Regional carrier Rex will get an overhaul after its administrators won more time to entice a buyer despite a four-month search failing to find a long-term lifeline for the struggling airline.
Administrators were appointed to five companies in the Rex group in July as the business sunk into about $500 million in debt.
Buoyed by an $80 million loan facility from the federal government, the airline is still trying to secure a buyer despite administrators from EY previously projecting a rosy outlook.
Partner Samuel Freeman told a first meeting of creditors in August there had been "quite some interest" in the airline and some parties had already executed disclosure agreements.
But more than four months later, administrators are still trying to lock in a buyer and have provided a more downbeat assessment of the prospects.
They were forced to go to the Federal Court to postpone a second meeting of creditors until July 2025, with permission granted in mid-November.
"Based on the evidence before me, it was apparent it is presently unlikely that the administrators will be able to sell the regional business," Justice Brigitte Markovic said in a judgment published on Friday.
In August, interested bidders were provided with a "Rex 2.0 discussion pack" setting out a number of initiatives administrators suggested would make the airline's core regional business more "commercially desirable".
Several key challenges to the business needed to be resolved before a binding sale could occur, Justice Markovic noted.
Rex would have to be wound up if the next creditors' meeting was not postponed as requested, she said.
The meeting will include a vote on whether to return the Rex companies to the existing board, place them under a deed of company arrangement or liquidate.
As well as the regional business, administrators have been unable to find a buyer for the airline's pilot academy.
But they have successfully sold Rex's aero-medical arm Pel-Air Aviation, shares in fly-in-fly-out charter business National Jet Express and two plots of land near Sydney Airport, one of which houses a flight simulator.
Justice Markovic allowed the second creditors' meeting to be postponed after being told more time was needed to improve the regional business and enhance the company's assets.
The improvements were expected to yield a higher sale price for the airline, the court was told.
While Rex permanently grounded its Boeing 737 fleet on major metropolitan routes, its regional flights have continued because of ongoing funding from private equity firm PAG Asia Capital.
The airline struggled since an aggressive move in 2021 to compete on key capital-city routes against majors Qantas and Virgin Australia.
Formed in 2002, Rex is Australia's largest independent regional airline and makes about 1050 flights a week on 45 routes.
