REX flies into political storm

Qantas’ (QAN) results have overshadowed the airline sector, but Region Express Holdings’ (REX) profit announcement is bound to raise some eyebrows.

It’s not so much that the regional airline operator posted a 45% plunge in net profit to $14 million for the year ended June 2013 or that it’s shares took a 4.6% nosedive this afternoon to $1.14, but the fact that it actually pinned its financial performance to a Coalition victory at the upcoming federal election.

Management said its outlook will dim if Labor wins another term but will improve slightly if Tony Abbott takes over the prime ministership.

It is very unusual for a publically listed company to appear to back one side of politics over another, but in REX’s case it is even more surprising.

For one, REX competes for government contracts (such as a defence force contract for target towing) and taking sides could hurt its ability to win future work.

REX’s management team is also largely made up of Singaporeans and citizens from that island nation are arguably one of the most apolitical bunch in the world thanks to years under Lee Kwan Yew’s rule as the country’s longest serving prime minister.

It won’t surprise shareholders that REX has declined to give any sort of guidance for 2013-14 except to say that the volatile economic and political conditions, and swings in the currency and fuel costs make it impossible to give any sort of accurate profit forecast.

But management did note that the carbon tax has added $2.4 million, or around 7%, to its fuel cost.

REX is part of the Uncapped 100.