The board of regional airline Rex has approved plans to raise at least $30 million to launch services to compete against Qantas and Virgin Australia.
Rex, which operates turboprops and has largely concentrated on less busy routes, would aim to have five to 10 jets based in Sydney and/or Melbourne to service flights between Sydney, Brisbane and Melbourne from March 1, 2021, pending funding and regulatory approval.
The routes between Australia’s three biggest cities are a “golden triangle” of business and recreational traffic for airlines.
Rex will raise at least $30 million through sale-and-leaseback arrangements, equity injection or convertible notes to fund the expansion, it said on Monday.
It added that lessors were willing to provide funding covering 15 of its fleet of unencumbered Saab 340 turboprops.
“Rex’s domestic operations will be priced at affordable levels but will also include baggage allowance, meals on board and pre-assigned seating,” Rex deputy chairman John Sharp said.
“Lounge membership will be available for subscription. It is the hybrid model that Rex has so successfully pioneered over the past two decades for its regional operations.”
Rex currently operates on less competitive regional routes such as Sydney-Wagga Wagga and Adelaide to Port Lincoln using a fleet of ageing Saab 340 turboprops with 30 to 36 seats.
The airline said in May that it was considering expanding to capital city routes, and that it would need $200 million to do so.
Before the pandemic, Rex was flying 1500 weekly flights to 59 destinations in regional Australia.
In the early days of the virus crisis, that was cut to just five routes in Queensland as part of a contract with the state government.
Its announcement of board approval to launch the capital city flights came after US private equity group Bain Capital on Friday agreed with Virgin Australia’s administrator to buy the country’s second-biggest airline.
Rex said it had also signed a non-binding memorandum of understanding with turboprop maker ATR, a joint venture between Airbus SE and Leonardo SpA, to study the eventual replacement of its Saab 340 fleet with larger ATR42 and ATR72 planes.
The memorandum of understanding includes plans to explore financing solutions, such as with ATR’s partner export credit agencies.