The Qantas Airways Ltd (ASX: QAN) share price is down around 1% amid news that the Australian Government may step in to save Regional Express Holdings Ltd (ASX: REX) if necessary.
REX is currently in administration and is being managed by administrators who are going through a process of trying to find a saviour for the financially troubled airline.
The Australian Federal Government has already provided a loan of up to $80 million to keep REX's regional routes operating until 30 June 2025 and acquired $50 million of debt from REX's largest credit, PAGAC Regulus, earlier this year to ensure the airline could continue to operate.
What's happening with Regional Express now?
The administrators are currently working through a competitive sales process to try to find a new owner for the business.
The Federal Government has said it will "work with shortlisted bidders on what support the Albanese Government may be able to provide to maximise the prospect of a successful sale."
While the Federal Government is not a bidder in the upcoming sales process, and it wants to see a successful market-led outcome, it's open to stepping in to ensure the airline continues operations for regional Australians. The Prime Minister of Australia, Anthony Albanese, said in a statement:
…in the event there is no sale, the Albanese Government will undertake necessary work, in consultation with relevant state governments, on contingency options, including preparations necessary for potential Commonwealth acquisition.
The Albanese Government is also providing further support through a waiver of the "use it or lose it" test for Rex regional flight slots at Sydney Airport, which will ensure its access to those slots until 24 October 2026.
These actions make clear the Government's ongoing commitment to maintaining access to aviation services for regional and remote communities, and recognises the critical role of the Rex network to local economies.
Albanese then said:
Regional Australians deserve access to quality and crucial regional aviation services.
We are working collaboratively with the administrators of REX to ensure that regional services continue beyond June 2025, including looking at what support the Commonwealth can provide.
Regional Australians can be assured that our Government will continue to fight to ensure these regional airfares remain available.
Why is this affecting the Qantas share price?
On a day when the S&P/ASX 200 Index (ASX: XJO) is up 0.3%, the fall of close to 1% for the Qantas share price is quite noticeable.
Share prices are generally a reflection of the market's expectations of the ability of the company's future profit. If REX went out of business, it would mean less competition for Qantas, which could help both revenue and profit for the airline.
However, if the government stepped in to save REX, Qantas' profit may not be quite as high as expected by some investors in the longer term.
The broker UBS currently expects Qantas to make a net profit of $1.64 billion in FY25 and, in the longer term, $2 billion of net profit in FY29.
Qantas share price snapshot
In the past 12 months, the Qantas share price has risen more than 60%.
