Rex Airlines: Government bailout conditions likely to require ‘watchdog’ seat on the board

Any government bailout for embattled regional airline Rex would need strict conditions and could require the government to take a seat on the board, an expert says.

The airline has appointed administrators and grounded the Boeing 737s on its intercity routes, while its regional services remain operational.

Federal Transport Minister Catherine King said the government was working closely with administrators to ensure the airline’s “absolutely vital” regional presence remained.

Further government funding could require conditions allowing some control in the boardroom, Swinburne University law and corporate governance specialist Helen Bird told AAP.

“Whoever is the new investor, be it government or otherwise, is essentially taking up fixing a corporation that got to where it is because of poor governance and poor management,” she said.

Private investors take advantage of that opportunity all the time.

“But we’ve got to be very careful before we let taxpayers’ money go down that route, and certainly we need to put some pretty strict conditions on it,” Ms Bird said.

A failing company would not attract unconditional funding.

“Unless you saw it as an essential service, which it is in regional Australia, and you said, ‘Well, if we are going to give that kind of money as a government we’ll need to have a shareholding stake’,” she said.

“We haven’t done that in the past, certainly with Qantas, and the government gave lots of money to Qantas during COVID.

“They didn’t require that but I note that several airlines overseas did ... in return for funding.”

The airline’s trouble started with its expansion into capital city routes, the University of Sydney’s Professor Rico Merkert told AAP.

Government support, which would likely be limited to regional services, might not be required to ensure they continue.

“On many of the routes there was little to no competition, allowing Rex to generate high yields and sustainable profit margins,” the Institute of Transport and Logistics Studies deputy director said.

“The aircraft were old and they would have had to replace them at some point but that was in the planning, including electrification projects.”

Acting Opposition Leader Sussan Ley said aviation was complex, with a lot of policies around competition and supporting regional routes.

“It’s policy, though, that this government hasn’t paid enough attention to,” she told the ABC.

She accused the government of leaving a review of demand management slots at Sydney Airport sitting on a desk for months.

Ms King said the government was working its way through significant slot reforms announced in February.

Commercial flights require a slot to land at Sydney Airport, with 80 available each hour of its 6 am-11 pm operation.