The Rex (ASX: REX) share price has gained ground by more than 27% in December and smashing its 52-week high today. Here’s why.
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The Regional Express Holdings Ltd (ASX: REX) share price is soaring again today, up 13.24 to $1.94 and smashing its 52-week high.
Let’s take a look at what’s lifting the Rex share price this month.
What happened in December?
Shares in the airline have gained ground by more than 27% in December, following Rex’s announcement that it will start flying the Sydney-Melbourne route in March 2021.
The airline plans to extend that service to Brisbane by Easter, effectively opening the ‘golden triangle’ routes for the company and putting Rex’s business head-to-head with the major airlines.
The Sydney-Melbourne route was the second busiest domestic route in the world prior to the coronavirus pandemic, with the Seoul-Jeju route in South Korea taking the number one spot.
The Sydney-Melbourne-Brisbane routes meanwhile, are collectively known as the ‘golden triangle’, as they are the busiest and most lucrative domestic routes in Australia.
Analysts see the entry of Rex into the domestic capital cities market as one of the biggest shake-ups in Australian aviation history.
To celebrate the launch of the new route, Rex has offered 100,000 promotional fares for its Sydney-Melbourne services. Sales in the special fares started on 2 December, with prices from $79 for travel within 12 months.
More about Rex Airlines and its competition
Rex has been in business for 18 years, founded by former Ansett Australia employees who acquired Hazelton Airlines and Kendell Airlines and merged the two companies into Rex Airlines.
In the early years, Rex only operated a small fleet of turboprops to provide essential regional connectivity.
The recent announcement will pit Rex’ business against major low-carrier competitors, as its prices are cheaper than a Virgin Airlines (which is currently delisted from the ASX) flight at a similar time slot.
The post-administration Virgin 2.0 has said that it plans to target ‘value-conscious’ customers after a strategic review of its business-class offering, inflight Wi-Fi and entertainment.
Rex’ prices are more in line with Qantas Airways Limited (ASX: QAN)’s budget offshoot Jetstar, which also announced its own sales promotion billed as ‘the biggest airfare sale of the year’, two weeks ago. Jetstar’s popular ‘Return for Free’ sale went live on 17 November, with 400,000 return trips across 51 domestic routes up for grabs.
About the Rex share price in 2020
The Rex share price has gained 60% this year. In March, the share price dropped more than 60% after the COVID-19 lockdown closed most of Australia’s state borders.
Rex was severely affected by the lockdowns in the first half of the year, and received $62 million in government aid. It also signed a deal with the private Asian investment company PAG for $150 million to fund its expansion, which could see PAG eventually own half of Rex.
Rex currently commands a market cap of $187 million.
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Motley Fool contributor Eddy Sunarto has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.