The administrators of insolvent Australian carrier Rex - Regional Express (ZL, Wagga Wagga) have failed to find a buyer, according to The Australian, with a source close to the administrators telling the newspaper that the airline was "a bit of a Frankenstein business" and its breakup was inevitable. It comes as Rex's two top board members gave their first post-administration interviews on Australian television.

Rex called in the administrators in July after a venture into mainline B737-800 operations went south. Those flights have stopped, but the regional Saab 340B-operated services continue. The company also has other ongoing business arms, including flight training schools, an MRO facility, aeromedical and freight operator Pel-Air Aviation (PFY, Sydney Kingsford Smith), and a closed charter fly-in-fly-out airline National Jet Express (JTE, Adelaide International). When it filed for administration, Rex had accrued debts of around AUD500 million (USD346 million) and was losing around AUD1 million (USD690,000) per week.

According to the report, there has been little interest in acquiring Rex, although Pel-Air and the flight school had attracted some interest, and some assets including a B737 flight simulator, spare parts, and some minor real estate holdings had been sold to raise cash.

The courts have given the administrators, Ernst & Young, until November 25, 2024, to find a buyer/s. The administrators have argued that this outcome, as opposed to liquidation, is the best case for creditors. However, liquidating the airline would likely be politically unacceptable to the Australian government, given it is the sole carrier into many regional and rural airports, and its demise could have significant ballot box implications at next year's federal election.

Councils speak out on Rex's hardball tactics

Meanwhile, an Australian Broadcasting Corporation Four Corners report this week suggested Rex had built "a fiefdom in the regions with a leadership to match."

"We need Rex more than they need us," said Ceduna mayor Ken Maynard, whose council operates the town's airport - Ceduna - that services the once daily flight to Adelaide International, around nine hours drive away. "We have very little bargaining power."

Murray Wood, CEO of Dubbo Regional Council and operator of the local airport around 500 kilometres west of Sydney said Rex stood out among its suppliers. "Councils are used to vigorous conversations, but that can be done respectfully and professionally," he said. "Our relationship with Rex is unique."

In 2019, in response to an AUD1.99 dollar (USD1.38) passenger surcharge increase to fund upgrades at the airport, then Rex chairman Lim Kim Hai sent Dubbo residents letters describing the council as either "very corrupt" or "very incompetent." Ultimately Rex elected to maintain operations at Dubbo where it competes on the Sydney Kingsford Smith route with QantasLink.

When South Australia's Whyalla Council introduced similar surcharges to fund security upgrades at Whyalla Airport, Rex sent a letter calling the council "devious and underhanded" and "deliberately deceptive." Whyalla mayor Phil Stone called the letter's tone spiteful and aggressive. Rex no longer flies to the city some five hours drive west of Adelaide.

Rex's hardball tactics contrast with its public persona of a folksy carrier with the interests of the regions at heart. However, it aligns with conversations ch-aviation has had with other local aviation industry figures who variously recount stories of unpleasant dealings with the airline and high levels of micromanagement and interference by Lim Kim Hai, who was also widely disliked within Rex. Speaking to Four Corners, he questions why his managers and leadership team, who now publicly and privately disparage him, stuck around for so long if his leadership and management styles were not to their liking.

Lim owns 17% of Rex and held the chairman's role for two decades until ousted shortly before Rex went into administration.

B737 sale plans shot down by chairman

Long-time Rex deputy chairman and more recently chairman John Sharp, who no longer talks to Lim, also went on Four Corners. He confirmed reports that Rex was negotiating to sell its B737 operations to Virgin Australia (VA, Brisbane International). "We put in place a rescue plan," he said. "We thought the plan would avoid the need for administration and job losses, but unfortunately that plan was torpedoed."

Sharp named Lim as the person who shot down the talks. He had demanded a seat at the negotiating table but this was not granted. Among other things, it is known Virgin Australia CEO Jayne Hrdlicka refuses to deal with him.

"I said, as a shareholder, if I'm not involved, I won't accept it," Lim said. "A shareholder needs to act in his own best interests. Just because Virgin may have stepped in doesn't mean Rex would be in a better position today."

This week, Qatar Airways (QR, Doha Hamad International) announced that it would buy a 25% equity stake in Virgin Australia.

Sharp said his former chairman was the sort of person who thought if it wasn't their idea, it was a bad idea. "They will reject it because it's not their idea, and that's the situation we found ourselves in."

Local outlets have previously named both men as interested buyers of Rex's assets, either solely or in partnership with others.