Rex in hot water as ASIC claims board knew about poor sales despite positive investor briefing

A Rex Airlines Boeing B737-85R plane, registration VH-MFM, landing at Sydney Kingsford-Smith Airport as flight ZL549 from the Gold Coast. In the foreground is the airport's security fence with a warning sign not to enter. This image was taken from near Kyeemagh Beach, Botany Bay on a cold and sunny afternoon on 27 June 2024.
Edited by Travel Weekly


Rex Airlines’ board was reportedly aware of ‘bewilderingly poor’ sales and significant losses before informing investors of an expected profit for the 2023 financial year, according to allegations from the Australian Securities and Investments Commission (ASIC).

Legal documents filed in the New South Wales Supreme Court outline claims that the airline’s former chairman intended to mislead investors about its actual financial status.

ASIC has accused former chairman Lim Kim Hai, along with directors John Sharp, Lincoln Pan and Siddhartha Khotkar, of engaging in misleading and deceptive conduct, violating ASX continuous disclosure obligations.

Central to the case is an ASX statement from February 28, 2023, asserting that Rex would achieve positive operating profits for 2023, barring any unforeseen events. ASIC however argues that the airline lacked reasonable grounds for this guidance after reporting a $30.4 million loss in the first half and an additional $5.3 million loss in January.

The court documents reveal that Lim and his fellow directors failed to inform the market about Rex’s deteriorating financial condition until June 20, despite receiving multiple updates indicating the likelihood of a loss.

It is also alleged that Lim sought $10 million in funding from Asian investor PAG on April 14, 2023, citing critically low cash reserves and ‘disappointingly’ poor ticket sales.

According to media reports, subsequent emails indicated that Rex’s operations had recorded significant losses during February and March, further corroborating the allegations of misleading conduct.

ASIC states that the undisclosed information was significant enough that it would have materially impacted Rex’s share price had it been publicly available.

Following a revised guidance in June, Rex’s share price plummeted by 11.2 per cent. The airline’s regional routes are continuing with federal government support, as administrators continue to look for a buyer.

The case is set to return to the Supreme Court on April 4.

Email the Travel Weekly team at traveldesk@travelweekly.com.au

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