US-based Air T comes to Rex Airlines' rescue as four more subsidiaries placed into administration

US aviation investor Air T, Inc. has agreed to acquire Rex Airlines and rescue the embattled company from administration with a recapitalisation proposed to get the business back to basics in servicing regional Australia.

The acquisition comes as four Rex-linked companies, including Australian Airline Pilot Academy, were placed into voluntary administration yesterday affecting campuses for pilot training in Victoria and NSW.

Rex Airlines, which was placed into administration in August last year, is currently being supported by the federal government through an $80 million loan facility to maintain vital air links for regional Australia.

The level of support was boosted by $30 million this year after an extension of the administration period to December was secured, ensuring that Rex continues to operate during the process.

The federal government has welcomed the proposed sale to Air T as “a positive step towards bringing Rex out of voluntary administration”.  

“The Australian Government has also entered into an agreement with Air T in relation to restructuring Rex’s financing arrangements in connection with the acquisition,” says Catherine King, the Minister for Infrastructure, Transport, Regional Development and Local Government.

“This will allow Rex to keep flying and maintain critical aviation links for regional communities."

King says as the sale process is still under way, the government does not plan to comment further.

Administrators to Rex Airlines - Adam Nikitins, Samuel Freeman and Justin Walsh of Ernst & Young - revealed in June that they had received a number of offers to buy Rex Airlines.

Yesterday the administrators confirmed that they entered a sale and implementation deed with Air T, which they say will lead to the sale and recapitalisation of the business.

Air T owns 16 companies in the air services sector, including North American express-cargo operators Mountain Air Cargo Inc. and CSA Air, as well as air maintenance company Royal Aircraft Services.

The federal government has previously indicated that any potential support for a successful bidder was conditional on commitments to provide “an ongoing, reasonable level of service to regional and remote communities, the need to provide value for money to taxpayers and good governance”. 

The sale is still subject to regulatory and creditors’ approval, with the administrators also pointing out that shareholders are likely to get no return on their investment in Rex Airlines.

Creditors will vote on the sale at their second meeting, which will be held before the administration period expires in December.

In tandem with the sale announcement, the Rex Airlines administrators placed three subsidiaries of the airline and its associated frequent flyer business into voluntary administration.

The companies comprise AAPA Victoria Pty Ltd, Australian Aero Propeller Maintenance Pty Ltd, Australian Airline Pilot Academy Pty Ltd and Rex Flyer Pty Ltd.

AAPA operates flight training schools for pilots in Wagga Wagga and Ballarat, with the subsidiary established in 2007 by Rex to combat a severe pilot shortage that hit the industry that year.

Rex Flyer operates Rex Airlines loyalty program.