Australia’s Regional Express (Rex) is buying National Jet Express, the fly-in-fly-out and freight arm of Adelaide-based Cobham Aviation Services Australia. The deal, valued at around AU$96 million (US$64.8 million), will provide Rex with an entry card to the lucrative fly-in-fly-out (FIFO) resource sector work and help diversify its revenue streams.
Rex will acquire Q400s and Embraer E190 jets
Rex is best known as a regional airline flying turboprop Saab 340s to link country towns to capital cities. Recently, Rex has started flying Boeing 737-800s between a handful of Australia’s capitals. However, it is having a tough time competing against big players like Qantas and Virgin Australia on these routes.
Word of Rex’s interest in Cobham leaked out earlier this year after Cobham’s private equity owners appointed an investment bank to canvas sale options. While the pandemic financially devastated most passenger airlines, Cobham’s FIFO and freight work proved remarkably immune.
The deal will see the eight Bombardier Q400 turboprops and six Embraer E190 jets belonging to National Jet Express (NJE) join Rex’s fleet of 60 Saab 340s and six Boeing 737-800s. The Q400s have an average age of 8.1 years, and the Embraers are aged between 9.3 years and 15.2 years. Compared to Rex’s Saab 340s, which have an average of 28.2 years, the new additions are positively youthful and will bring down the average age of Rex’s overall fleet.
The Cobham Aviation/NJE Bombardier Q400s will head to Rex. Photo: Cobham Aviation
Rex buys a 20% stake in Australia’s FIFO market
Rex’s buy gives it a 20% share in Australia’s revenue-rich FIFO operations that transport workers to remote mine and resource sites. Glencore’s Minara Resources, Ansteel’s Karara Mining, and IGO Limited are among the blue-chip FIFO customers Rex will inherit from the deal. In addition to the FIFO flights, NJE operates freight services from Sydney (SYD) to Adelaide (ADL), Brisbane (BNE), Melbourne (MEL), and Gold Coast/Coolangatta (OOL), as well as air charter services in Papua New Guinea.
In a stock exchange filing on Friday, Rex said National Jet Systems’ calendar 2021 revenue was AU$142 million. Rex is stumping up $48 million to but NJE, with $15 million coming from a credit line with a longstanding investor and the remainder from cash reserves. A further $48 million is coming from private funds held by joint venture partners, including Rex Chairman Lim Kim Hai.
Rex will also inherit six Embraer E190 jets under the deal. Photo: Cobham Aviation
“With this acquisition, Rex will have a FIFO arm that is simply unparalleled in Australia,” said Rex’s Chairman on Friday. “I believe that NJE’s modern aircraft fleet and its long-term customer relationships overlayed with Rex’s proven record of safety, reliability, and cost efficiencies would propel NJS to be the premier FIFO operator in Australia.
“The Company will invest in modern aircraft and technology to enable NJE to expand from its traditional bases of WA and SA and bring our unique brand of FIFO services also to Queensland and Northern Territory.”
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Rex will join rivals Qantas, Alliance Airlines, and Virgin Australia Regional Airlines (VARA) in the FIFO market. VARA’s Western Australia-based operations are relatively modest, accounting for about 5% of the market. The two big players are Qantas and Brisbane-based Alliance Airlines. Qantas already owns 20% of Alliance and is making a play to buy the entire airline. That deal remains subject to regulatory approval, but if it proceeds, it will snag Qantas a 70% share of the FIFO market.
Rex also notes its proposed purchase is also subject to regulatory approval, including approval from Australia’s Foreign Investment Review Board.
