Aviation

Labor senator calls for corporate watchdog to investigate Rex

Labor Senator Tony Sheldon has called for the Australian Securities and Investments Commission (ASIC) to investigate Regional Express (Rex) for possible breaches to the Corporations Act.

Rex is facing a possible probe from ASIC after deputy chairman John Sharp revealed to The Australian Financial Review plans for the airline to expand capital city services.

This occurred without the airline first alerting the ASX – a requirement for the release of information that could have a material effect on company shares – prompting the ASX to halt trading in the company’s shares for breaking listing rules.

Following Rex’s exit from its earlier trading halt, after Sharp revealed the airline’s planned domestic route expansion, the company’s shares rose 32 per cent to $1.19. The company’s shares currently sit at $1.06.

Senator Sheldon is now calling for ASIC to investigate.

“Rex’s plans to expand into markets in direct competition with Qantas and Virgin, after having received a disproportionate share of government financial support, are inappropriate and exploitative,” Sheldon said, as reported by AFR.

“Their failure to inform the ASX of these plans per the ASX listing rules flies in the face of Australian corporate standards.

“If Rex or any officer of Rex has contravened the Act, I further request that ASIC take appropriate enforcement action against them.

“A reasonable person would expect that the information detailed by Mr Sharp, in his interview with [AFR] in relation to Rex’s expansion plans, would have a material effect on the price or value of Rex’s securities.”

ASIC declined to comment when contacted by Travel Weekly, advising it does not comment on investigations, or whether it has chosen to undertake an investigation.

Rex last week apologised to the ASX, saying it did not believe information about possible city operations would alter the price of its shares.

“Rex has always tried to ensure that any material information is disclosed to the ASX prior to the release to the general public,” it said.

“In this particular instance, Rex believed that information about possible city operations was not sufficiently definitive to constitute material information.

“Rex has made many announcements of contracts worth several hundreds of millions [of dollars] with barely a ripple on the share price. Given how the share price reacted to the news, it is evident that our judgement call was erroneous.

“We wish to reassure ASX that Rex will err on the side of caution in the future.”

Rex’s ASX blunder isn’t the only thing keeping the regional carrier in the headlines, with executive chairman Lim Kim Hai recently making some scathing comments on Virgin Australia, telling the AFR the carrier is headed for another financial disaster under new ownership unless it is totally restructured.

Among the measures, Lim told AFR that Virgin’s administrators must rewrite the EBAs, restructure the aircraft leases, cancel an order for Boeing 737 MAX aircraft and convert all debt into equity while the company is insolvent.

However, Deloitte responded by claiming it is running an “efficient and thorough” administration process of Virgin Australia, and ensuring a strong future for the carrier and what was best for the aviation industry.

“We are running an efficient and thorough process, which is ultimately designed to refinance and restructure the business to preserve as much value as possible,” a Deloitte spokesman told the AFR.

“All aspects of the cost base of the business will be taken into consideration, and we are working consultatively with management and other stakeholders, including unions, throughout this process.

“Our intention is to get the business out of administration as quickly as possible, with new owners, and our timeline reflects that. This is what is best for the business, its people and the aviation industry as a whole.”


Featured image: iStock/davidf

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