Why the Regional Express (ASX:REX) share price is flying high today

The Regional Express Holdings Ltd (ASX:REX) share price was a strong performer on Tuesday. Here’s what you need to know…

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The Regional Express Holdings Ltd (ASX: REX) share price was a very positive performer on Tuesday.

The regional airline operator’s shares rose 4% to $1.69.

This latest gain means the Regional Express share price has now more than doubled over the last 12 months.

Why did the Regional Express share price storm higher?

Investors were buying Regional Express shares on Tuesday following the release of an update on its agreement with PAG Regulus.

According to the release, the company has completed its investment transaction with PAG Regulus to raise up to $150 million to be used exclusively to fund its domestic operations.

The first tranche of $50 million has been drawn down and secured convertible notes have now been issued to PAG Regulus. The remaining $100 million of the funding will be available for drawdown over the following three years.

What is the funding for?

The funding from the deal with PAG Regulus will be used to support the launch of Rex’s domestic jet operations. These are aiming to compete with Qantas Airways Limited (ASX: QAN) and Virgin Australia on some major routes.

In November Regional Express announced the agreement with PAG Regulus. At the time, Rex’s Executive Chairman, Lim Kim Hai, explained the rationale for the deal.

He said: “PAG is a well-respected and highly successful investment group which manages more than USD40 billion on behalf of major global institutional investors. I look forward to tapping into the experience and expertise of PAG’s nominated directors whose professionalism I have grown to respect over the last few months of extensive discussions.”

“Preparations for our domestic operations are proceeding to plan with our first Boeing 737 800NG aircraft delivered on 5 November 2020. Our crew will carry out training on the aircraft over the next 3 weeks before the CASA proving flight on 2 December 2020. We anticipate CASA approval shortly after. Five other similar aircraft will be delivered from next month to March 2021.”

“We will debut on the Sydney – Melbourne route with 3 aircraft on 1 March 2021 and will ramp up to 5 aircraft by Easter that will see flights to other capital cities. Once the initial services are well established, we aim to progressively grow our fleet to cover all the major cities in Australia.”

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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. 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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