Federal government pays Rex's debts to King Island Council

King Island ratepayers won't swallow the cost of Rex Airlines’ 2024 financial collapse, after the federal government fully cleared the local council’s outstanding aviation ledger this week.

While massive mainland debts like NSW’s Dubbo Council ($598,672) captured national headlines, King Island Council’s owed balance of roughly $9,000 has been quietly extinguished under a $4.8 million Commonwealth relief package.

The local debt, accumulated from unpaid landing fees and passenger charges prior to Rex entering voluntary administration, was covered as part of Tasmania’s $120,000 state-wide funding allocation.

The lion's share of the state's payout went to the Burnie Airport Corporation, which was reimbursed $89,722, while TasPorts received $28,709 to cover outstanding debts at Devonport Airport.

While King Island's slice is a minor sum on a national scale, recovering the funds is a vital win for the island, where maintaining remote airport infrastructure places a heavy burden on a small ratepayer base.

The federal intervention ensures local council-run airstrips are not forced to write off bad corporate debts or stall critical maintenance. It comes as US-based aviation firm Air T stabilises the carrier following its acquisition of Rex late last year, backed by a $60 million federal support package.

Federal Transport Minister Catherine King said the debt relief was designed to protect regional connectivity without penalizing local communities.

The payouts come at a critical time for local aviation, with Rex slated to scrap its King Island-to-Burnie route and its Melbourne-to-Devonport route next month, citing rising fuel costs. With the historical debt wiped clean, local focus shifts entirely to long-term route reliability and securing the island's remaining transport links to Tasmania and the mainland.