‘No one’s going to get money back’: Taxpayers exposed to $130m hit in Rex sale

Industry experts fear more than $130 million in taxpayer cash injections made to failed regional airline Rex is at risk after administrators revealed a deal to save the airline would wipe out its shareholders.

The government loaned Rex $80 million to keep the company’s planes flying after it collapsed in July 2024 and bought $50 million from another creditor, but its return on the money is uncertain after administrators EY announced Rex would be sold to US aviation firm Air T.

Ian Douglas, honorary senior lecturer for UNSW’s school of aviation, said the government had been clear it did not want to take over the airline, leaving few options after it was forced into propping up the airline to keep regional routes open.

“I don’t think anyone’s going to get money back from Rex in any way, shape or form,” Douglas said. “And if this [deal] didn’t go ahead, I still don’t think there’d be an outcome that arrived afterwards that said: ‘here’s some money back’.”

While shareholders, who had invested in Rex, will get nothing from the proposed deal, creditors, who include staff, suppliers, airports and lenders – including the government – have not been told what they will receive.

Rex, which was formed in 2002 as a regional carrier, went under after trying to compete with Qantas and Virgin on capital city routes as the country emerged from the pandemic. The airline also suffered severe disunity on its board.

The airline was responsible for about 5 per cent of Australia’s domestic seats before its collapse, largely serving regional towns with few or no other options to fly. But it never made large profits and its aircraft fleet is decades old. The administration, which EY originally forecast could take just 12 weeks to find a fresh buyer and revitalise Rex, has dragged on for months.

“I think [the government] in that situation would be happy to see a capable operator – which this one is – take over Rex, even if it means writing off the $130 million that they’ve got in there,” Douglas said.

He said Rex’s minimal property holdings and ageing fleet meant it did not have the assets to sell to repay creditors, who would probably be unhappy with the outcome, but not surprised.

“I don’t think anyone had real expectations of collecting much money from Rex, given that the government has been loaning and pumping in money just to keep essential connections in place for the last year and a half,” Douglas said. He said the government may have to keep funding Rex to make sure it is viable and retains its regional routes.

“I’m not always a fan of the transport minister, but I think they did what they had to do. In this case, they said, ‘here are effectively essential services’,” he said.

A spokeswoman for Transport Minister Catherine King said: “The Australian government has entered into an agreement with Air T in relation to restructuring Rex’s financing arrangements in connection with the acquisition. As the administration is ongoing, we aren’t able to comment further at this stage.”

Rex has stopped flying its former capital city routes. Air T probably has aircraft maintenance facilities and spare parts that can help Rex’s planes keep operating.

Independent economist Saul Eslake speculated that the government, which is Rex’s main creditor, could have made a deal to support the new buyer in exchange for the airline maintaining regional routes.

“I’d imagine that perhaps in exchange for those commitments, the government might have agreed to waive some or all of their rights as a creditor, knowing that if they didn’t, perhaps they’d get the political blame and lose seats in areas where there were no longer services,” Eslake said.

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