fleet saab340, page-8

Basically, the issue of aging aircraft and fleet replacement is not immediate concern for management. Over the long term, yes they will have to ultimately choose as the Saabs are no longer produced and by then I suspect the new engines will be miles ahead in terms of fuel consumption, so changing fleet may have financial merit. As to Capex, being a monopoly they might get away with 2nd hand planes and may initially lease the fleet with options to buy them at the end (i.e. current arrangement with the Saab). Being conservative, this would probably spread capex over a longer term and reduce the need for debt.

I would agree that as long as good return of capital is maintainable then it doesn't matter when they pay the dividends. However, Rex has yet to get a return on the capital spent on the AAPA flying school. We should get a clearer picture on this when the 30 June 2012 financials are released.

I see the main risk for Rex being its exposure to the regional economy. It hasn't done well and it is showing in the low passenger numbers and load factors. If the regional economy picks, expect the stock to move higher towards the $1.30 mark.