Rex losses balloon due to COVID impact and skyrocketing fuel prices

Rex losses balloon due to COVID impact and skyrocketing fuel prices

A Rex VH-ZRI plane (via Twitter).

Regional carrier Rex (ASX: REX) has today blamed four months of COVID-19 related border closures and the war in Ukraine for its ballooning losses, which rose by $42 million during FY22.

The airline today reported its loss after tax came in at $46.1 million, up from a $3.86 million loss the year prior, forcing executive chairman Lim Kim Hai to explain the company's widening losses.

“Considering that COVID devastated practically three quarters of the FY and the war in Ukraine starting in February causing crude oil prices to skyrocket by over 70 per cent during the financial year peaking at a near record high of A$174 per barrel in June 2022 as well as other supply shocks on the international economy, I am mildly pleased that our performance is not much worse than it is,” the chairman says.

Despite the 1,096 per cent increase in the loss during the period, Rex’s revenue rose by 25 per cent to $319.2 million, up from $256.1 million in FY21.

The company attributes the loss primarily to the grounding of its B737 fleet for almost four months due to border closures. During this period, Rex said it did not make any staff redundant and wore the costs associated with the aircraft leases.

Most of the company’s total FY22 revenue was generated by passenger flights ($230.5 million, up from $125.1 million), with charter flights contributing $47 million to the total, and freight adding $1.5 million to the pool.

Were it not for a tax benefit of $22.1 million, the company’s losses would have been even worse at $69.3 million.

Hai adds that since the beginning of the new financial year Rex has “turned the corner”, noting that operational statistics have been “very encouraging”.

“In July, the Domestic Jet Operations load factor was at an all-time high of 86 per cent whilst the Regional Saab Operations saw higher passenger numbers, revenue and load factors compared to pre-COVID figures despite 5 per cent less flying,” Hai says.

“These pleasing outcomes are the result of partnerships with corporates and travel agencies that were entered into at the end of the prior FY. We have already seen 35 per cent of the committed monthly amounts for the partnerships in the first two months and we have every reason to believe that the performance will get stronger in the coming months.

“I note also that fuel prices have retreated to A$130 per barrel in the most recent week.”

Hai says that Rex continues to see strong booking volumes for August, with the past week showing a 50 per cent increase over the same period in July.

“Barring further external shocks, I am confident that the group will return to good profitability in FY23.”

Rex closed out the financial year with $42.2 million in cash, up by $12.1 million from 30 July 2021.

Shares in Rex are steady as of 3.14pm AEST.

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