The Regional Express Holdings Ltd (ASX: REX) share price has recovered more than 195% from its lows in late-March and is trading relatively flat for the year.
Australia's largest regional airliner's share price recovery has dwarfed that of larger airliners like Qantas Airways Limited (ASX: QAN) and Virgin Australian Holdings Ltd (ASX: VAH). Here's why the Regional Express share price has been flying under the radar and why it could be a long-term buy.
Expanding into the 'Golden Triangle'
Regional Express recently announced that the airliner will expand its domestic operations into the 'Golden Triangle'. In local aviation terms, the 'Golden Triangle' refers to the lucrative domestic routes between Sydney, Melbourne and Brisbane.
The company will look to raise $30 million to support the initiative in order to purchase 5–10 narrow-body jets to be based in major cities on the east coast. The airliners board aims to have the new routes in operation by the start of March 2021. The company's new domestic operations will be priced at affordable levels and incorporate its hybrid business and service model.
How has Regional Express performed?
Regional Express operates exclusive services to 60 regional destinations in Australia and currently has a fleet of 60 Saab aircraft. The company has made an operational profit every year since 2004, 2 years after it was founded.
Despite the company's resilience and consistent profitability, Regional Express has not been spared the impact of the coronavirus pandemic. The airliner withdrew its profit guidance in mid-March and has managed to maintain services to regional Australia thanks to funding arrangements with both federal and state governments.
Should you shares in Regional Express?
Regional Express currently dominates regional services, covering 85% of the routes on offer. However, it should be noted that expanding into servicing capital cities comes with a range of additional risks. The current environment also remains highly volatile given the evolving nature of the coronavirus pandemic. Qantas also sacked 6,000 workers and implement a 3-year recovery plan, despite being a highly-regarded airliner.
If Regional Express can build on its existing infrastructure and maintain a lower cost base, it should be competitive. I think the prospect of Regional Express expanding its services would be great for consumers and potentially shareholders, too. I think investors should keep an eye on the sector and Rex, in particular, before making an investment decision.
