With a territory of nearly three million square miles but a population of just 27 million people, Australia is a difficult place to launch and operate low-cost airlines, due to the high costs, coupled with a relatively small potential client base.
Earlier in October, two U.S. executives from the financial company that helped launch Queensland-based budget carrier Bonza were charged with fraud of over $500 million over allegedly “pledging assets that [the] firm did not own, falsifying bank statements, and making other material misrepresentations” about the state of its finances both to investors and companies into which they put money.
In April 2024, creditors began seizing Bonza’s fleet of aircraft over unpaid debt, and the carrier had to abruptly shut down operations, leaving thousands of travelers in airports across rural Australia stranded with canceled flights.
A short summary of Rex Airlines and how it ended up in bankruptcy
Launched in 2002 from the merger of two regional airlines, Sydney-based low-cost carrier Rex Airlines has been under voluntary administration (the Australian equivalent of Chapter 11 bankruptcy) since July 2024 after running out of funds and having to stop operating all but a few regional flights funded by Asian investment firm PAG and the local state government.
The airline was also forced to withdraw from trading on the Australian Stock Exchange over investor fears that the carrier could collapse at any moment. Meanwhile, on its website, Rex states that any flights it sells have a “federal government regional flight booking guarantee.”
Related: American airline brings back very long flight to New Zealand
After more than a year in bankruptcy proceedings overseen by administrators from Ernst & Young, Rex has just been given an unexpected Hail Mary after E&Y confirmed that Minneapolis-based aviation company Air T plans to buy the beleaguered carrier.
Few financial details about the transaction have been released, but Air T is a wider parent company with branches in cargo, commercial aircraft, and ground support.
“The administrators would like to thank the Australian government for their support to date in assisting to facilitate the proposed transaction,” E&Y said in a statement on the sale.
Since the company filed for bankruptcy, a judge has extended the deadline for Rex to find a buyer three times while also giving up $80 million in debts so the airline could keep running.
Shutterstock
“No return to shareholders is anticipated,” E&Y says of airline sale
While Rex owed over 4,800 creditors a combined $500 million, E&Y said “no return to shareholders is anticipated.”
Given the airline’s critical role in providing service between Australian cities and remote rural communities, it has been permitted to exit bankruptcy through a sale that does not take on its heavy debt load.
More on travel:
- United Airlines CEO gives stark warning on Olympic Games
- Another regional airline cancels all flights, no refunds
- US government issues sudden warning on Switzerland travel
- Another country just issued a new visa requirement for visitors
“Reliable air connectivity is fundamental to the social and economic wellbeing of regional Australia,” Australian Airports Association CEO Simon Westaway said in a statement.
Details of the proposed sale reported by news.com.au say that Air T has agreed to help Rex restructure its financing arrangements and file a plan for a profitable way forward given ongoing challenges amid a limited market and aging aircraft.
Related: Another airline files for bankruptcy, cancels all flights
#Budget #airline #filed #Chapter #surprising #buyer