Posted on: 20 April 2011 by Ross McSweeny
Regional Express (Rex) has today released its first profit guidance for FY11, declaring that it expects its full year profit before tax to be in the region of A$23.5 million, 10% down from last year’s result of A$26.2 million.
The profit after tax will be more severely impacted with the current forecast for this parameter estimated to be A$17.1 million, some 30% below last year’s result of A$24.6 million.
Rex executive chairman Lim Kim Hai explained that the extremely sharp increases in fuel prices and the continuing uncertainty in the economic outlook have translated into a slight weakening of passenger numbers which magnified the impact of higher fuel costs. Commenting on the sharper drop in profit after tax, Lim explained that in the previous financial year Rex was able to take full advantage of the Government’s one-off Investment Allowance that was established to mitigate the effects of the global financial crisis which provided Rex with investment-related tax benefits.
“The aviation environment this year has been extremely toxic and we have seen all the major carriers in Australia announcing significant declines in profits,” Lim observed. “Looking ahead, we do not see the situation improving much with both the domestic and international economies threatened with much uncertainty and risk.
“Regional aviation in Australia is now extremely vulnerable and it does not help that the Federal Government is proceeding with plans to increase significantly the cost burden on regional carriers,” Lim continued. “In response to the challenging environment, Rex is reviewing its network and may have to pull out of some marginal routes. We will also have to redouble our efforts at making productivity gains and we may have to contemplate retrenchment – something we avoided even in the depths of the global financial crisis.”