Australia’s corporate regulator has launched legal action against collapsed airline Regional Express Holdings Limited (Rex) and its directors over “serious governance failures”.
The Australian Securities and Investments Commission (ASIC) said it had sought leave in the Supreme Court of New South Wales to allege Rex engaged in misleading and deceptive conduct and contraventions of continuous disclosure obligations.
ASIC said it would also allege former executive chair Lim Kim Hai was involved in Rex’s continuous disclosure breach and that Lim, John Sharp, Lincoln Pan and Siddharth Khotkar contravened their directors’ duties.
ASIC will allege Rex released a misleading ASX announcement on 28 February 2023 that it was “optimistic the Group will have positive operating profits for the full FY23 barring any further external shocks”.
Rex allegedly breached its continuous disclosure obligations by failing to disclose a material downgrade despite being aware when it issued the ASX (Australian Securities Exchange) announcement that the company was unlikely to achieve an operating profit.
Rex subsequently announced forecast a $35 million operating loss for the financial year ending 30 June 2023.
ASIC Chair Joe Longo said in a media release: “Our case will allege serious governance failures at Rex. Rex’s directors had a responsibility to take reasonable steps to ensure the company complied with the law and we will seek to hold them to account.”
Rex (ASX: REX), Australia’s third largest airline behind Qantas (ASX: QAN) and Bain Capital-owned Virgin Australia, was suspended from trading on the ASX when it entered voluntary administration on 30 July 2024.
The reasons for the collapse included the airline’s loss-making expansion from regional Australia focus into the more competitive domestic market dominated by Qantas and Virgin during the COVID-19 pandemic, along with higher fuel and maintenance costs.
Created from the merger of Hazelton Airlines and Kendell Airlines in 2002, Rex continues to operate on regional routes.
The Australian aviation landscape is littered with the wreckage of collapsed airlines which reflects the difficulty of creating a sustainable third force in the market.
The failed carriers include:
- Bonza Airlines (2024)
- Tigerair Australia (2020)
- OzJet (2006)
- Air Australia (2012)
- Ansett Australia and Impulse Airlines (2001), and
- Compass Airlines (1991 and 1993)