The Australian aviation could be heading for a major overhaul in 2020 because of the coronavirus pandemic.
At present Virgin Australia Holdings Limited (ASX: VAH) is in administration after failing to gain the required financial support to keep its operations running.
While there are a number of suitors rumoured to be interested in taking over the struggling airline, if it fails to find a buyer it won’t necessarily mean Qantas Airways Limited (ASX: QAN) has the market to itself.
This morning Regional Express Holdings Ltd (ASX: REX) confirmed reports that it is looking into the feasibility of commencing domestic airline operations.
In response to the news, the regional airline operator’s shares rocketed 45% higher this morning.
What did Regional Express announce?
Regional Express revealed that it has been approached by several parties that are interested in providing the equity needed for it to start domestic operations in Australia.
The preliminary estimate of equity required is in the vicinity of $200 million, though the structure of any potential equity raising is yet to be determined.
The company’s board is now exploring this opportunity and has begun talks with potential equity partners. At this point, the board believes that with sufficient capital injection the start of domestic operations would be a particularly compelling proposition.
Though, it warned that if the company were to go ahead with the launch, it would take some time before the first flights took off. It intends to make a decision within the next eight weeks, with operations expected to commence on March 1 2021 if it chooses to go ahead with it.
The Qantas share price is pushing higher today despite the news. It would appear as though shareholders are not overly concerned by the potential competition from Regional Express.
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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.
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