Our heart is in the country Lead Manager & Underwriter TRICOM EQUITIES PROSPECTUS Regional Express Holdings Limited ACN 099 547 270 TABLE OF CONTENTS Important Notice 1 Letter From The Chairman 3 1. Key Dates & Offer Statistics 6 2. Investment Highlights 8 3. Summary Of The Offer 12 4. The Australian Aviation Industry 22 5. Business Overview 30 6. Investment In Pel-Air 56 7. Directors and Senior Management 68 8. Financial Information 80 9. Risk Factors 112 10. Investigating Accountants’ ReportsReport 118 11. Additional Information 128 Glossary 165 1 Regional Express Holdings Limited IMPORTANT NOTICE THIS IS NOT INVESTMENT ADVICE Prospectus to be examined by market – YOU SHOULD SEEK YOUR OWN participants prior to the raising of FINANCIAL ADVICE funds. Any Applications received THIS PROSPECTUS The Offer does not take into during the Exposure Period will not The Offer contained in this account the investment objectives, be processed until after the expiry Prospectus is an invitation to apply financial situation and particular of that period. No preference will for Shares in Regional Express needs of any investor. Before be conferred on any Applications Holdings Limited ACN 099 547 270 deciding to invest in the Shares received during the Exposure (the Company or Rex). potential investors should read the Period. This Prospectus will be entire Prospectus. In particular, in made generally available during the This Prospectus is a replacement considering the prospects of the Exposure Period on the Company’s prospectus dated 29 September 2005 Company, it is important that you website, www.rex.com.au. and was lodged with the Australian consider the risk factors that could Securities & Investment Commission affect the financial performance ELECTRONIC PROSPECTUS (ASIC) on that date. This Prospectus of the Group. You should carefully This Prospectus is available in replaces the prospectus issued by consider these risks in light electronic form on the Company’s the Company dated and lodged of your particular investment website, www.rex.com.au. with ASIC on 23 September 2005. objectives, financial circumstances The Offer constituted by this ASIC and Australian Stock Exchange and investment needs (including Prospectus in electronic form is Limited (ASX) take no responsibility financial and taxation issues) available only to residents in Australia. for the contents of this Prospectus. and seek professional advice Persons who access the electronic No person is authorised to provide from your accountant, financial version of this Prospectus should any information or to make any adviser, stockbroker, lawyer or ensure that they download and read representation in connection other professional adviser before the entire Prospectus. A paper copy with the Offer described in this deciding whether to invest. Some of this Prospectus is available to any Prospectus which is not contained of the risk factors that should be person in Australia, free of charge, by in this Prospectus. Any information considered by prospective investors calling the Investor Hotline on 1300 or representation not in this are set out in Section 9. You 799 367 (within Australia) during the Prospectus may not be relied on should consider the assumptions period of the Offer. as having been authorised by the underlying the financial forecasts Company in connection with and the risk factors that could affect FOREIGN JURISDICTIONS the Offer. the financial performance of the The distribution of this Prospectus Company. The price of Shares may (including an electronic copy) in No Shares will be sold or issued rise or fall according to a number jurisdictions outside Australia may on the basis of this Prospectus of factors. be restricted by law. Persons who later than 13 months after the come into possession of it should Prospectus Date. EXPOSURE PERIOD seek advice on and observe any such The Company will apply to ASX for The Corporations Act prohibits restrictions. Any failure to comply listing and quotation of the Shares the processing of Applications with such restrictions may constitute a on ASX within seven days after the during the Exposure Period. The violation of applicable securities laws. Prospectus Date. Exposure Period is to enable the Regional Express Holdings Limited 2 This Prospectus does not constitute behalf) will collect, hold and use purpose, you should contact the an Offer in any jurisdiction in which, that personal information in order Investor Hotline on 1300 799 367. or to any person to whom, it would to assess your Application, service Under the Privacy Act 1988 (Cth), not be lawful to make such an Offer. your needs as an investor, provide you may request access to your the facilities and services that you personal information held by (or on No action has been taken to request and carry out appropriate behalf of) the Group or the Share register or qualify this Prospectus administration. Company and tax