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| The government's move has some analysts concerned. (ABC News ) |
By Rachel Clayton
In the lead-up to a federal election, bipartisan support to rescue the key regional airline Rex may not surprise voters.
But what happens next could set the stage for the federal government to own an airline for the first time in three decades, after it privatised Qantas through a public share sale in 1995.
This week, the federal government announced it was acquiring $50 million in debt from Rex Airlines’ largest secured creditor PAG — the company that invested in Rex so it could launch capital city flights, which ultimately led to its downfall.
Rex went into voluntary administration last year, and the government's move gives it significant influence over the airline's future.
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| Rex terminated hundreds of staff last year when it went into voluntary administration. (Supplied: Rex Airlines) |
Specifically, the government now has the power to direct the administrator to attempt another sale of the airline, rather than letting it fall into liquidation.
It will be the second attempt to sell Rex after a failed bid last year, and the second time the government has propped up Rex, after it loaned the airline $80 million of taxpayer funds severe; months ago.
Federal Transport Minister Catherine King said, as a creditor, the government "would be seeking to get that money back through any second sale process".
But what happens if, again, no buyer comes forward?
As the airline's largest creditor, the government ultimately controls Rex's fate — raising the prospect of an unprecedented nationalisation.
Coalition raises the question
Shadow Transport and Infrastructure Minister Bridget McKenzie raised this very question on Friday.
She told ABC Radio National Breakfast her party supported the debt buyout because "Rex provides a vital service to regional Australia".
"But there are serious questions that need to be answered … I have not been briefed by the department about what is behind the $50 million debt acquisition," she said.
"Are we seeking to nationalise Rex?"
Bridget McKenzie would not say whether she thought nationalisation was a bad idea. (ABC News: Sean Davey)
Ms McKenzie said if she was in government she would "love to have a look at the books" but would not say if the Coalition would support nationalising the airline.
When asked whether the airline would be nationalised, a spokesperson for the transport minister said the government had "consistently not ruled in or out options for decisions on Rex".
'No one wants to buy it'
Aviation experts have weighed in on what the debt acquisition means.
Neil Hansford from Strategic Aviation Solutions was very critical of the move, labelling it "pork barrelling" and a "national disgrace".
"Underlying all of this is that no-one wants to buy [Rex]. The whole fleet has to be replaced, no-one wants to touch it," Mr Hansford said.
"There have been people prepared to step up and take it with all its warts, but your real problem is you've got a fleet of aircraft that are greater than 30 years old."
Mr Hansford said the move was a "backdoor nationalisation of the airline" that "sets a precedent".
"If Qantas got into a similar situation, they [the government] would go and find $4 or $5 billion to take on Qantas," he argued.
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| The federal government has continued to signal support for Rex to ensure regional and rural communities are serviced. (Supplied: Rex) |
"It's all about the election. He [Anthony Albanese] doesn't want to be seen to have let down the country areas where there are still some Labor votes left."
Aviation analyst Peter Harbison agreed the move had "to be viewed in the perspective of the federal election and the importance of the regional vote".
"That's the sort of the cynical side of it," he said.
"The practical side of it is we really don't want to see the country's main independent regional operator going out of business — it is so important to regional centres."
Mr Harbison argued the government's move was "unprecedented", especially in a "deregulated marketplace" but did not think the government intended to nationalise the airline.
"That would be a really substantial undermining of the whole domestic marketplace," he said.
"I'd be inclined to think that if it were to be classified as a nationalisation, it was just purely a temporary process that would lead to making sure that the airline survives long enough for commercial interest to take over."
Rex likely to sell eventually
Isaac Gross is a senior lecturer in economics at Monash University and said he believed the airline would "sell eventually".
"But at what price and at what level of support from the government?"
Dr Gross said it was possible the government could offer debt forgiveness to make a sale more tempting.
"It could still go completely bankrupt and be liquidated if the government doesn't want to run it, but I suspect that's unlikely because if the government is willing to stump up $50 million it means they're pretty committed to making a deal happen."
Dr Gross said the government wouldn't be keen to keep Rex because airlines were "notoriously tricky" businesses.
He believed it wouldn't want Qantas to take over, because it would lessen competition, but may consider partially owning the airline with Qantas and allowing the carrier to operate it.
"That would be better than going bankrupt."
Michael Kaine, national secretary of the Transport Workers Union reiterated his support for the nationalisation of Rex.
"Rex is in dire straits, when the government is taking on debt in an administration process that has spent months and months with no success to find a buyer you know there's trouble," he argued.
Mr Kaine said the debt buy-out "cuts across the economic orthodoxy of the last 30 to 40 years".
"The government should buy Rex, nurse it back to health — it should say to the community this is an investment in the future of regional Australia.
"Once there's an investment plan for the future, and it has a new fleet, they can sell it as an ongoing concern."
First Published at ABC News, January 25, 2025
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