Rex shrugs off rising oil Costs report lift in first half net profit

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Regional Express Saab 340B aircraft at Cairns. (Seth Jaworski)

Regional Express (Rex) executive chairman Lim Kim Hai says the airline has “ bucked” the worldwide trend to post a rise in net profit amid higher oil prices and geopolitical tensions.

{The company|The organization|The business} said net profit {for the|for that|for your} six months to December 31 2018 came in at $9. 8 million, an improvement {of 7|of seven}. 7 per cent from $9. 1 million in the prior corresponding period.

Revenue was up 8. 5 per cent to $163. 8 million, Rex said in a regulatory filing {to the|towards the|for the} Australian Securities Exchange (ASX) on Wednesday.

“ This period was particularly difficult with fuel prices skyrocketing and with the sharp slowdown of economic activity from December due to the Sino-US trade war, ” Lim said in a statement.

“ I am pleased to report that Rex has bucked the worldwide airline trend of steep decline in profitability. ”

Profit before tax increased 2 . 9 per cent to $14. 2 million.

Global oil prices had a volatile 2018. In October, Brent Crude Oil reached four-year highs of {close to|near to|near} US$86 per barrel as tensions in the Middle East {and the|as well as the|plus the} United States imposition of sanctions on Iran sent jitters through commodities markets.

However , crude then began steady retreat to its lowest level in more than 12 months at about US$62 a barrel in December as {fears of|anticipation of|concerns over} reduced supply from the Iran sanctions proved overblown.

At February 22 2019, the International Air Transport Association (IATA) jet fuel price monitor was up about 1 . 8 per cent from a year ago.

The airline group said its total fuel bill for the 2018/19 first half jumped by more than half to $23 million, compared with $15. 2 million in the prior corresponding period.

Looking ahead, the airline group said its fuel needs {for the|for that|for your} second half of 2018/19 was fully hedged when Brent Crude oil was below US$60 a barrel.

Lim said this would {translate into|lead to} a $2. 3 million reduction in the fuel bill for the second half, {compared with|in contrast to|compared to} the first half.

During the half, Rex began flights between Perth and Canarvon and Monkey Mia, two West Australian-Government regulated routes that it won the tender {to operate|to work|to use} .

{The start of|The beginning of} those services, among {other factors|elements}, led to a 4. 8 per cent increase in passengers carried during the half, compared with {the prior|the last} corresponding period.

Capacity, measured by available seat kilometres (ASK), rose 1 . 0 per cent, while average load factors, a measure of how full the flights are, rose 4. 3 percentage points to 64. 2 per cent.

“ This is a really good sign, ” Rex deputy chairman John Sharp said {during the|throughout the|through the} airline’ s first half results presentation on Wednesday.

“ Each flight that takes off is carrying more passengers {and therefore|and for that reason|and thus} more revenue is being generated. ”

Rex said the average fare rose $6. 40, or three per cent, to $221. 00.

In terms of the fleet, Rex said it took delivery of one Saab 340B+, brining the total number of Saab 340s in the airline group to 58 aircraft.

Meanwhile, the company said {it had|completely} fully repaid the mortgage on 15 aircraft, meaning it now only had two aircraft on lease.

Looking ahead, Rex said conditions were too uncertain to offer a “ reliable profit forecast”, {with the|using the|with all the} likelihood of business conditions {slowing down|reducing|slowing} ahead of the likely federal election in May and should the United States and China fail to reach a trade agreement.

“ The board has grounds to believe that if trading conditions do not deteriorate further, the group could still achieve profit growth for the full financial year, ” Rex said.

In November, Sharp told shareholders at the company’ s annual general meeting it “ cautiously confident that the group will still be able to turn in at least double-digit growth {for the|for that|for your} new financial year if fuel prices remain at today’ s level”.

At the time Brent {crude oil|commodity future trading} prices were at about US$62 a barrel. Currently, it sits at about US$65 per barrel.

{The company|The organization|The business} declared an interim dividend of four cents per share, fully franked.