Why the Regional Express (ASX:REX) share price is down

The impact of Sydney’s lockdown has been more significant than expected.
The post Why the Regional Express (ASX:REX) share price is down appeared first on The Motley Fool Australia. –

The Regional Express Holdings Ltd (ASX: REX) share price is facing turbulence following yesterday’s announcement of lower earnings and staff stand downs.

At the time of writing, shares in the regional carrier are trading for $1.18 – down 0.84%. By contrast, the S&P/ASX 200 Index (ASX: XJO) is 0.69% higher.

Let’s take a closer look at today’s news.

Rex lockdown disruption

In a statement to the ASX, Regional Express says its previously forecasted statutory loss of $15 million for the financial year will now be a larger $18 million. The company attributed the larger-than-expected loss to New South Wales’ ongoing lockdown to curb the spread of coronavirus. Rex says the impact of the lockdown and state border closures have “significantly impacted revenue”.

The company also admitted it did not take any measures to mitigate losses as it believed the Sydney lockdown would only be for a short duration. Losses in June, as the airline put it, “increased substantially”.

The Rex share price has dropped the last 2 days, more than likely due to this news.

Due to the losses, Rex will be implementing “temporary stand downs” of staff. The exact number of stand downs and in what departments will be announced either tomorrow or the day after.

Only last week Rex Deputy Chair John Sharp questioned the Qantas Airways Limited (ASX: QAN) decision to stand down its staff.

According to Sharp, it was premature of Qantas to stand down any staff before going through the details of the federal government’s scheme to retain airline staff. The Commonwealth will pay airlines that have a 30% downturn in revenue $750 per week per frontline staff member.

The details of the scheme have been announced, but Rex might not believe it is sufficient to retain its staff during this difficult period.

Rex share price snapshot

Over the past 12 months, the Rex share price has increased 13%. Over the same time, the ASX 200 has increased 23.8%.

Given its current valuation, the Regional Express market capitalisation is around $130 million.

The post Why the Regional Express (ASX:REX) share price is down appeared first on The Motley Fool Australia.

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More reading

Qantas (ASX:QAN) share price wobbles as rival questions staff layoffs
Is this why the Qantas (ASX:QAN) share price is struggling today?

Motley Fool contributor Marc Sidarous has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. 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.

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