In summary:
At Rex’s first creditors’ meeting, administrators announced that the company’s debts totaled $500 million and it owed them to 4,800 creditors.
During the meeting, administrators said they were still investigating what was causing the company’s high level of debt.
What happens next?
The insolvency administrators are still working on the company’s books.
The insolvency administrators of the troubled regional airline Rex say the company has debts of half a billion dollars.
The airline, also known as Regional Express, was placed into voluntary administration on the evening of July 30 after it ceased its flight operations between major cities.
At the first creditors’ meeting, convened on Friday by the administrators of the management consultancy Ernst & Young (EY), it was announced that Rex’s debts total $500 million, which he owes to 4,800 creditors.
Several creditors are former employees of the airline and have been told it could take months before their claims are paid out.
A consultation process with the workforce began on 31 July and employees received their first notices of termination that same evening.
By August 2, the airline had laid off 594 employees, including 343 employees on its capital city routes, which are operated with Boeing 737 aircraft.
A further 251 employees from other parts of the company were laid off, including from the regional division, which will continue to operate.
The insolvency administrators also informed the creditors that flight operations to the capital were not profitable and would not be resumed even if a buyer was found for this business unit and all Boeing 737 aircraft were returned to their lessors.
However, the administrators are confident that Rex’s regional business will continue.
A sales process for Rex’s regional activities began on Friday, with the insolvency administrators selling the company as a fully functioning regional transporter.
The insolvency administrators had previously stated that they had been inundated with prospective buyers from several sides since Rex filed for insolvency.
Insolvency administrators are still investigating how Rex accumulated high debts
During the meeting, the insolvency administrators said they were still investigating what caused the company’s high level of debt and whether the airline would continue to operate despite its insolvency.
However, the insolvency administrators explained at the meeting that the company was having problems with the procurement of materials – including spare parts – and was suffering from a shortage of pilots. These were factors that contributed to the company’s insolvency.
A detailed creditor notice sent to employees last week revealed that EY had been asked by management to conduct an independent audit of the airline on May 9.
The document also shows that the company’s first review was presented on May 20 at a meeting attended by then-Chairman Lim Kim Hai and then-Vice-Chairman John Sharp.
Follow-up meetings took place in June and July.
The last meeting was held on July 30, where Rex’s board was presented with a final report from EY on the company’s “financial position” – which resulted in the company going into voluntary insolvency at 9:30 p.m.
The federal government has repeatedly reiterated its support so that Rex can continue to serve regional and rural communities.
Earlier this week, now-laid-off Rex employees in Brisbane, Melbourne, Sydney and Adelaide were ordered to return all their company belongings, including uniforms and access badges.
Former employees were given only two days to return their documents in person in each city, and some expressed frustration to the administration about the tight deadlines while they tried to find new jobs.
A second creditors’ meeting is expected to take place by the end of August.
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