Ex-transport minister, directors allegedly kept market in the dark about airline’s dire straits

Rex Airlines directors, including a former federal transport minister, knew the failed airline was publishing an “unreasonable and unsupportable” profit forecast before reversing course and revealing a $35 million loss in 2023, lawyers for the corporate regulator told a court on Monday.

In opening argument before the NSW Supreme Court, ASIC’s barrister said then-executive chairman Lim Kim Hai was aware Rex faced an operating loss in February 2023 but instead authorised a statement from Rex saying it was “optimistic the group will have positive operating profits” for the fiscal year.

Barrister Michael Borsky, for ASIC, told the court that “it was plain that the guidance was unreasonable and unsupportable, and ought to not be made, and ought to be withdrawn or corrected well before it was”.

ASIC is arguing that Rex breached its obligations to keep the market informed, and that Lim failed to take steps to correct the announcement made in February 2023.

Three of Rex’s board members also knew that when the company issued a positive view of the company’s finances in the February 2023 ASX announcement, it was unlikely to achieve an operating profit, Borsky argued.

The announcement said Rex was “optimistic the group will have positive operating profits for the full FY23 barring any further external shocks”, a reference to the aftermath of the COVID crisis that had caused disruptions and losses across the aviation sector.

Directors John Sharp AM, Lincoln Pan and Siddharth Khotkar failed to take steps to reveal Rex’s true financial position that it was unlikely to have positive operating profits for the year to June 30, 2023, the regulator alleges.

Sharp, a former Nationals MP, served as minister for transport in the Howard government in 1996-97.

The former directors are defending the allegations.

Borsky told Justice Ashley Black that from mid-April 2023 to mid-May 2023 the position of the defendants “becomes more difficult” because there was no suggestion in the minutes of meetings “that any one of them proposed for consideration any correction” on the guidance that had been in the market since the end of February.

On June 20, 2023, Rex announced a downgrade and forecast a $35 million operating loss for the financial year ending June 30.

In July 2024, Rex tipped into administration with $500 million in debt. It was delisted from the ASX in September 2025.

The Albanese government stepped in to offer assurances that the carrier, which provided crucial links to far-flung communities, would continue to operate while a buyer was found. The government provided up to $80 million in loans to keep Rex’s regional routes running, while taking $50 million of debt from Rex’s largest creditor, PAGAC Regulus Holdings Ltd.

After a global search for a suitor, US-based Air T, a regional carrier, was named as the buyer for Rex, with the government becoming the principal secured creditor.

Directors said they were in negotiations with “a major Australian domestic mainline operator” to “sell or transfer the loss-making domestic business” operated by Rex, when the insolvency occurred, a report by voluntary administrators EY in November said.

The administrators said a key cause of Rex’s failure was a shortage of pilots and supply chain problems, particularly for engine maintenance components, which led to suboptimal use of its fleet.

An inability to continue servicing its core regional markets, because of the readiness of its fleet, undercut Rex’s ability to stay afloat.

At the same time, the administrators blamed Rex’s decision to enter a “competitive domestic market to service the metro flight routes between major cities with an inability to secure frequency”.

In 2023, Rex blamed a lack of access to competitive slots for take-off and departure at Sydney, raising concerns of so-called “slot-hoarding” by larger rivals Qantas and Virgin.

Rex has been contacted for comment on the ASIC case. The case continues.

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