Alliance Aviation’s OZ Minerals contract to end in August

A file image of an Alliance Fokker 50 at Hobart Airport. (Rob Finlayson)
A file image of an Alliance Fokker 50 at Hobart Airport. (Rob Finlayson)

Alliance Aviation Services says its contract with OZ Minerals to fly workers to the miner’s copper/gold Prominent Hill site in South Australia will end in August.

The company said in a statement to the Australian Securities Exchange on Tuesday that the end of the contract on August 11 2017 would have no impact on its 2016/17 full year financial results.

“The contract also provides Alliance with a significant exit fee to further offset any future financial impact,” Alliance said.

“The revenue arising from the OZ Minerals contract during the last 12 months was 5.8 per cent of total revenue and had been forecast to reduce significantly in FY18.”

In February, the charter and fly-in/fly-out (FIFO) operator reported net profit after tax of $8.7 million for the six months to December 31 2016, up 77.5 per cent from $4.9 million in the prior corresponding period. Revenue grew 10 per cent to $100.53 million.

Alliance is in the midst of a transition into a “broad-based aviation business” that encompasses tourism, aircraft sales, wet and dry leasing and spare parts sales, as well as its traditional long-term contract flying for the mining and resources sector.

To that end, Alliance has purchased 21 Fokker aircraft from Austrian Airlines to build up its inventory of spares for the out-of-production aircraft, secured more non-mining work such as a four-year contract to operate aircraft in Australia and New Zealand for US-based tour operator Tauck and reduced costs through the outsourcing of heavy maintenance work to Europe.

The company has also applied to the competition regulator for approval to form charter partnership with Virgin Australia Regional Airlines (VARA), which would allow the pair to work together on joint tendering for corporate FIFO contracts. However, the Australian Competition and Consumer Commission (ACCC) in December issued a draft determination proposing to reject the application.

In response, VARA and Alliance Airlines have told the ACCC they were willing to have the competition regulator monitor their charter operations in an effort to secure approval for a proposed partnership.

The ACCC said it had extended the deadline for considering the application until May 31 2017.

Figures from the Australian Bureau of Infrastructure, Transport and Regional Economics (BITRE) showed the number of charter passengers fell eight per cent in calendar 2016 amid a decline in resources-related activity, while the number of charter aircraft trips dropped 12.6 per cent.

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