Will Regional Express investors get any of their money back or will they be wiped out?

Regional Express investors have waited more than 12 months to get an answer as to what will happen next…but they may be disappointed with the outcome. Yes, there is a buyer, but it looks like all the airline’s investors will lose all their money. With one exception.

What are the Best ASX Stocks to invest in right now?

Check our buy/sell tips

How Regional Express got to this point?

Regional Express (Rex) was founded in 2002 as kind of ‘roll up’ of a few major airlines. In the middle of the pandemic, when Virgin Australia fell over, the airline’s executives envisioned that it could ‘take Virgin’s place’ as it was uncertain that Virgin would be coming back. So it leased some 737s to service ‘Golden Triangle routes’ as in flights between Australia’s 3 major east coast cities (Melbourne, Brisbane and Sydney).

This was in addition to its regional flights, operated by multi-decade old Saab aircraft on routes that Qantas could not service for various reasons including not having small enough aircraft.

Unfortunately, Virgin did come back and gradually put itself into the best shape in it history. Finally profitable, focused on profitable domestic routes on just one aircraft type, and freshly listed on the ASX. The losses for Rex could not keep mounting forever and it entered into administration in mid 2024.

For the last 15 months, there has been much speculation as to what would happen. Would the Albanese government step in and run the airline as a public enterprise? Would the airline be ‘broken up’ and its segments being bought by various individual buyers? Or would a buyer for the whole business come out of nowhere? The latter would be the ideal scenario, but there’d be many stumbling blocks including the need to either replace Rex’s Saab fleet or find a way to keep them flying until new aircraft could be developed.

Rex is being bought by Air T

Last week, it was announced that Air T would be buying Rex. The Nasdaq-listed company is ideal, if for no other reason, because it has its own Saab 340 business (i.e. aircraft and spare parts). A deal price has not been publicly disclosed.

What we do know is that EY will receive $25m for the time it took to facilitate the deal. Virgin will receive some of its old 737s, and (according to the AFR) the Hong Kong private equity firm PAG would be repaid the $150m it spent for the whole ordeal. But other investors won’t be so lucky.

So will Regional Express investors get any money back?

Nope, EY has confirmed as such. Rex is still listed but will be delisted in the near future? What to do?

Well, obviously claim the tax loss. We’ve written a whole article about what investors can do in the scenario when companies are delisted.

As we articulated there, Rex investors cannot claim the loss as a tax deduction, but they can use it to offset (in other words reduce) capital gains that they may have made during the year.

You have to calculate a ‘net capital gain’ in your tax return which accounts for all capital gains and losses. You then include that as part of your assessable income.

That’s just about all investors can do. Yes there are rumours that ASIC may try and sue former Rex directors if it can find that the accounts they signed off on did not tell the full story, and ASIC does have that power. We are talking hypotheticals (and by no means suggesting that). And of course, just because a business fell over, it does not necessarily mean directors did anything wrong (even if sometimes they can be the cause).

Conclusion

Unfortunately, it seems ASX investors in this company will be ‘wiped out’ and not get their money back. If there is any consolation, at least the towns that only Rex serves will remain connected for the foreseeable future.