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

The Regional Express Holdings Ltd (ASX: REX) share price is soaring higher. We take a look into what the company announced to the ASX.

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The Regional Express Holdings Ltd (ASX: REX) share price is soaring. At the time of writing, the regional airline operator’s shares are swapping hands for $1.34 apiece, up 4.2%.

This comes after the company provided a business update on its operations for the FY21 period.

How is Regional Express performing so far?

Investors appear upbeat on the company’s progress, sending Regional Express shares on the rebound from its 6-month low.

In its announcement, Regional Express advised that overall demand across its business is sitting at 60% from pre-COVID levels. However, some states in Australia are performing better than others, with Queensland and Western Australia taking the lead.

The company noted that it’s carefully expanding its regional network with capacity growth roughly 5% ahead of forecasted demand. As a result, total capacity stands around 35% of what was it was before the pandemic hit the aviation industry.

In a bid to invigorate demand, Regional Express has added new regional routes in competition with rival company, Qantas Airways Limited (ASX: QAN). Operations such as the Coffs Harbour and Port Macquarie route commenced in late March this year. Interestingly, these two regional centres account for around 40% of the total number of passengers in Regional Express’ entire network.

Furthermore, the company revealed it is looking at entering new domestic markets that are monopolised by Qantas. Recently, Regional Express introduced new $39 fares between Sydney and Melbourne to challenge its bigger opponent, Qantas.

Moving on to the financial side, Regional Express stated its currently operating at a slight loss on current demand levels. This is due to the closing of the JobKeeper program as well as a significant drop in federal government assistance.

The company said that it is hopeful that demand will increase in the short-term, enabling operations to return to profitability.

Although Regional Express didn’t specify, it revealed that its cash position has increased over 1,000% when compared to March 2020. This is attributed to strong advanced bookings on 5 new domestic routes and two regional routes.

FY21 is projected to be breakeven for the company, despite the aviation sector still navigating through the pandemic.

About the Regional Express share price

In the last 12 months, Regional Express shares have climbed close to a 50% gain. However, year-to-date performance sits almost 40% below.

On valuation grounds, Regional Express has a market capitalisation of roughly $144 million, with approximately 110.1 million shares on issue.

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Motley Fool contributor Aaron Teboneras 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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