Registry. You can request access to or to otherwise permit a public law also requires some of the your personal information by calling offering of Shares outside Australia. information to be collected in the Investor Hotline on 1300 799 In particular, this Prospectus has connection with your Application. If 367 or writing to the Company not been registered under the you do not provide the information through the Share Registry as United States Securities Act of 1933 requested, your Application may follows: (Securities Act), and Shares may not be able to be processed. not be offered or sold in the United ASX Perpetual Registrars States or to, or for the account or The Company and the Share Limited benefit of, a U.S. person (as defined Registry may disclose your personal GPO Box 1736 in Regulation S of the Securities information for purposes related Melbourne VIC 3001 Act). Shares may be offered in a to your investment to members jurisdiction outside Australia where of the Group and to their agents You can obtain a copy of the such an Offer is made in accordance and service providers including Company’s privacy policy online at with the laws in that jurisdiction. those listed below or as otherwise the Company’s website, If you are located in jurisdictions authorised under the Privacy Act www.rex.com.au. outside Australia you should refer to 1988 (Cth): Section 3.13. • the Underwriter in order to ENQUIRIES assess your Application; For further information in relation FINANCIAL INFORMATION to the Offer, please call the Rex • the Share Registry for ongoing All financial amounts contained Investor Hotline on 1300 799 367 in administration of the register; in this Prospectus are expressed Australia. The Company’s Investor and in Australian currency unless Hotline will be open from 8.30am • the printers and the mailing otherwise stated. Any discrepancies until 5.30pm AEST, Monday to house for the purposes of between totals and sums of Friday until the end of this Offer. components in tables contained in preparation and distribution this Prospectus are due to rounding. of holding statements and for DEFINITIONS AND handling of mail. INTERPRETATION PRIVACY If you become a Shareholder, your A number of terms and The Application Form accompanying information may also be used abbreviations used in this this Prospectus requires you to or disclosed from time to time Prospectus have defined meanings provide information that may to inform you about the Group’s which appear in the Glossary. be personal information for the products or services that the Group All references to times in this purposes of the Privacy Act 1988 thinks may be of interest to you. Prospectus are to (Sydney) (Cth) (as amended). The Company If you do not want your personal Australian Eastern Standard Time. (and the Share Registry on its information to be used for this 3 Regional Express Holdings Limited LETTER FROM THE CHAIRMAN Dear Investor, On behalf of all the Directors, it is with great pleasure that I invite you to be a shareholder of Rex. Whilst Rex is only three years old, our roots, culture, practices and commitment go well back to the 1950s – the ‘dawn’ of regional air services in Australia. We are the result of a merger of Hazelton and Kendell – two successful regional airlines. We inherited from these great aviation pioneers, Max & Laurel Hazelton and Don & Eilish Kendell, the conviction that our ‘heart’ is in the country and that by providing reliable services, fairly priced tickets and most importantly warm country hospitality, a regional air service can and will grow and prosper. Since August 2002, Rex has lived this philosophy and the bush has embraced the airline as its own, making Rex one of the fastest growing of Australia’s major airlines, with passenger numbers growing 75% since our first year of operations in FY 02/03. Rex now carries over a million passengers on some 50,000 flights annually, resulting in net profit after tax of $11.3M on the back of $137.1M in revenue. This outcome represents one of the fastest and most dramatic transformations seen in Australian aviation. Today, Rex’s profit as Regional Express Holdings Limited 4 a percentage of revenue is comparable to the most profitable airlines worldwide. But beyond just the financial figures, I am particularly gratified by Rex’s ability to distinguish itself in both operations and customer satisfaction: • Rex has the best On Time Departure record of all major Australian carriers operating out of the very congested Sydney airport where half of Rex’s operations are based; • Rex received the highest score for customer satisfaction out of four airlines surveyed (Rex, Jetstar, Qantas and Virgin Blue) in a survey published by Choice magazine in April this year; and • Rex was awarded a 3-year extension to its Air Operator Certificate and Certificate of Approval by CASA in 2004. These snapshots give a good preview of what Rex is capable of.