Rex's failure primarily stemmed from the unsustainable financial burden of its capital city airline operation, which incurred significant weekly losses.
The core issue was the considerable expense of maintaining its intercity flights. This particular segment of Rex's business proved to be a massive financial drain, reportedly costing the airline an alarming $1 million each week to keep its aircraft in the air. This unsustainable expenditure made the operation financially unviable, directly leading to its failure in this specific venture.
The Impact of Unprofitable Operations
The heavy financial bleeding from the capital city routes necessitated immediate and decisive action to mitigate further damage. The situation was described as needing to "cauterise the wound," indicating an urgent need to halt the severe losses and prevent them from impacting the broader company. While the full implications for Rex's 2,000-strong workforce outside of Mascot are not detailed, such a significant operational retreat undoubtedly had a profound impact.
- Primary Cause: Excessive operational costs incurred by its capital city airline segment.
- Financial Strain: The operation was losing a critical $1 million every week.
- Consequence: The necessity to cease or scale back these unprofitable services to stem financial losses.
This specific operational failure highlights the intense challenges and financial risks associated with expanding into highly competitive aviation markets, particularly when new routes fail to achieve profitability and instead become continuous liabilities.
