The issue is fleet age. The cost will continue to rise as the...

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Starry001

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23/09/16

21:14

Post #: 19390049
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Originally posted by Darre11 ↑

Overall disappointing results as the full year underlying profit of $3 million meant that the second half of FY16 actually produced a loss of $300k given the HY16 profit was $3.3 million.

There are some good tailwinds for the year ahead which include the new routes in WA is expected to contribute circa 9% more passengers but proportionate more in revenue given higher average fares. Also fuel hedging is expected to save at least $4.7 million in FY17. However, these tailwinds are unlikely to see Rex's net profit return to pre-2010 levels (above $20 million).

Fundamentally, the problem is a lack of passengers compounded with ever increasing cost. Although passenger numbers is driven by the regional economy, I believe management's response to increasing cost by increasing fares is driving passengers away. There has been nearly a 50% decline in passengers from 2008 - 2016!

Based on the current trajectory, I don't foresee the company making an adequate return on its capital. I think the solution is to shrink the operations, optimise the network and cull routes that don't earn an adequate return of capital.

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http://chasingvalue.com.au/

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The issue is fleet age. The cost will continue to rise as the engineering costs also increase. The falling dollar does not help with part prices either.

REX Price at posting: 76.0¢ Sentiment: Buy Disclosure: Held
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The issue is fleet age. The cost will continue to rise as the...

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