Rex reiterated its confidence in a two-airline domestic duopoly post-pandemic in the presentation. But this week, the carrier’s deputy chairman, former Howard government transport minister John Sharp, wrote in the Financial Review that three carriers could effectively compete domestically.
Rex said it would compete as a mid-tier carrier without major competition as it expected Virgin 2.0 to take on Qantas in the full-service arena.
Yet new Virgin chief Jayne Hrdlicka plans to pivot the relaunched airline into the same mid-tier market as Rex, and has negotiated less onerous pay deals with most of the carrier’s 6000 workers. She also has the financial might of US private equity firm Bain Capital behind her.
The changed circumstances raise questions about the viability of Rex’s capital city plan revealed by the Financial Review last year. Rex secured $150 million from Asian private equity outfit PAG for the expansion.
Rex said on Thursday its strategy had evolved since the presentation was circulated.
“The slide deck was the subject of confidential exploratory discussions with potential investors. The slide deck has significantly evolved over the months as the situation evolved and different potential investors will have different versions of it,” a company spokesman said.
PAG saw an early version of the presentation in around last May. It signed a binding deal to fund the expansion via two tranches of convertible notes which would see it own nearly half of Rex if converted on November 19.
If successful, Rex’s domestic expansion would prove the most significant shake-up of the market since Ansett failed in late 2001.
Rex told investors it could capture a 37 per cent of the domestic market. But Ms Hrdlicka has said Virgin would fight to retain a third of the market, although the carrier was falling behind this in December.
Asked whether Rex still believed Virgin was doomed to collapse again, a company spokesman said: “It is extremely difficult to predict the future in the airline world.”
The airline also maintained it was set to launch the capital city services on March 1, despite the re-emergence of state and territory border closures in response to coronavirus outbreaks in Sydney, Melbourne and Brisbane.
The investor presentation said Rex expected to make $100 million of before-tax profit in the first two years of operating the domestic capital city flights. It also flagged international services to New Zealand, Bali and Indonesia for the future.