Rex set for capital city services, but ASIC applies the brakes

Rex set for capital city services, but ASIC applies the brakes

Second-tier Australian airline Regional Express Holdings (ASX: REX) has taken a major step towards its goal of operating domestic flights between Sydney and Melbourne next year after getting the nod from the Civil Aviation Safety Authority (CASA).

The news sent shares in Rex more than 10 per cent higher in early trade, despite the company also receiving a warning from the corporate watchdog over what it describes as "continuous disclosure failures".

The shares were up 8 per cent ahead of a trading halt as the company prepared a response to Australian Securities and Investments Commission's  (ASIC) action relating Rex's plans for capital city services.

ASIC has restricted Rex from issuing a reduced-content prospectus and using exemptions for reduced disclosure in fundraising documents until 14 December 2021. This means Rex needs to issue a full prospectus in order to raise funds from investors.

The action follows a news report in May which highlighted the need for Rex to raise $200 million to pursue its plans for capital city air services. ASIC says the company failed to disclose to the market it was considering the feasibility of starting these services in addition to its existing regional routes.

The company announced in September that these plans would be supported by a $150 million convertible notes issue to Asian investment firm PAGAC Regulus Holding. PAGAC last week received Foreign Investment Review Board approval to make its investment in Rex.

Rex is currently preparing a response to ASIC's action.

Meanwhile, CASA has now issued Rex with a High-Capacity Air Operator's Certificate, approving the company for regular public transport services using the Boeing 737-800NG on its existing network.

This paves the way for Rex to begin domestic operations between Sydney and Melbourne from 1 March next year as planned. The company plans to extend the service to include other cities.

The company has already launched a special promotion of 100,000 tickets for $79 on its nine daily return flights between Sydney and Melbourne.

"CASA's commitment and dedication to the recovery effort during this period of national emergency is nothing short of outstanding and exemplary," says Rex's executive chairman Lim Kim Hai.

"Under the leadership of Shane Carmody and Craig Martin, CASA has gone above and beyond to ensure that the aviation industry is fully supported by the regulator in all aspects.

"CASA's assistance was critical at a time when all airlines were fighting for survival."

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