Rex (ASX:REX) share price takes flight as domestic launch nears

The Rex share price jumped today as the company prepares to offer Sydney to Melbourne flights for the first time.

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The Regional Express Holdings Ltd (“Rex”) (ASX: REX) share price is rising today. The Rex share price is currently trading at $1.76 a share — that’s a 2.92% gain for the day and a gain of more than 50% over the past year.

As the smallest of Australia’s three airlines sets its sights on the major cities, let’s take a look at its recent moves and the latest news out of the industry.

Rex celebrates Australia Day in Sydney with no sign of Qantas or Virgin

During yesterday’s Australia Day celebrations, some Sydneysiders would have been surprised to see a Rex airplane soaring over the Sydney Harbour.

According to today’s Australian, this annual tradition is usually carried out by Qantas Airways Limited (ASX: QAN), which zooms through in an A380 and hands Tim Tams out at the luggage carousels.  

In the past, Virgin Australia has also joined the Australia Day celebrations, serving up classic Aussie treats in its lounges.

With neither bigger sibling making an appearance this year, Rex seized the opportunity to promote its latest fleet addition, a Boeing 737.

Rex gears up to compete with Qantas and Virgin Australia

Starting 1 March, borders permitting, Rex will operate its first Sydney–Melbourne flight. Following the Easter holiday, Rex intends to add Brisbane flights as well.

Earlier this month, the Australian Financial Review (AFR) published a commentary questioning whether Rex is strong enough to compete in this space. It argues that  between the aggressive business strategy of Qantas combined with the new set of private equity hands steering the Virgin Australia ship, Rex might be out of its depth.

A second commentary at the AFR published 18 January takes the opposite position. It states that with a company history that dates back 70 years, there’s no better contender to face up to the bigger players. The article points out that Rex has made operational profits every year since the 2004 financial year and “is probably one of only three listed airlines in the world that has been able to do so”.

Navigating an industry in flux

As Rex positions itself in Sydney, Qantas and Virgin Australia prepare for new competition. Both companies are also currently dealing with border closure problems caused by international flight restrictions, an issue Rex doesn’t have.

As reported by the AFR, Virgin Australia recently proposed an ‘AviationKeeper’ pitch to the government. Via a joint letter written with the Transport Workers’ Union and Australian Services Union, the letter proposed that if international borders remain closed for the next year, an ‘AviationKeeper’ scheme must be enacted to support the industry.

Qantas was asked if it wanted to sign the letter and the company declined.

The Qantas share price has taken a roughly 28% beating over the past 12 months. At time of writing, the Qantas share price is $4.67, down just over 2%.

In comparison, the Rex share price is up nearly 3% today and has climbed more than 57% over the past year.

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Motley Fool contributor Gretchen Kennedy owns shares of Qantas Airways Limited. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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