Rex warning for regional carriers

Regional Express has warned that the operating environment is "so bad" in the domestic air travel market that many regional airlines will go bust over the next two years.

The country's largest independent regional airline has steered clear of giving earnings guidance, telling shareholders that the weak economy in the first quarter indicated that its performance this year will be worse than in 2012-13 when it posted a $14 million profit.

Rex chairman Lim Kim Hai said it would not be prudent for the airline to pay a dividend because what it had experienced in the first quarter did not bode well for the rest of the year.

"Rex has always had the practice of calling a spade a spade, and the environment is really bad," he said.

"Many smaller airlines cannot survive the next two years."

Mr Lim said Rex wanted to safeguard its future by raising the level of spending in its business, just as it had done when the financial crisis struck in 2008.

"The best thing that we could do is to invest heavily because we believe that the investment can bring returns," he said.

Rex will boost its capital expenditure to $50 million this year, which will go towards the purchase of 25 Saab aircraft and a large order of spare parts.

The airline joined a long line of companies in saying it had yet to see the expected lift in economic conditions after the federal election.

Deputy chairman John Sharp renewed the airline's attack on the previous government for policies, including the carbon tax, which created "one of the most toxic environments".