million owed to approximately 4,800 creditors.

The airline's financial difficulties were exacerbated by a failed attempt to expand into capital city routes in 2021, which significantly impacted its profitability.

Following these events, the Australian Securities and Investments Commission (ASIC) initiated legal proceedings against Rex and four of its directors for allegations of misleading and deceiving investors.

Prime Minister Anthony Albanese emphasized the importance of regional air services, stating, "Regional Australians deserve access to quality and crucial regional aviation services." In an effort to support Rex before its administration, the federal government provided an $80 million lifeline in November 2023, aimed at keeping regional flights operational until July 2025.

As Rex's administration continues, the Australian government is actively engaging with administrators and shortlisted bidders to find a resolution.

Any government support for a potential buyer would come with conditions, such as commitments to maintain adequate service levels to regional communities and assurances of effective governance and taxpayer value.

Transport Minister Catherine King highlighted the government's role in addressing market failures, particularly in regions that depend heavily on essential services.

The Albanese government has indicated that it is only a contingency plan to acquire Rex, clarifying that it does not wish to become a bidder in the upcoming sale process.

As part of its strategy to support local aviation, the government announced the suspension of the 'use it or lose it' rule for Rex's slot allocations at Sydney Airport until October 2026. Typically, this rule requires airlines to use at least 80% of their allocated slots, or risk losing them.

This development arrives as regional reliance on Rex Airlines presents a politically sensitive issue ahead of the upcoming election.

Opposition leader Peter Dutton and National Party leader David Littleproud have both expressed support for measures that would keep Rex operational, indicating a willingness to collaborate with the government to resolve the airline's issues.

The situation remains dynamic, with the federal government actively monitoring developments in the hope of a market-led solution that avoids a complete takeover of the airline.
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