The Qantas factor: Rex shares hold steady despite deepening loss

Rex shares were flying steady today after the airline reported its results for FY22.

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Key points

  • The ASX 200 had a positive day of trading on Wednesday
  • Rex shares were a little more subdued after the release of the company's FY22 earnings
  • Rex reported increased revenues, but profits plunged over the past year

The Regional Express Holdings Ltd (ASX: REX) share price ended up having a flat day today, despite the company reporting its full-year earnings for the 2022 financial year.

Rex shares closed at $1.40 each at the conclusion of Wednesday's session, flat on where the company closed at yesterday, but above the $1.35 price that Rex opened at this morning.

What did the company report?

  • Group revenue total of $319.2 million, up 24.6% on FY21's $256.1 million
  • Fuel costs of $65.4 million, up from FY21's $24.8 million
  • Statutory loss before tax of $68.3 million, up from the loss of $7.2 million in FY21
  • Statutory loss after tax of $461 million, up from the loss of $3.9 million in FY21
  • No dividend declared due to operating loss.

What else happened in FY22?

It was a tough year for Regional Express, given COVID-19 lockdowns and a surging oil price making fuel more expensive.

However, the company did clock a few positive developments, with Rex launching the Brisbane leg of the 'golden triangle' of Sydney, Brisbane, and Melbourne routes late last year.

The company also received a "multimillion dollar grant" under the NSW Jobs Plus program. This is helping Rex to fund new flight simulators at its headquarters, as well as a new hangar at Sydney Airport.

Regional Express was also re-awarded a 12-year contract with Ambulance Victoria that will commence in 2024.

In a sign of the ongoing disputes between Rex and its larger rival Qantas Airways Ltd (ASX: QAN), Rex blamed the June "cessation of services to Cooma from Sydney" on "Qantas' predatory behaviour".

But Regional Express also trumpeted the new services from Melbourne to Devonport, stating it will "end Qantas' 17-year monopoly of the route".

What did management say?

Here's some of what Regional Express chair Lim Kim Hai had to say on these numbers:

Considering that COVID devastated practically three quarters of the FY and the war in Ukraine starting in February causing crude oil prices to skyrocket by over 70% during the Financial Year peaking at a near record high of A$174 per barrel in June 2022 as well as other supply shocks on the international economy, I am mildly pleased that our performance is not much worse than it is.

The operational statistics for the new Financial Year have been very encouraging and indicate that we have turned the corner.

We are continuing to see very strong bookings in August with the past week showing a 50% increase over the same period in July last month. Barring further external shocks, I am confident that the Group will return to good profitability in FY23.

What's next for Rex?

As Lim stated, the company is now eyeing a return to profitability in FY23. He pointed out that falling oil prices in recent weeks will be a boon for the company in this endeavour.

In addition, it was mentioned that "we have every reason to believe that the performance will get stronger in the coming months".

Rex share price snapshot

The Rex shares have been lacklustre, albeit market-beating, performers in 2022 thus far.

Regional Express shares are now down around 3.5% year to date. But the company is still in the green over the past 12 months, giving investors a gain of just over 13%.

The ASX airline operator has a market capitalisation of $154.2 million.

Motley Fool contributor Sebastian Bowen has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. 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 Scott Phillips.

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