Alliance Aviation says it is working to secure more non-mining related work as the charter and fly-in/fly-out operator swung to a first half loss after writing down the carrying value of its fleet in response to changing market conditions.
The company reported a net loss of $25.8 million for the six months to December 31 2014, compared with net profit of $6.5 million in the prior corresponding period.
The statutory figure included a $41.4 million impairment charge on the carrying value of its aircraft fleet.
“This charge is a product of the slowing economic conditions, particularly in the resources industry,” Alliance said in its first half accounts released on Thursday.
When the impairment charge and other one-off items were excluded, Alliance said underlying net profit after tax was $6.3 million, down 11 per cent from $7.1 million in the prior year.
Alliance said any savings from lower fuel prices were typically passed through to its contract flying customers.
The company expected the 2014/15 full year underlying net profit to be in the vicinity of $13 million, compared with the 2013/14 result of $10.9 million.
On December 23, Alliance flagged two Fokker 100 and one Fokker 50 aircraft would be leaving by March 31 in response to the changing schedules of its customers and the volatility in the resources and energy sector, reducing its fleet to 24 aircraft by the end of 2014/15.
The company also shed 32 staff during the first half of 2014/15, with further jobs to go in the current half through natural attrition, early retirement and leave without pay.
More than 90 per cent of Alliance’s $105 million in revenue in the first half of 2014/15 was from long term FIFO contracts with blue chip established mines currently in production, which the company described as the “foundation of a business which has established itself as a resilient and long term flexible business”.
However, the company was seeking to broaden its revenue base and identify opportunities beyond FIFO.
To that end, it recently secured a four-year contract to operate aircraft in Australia and New Zealand for US-based tour operator Tauck.
Alliance said on January 20 one aircraft was currently based in Melbourne, having started flying between the Victorian capital and Uluru, Cairns and Sydney, while a second aircraft commenced operations based out of Auckland in January, with flights between Wellington, Blenheim and Te Anau.
“Whilst Alliance remains committed to its main strategy of long term contracts with top tier mines which are in production, Alliance continues to develop ways to diversify its income, both in its customer base and geography,” the company said.
“The directors consider that the existing long term and material contracts underpin the financial performance of Alliance. These contracts have an average remaining life of 2.7 years.
“The company still has capacity to take on further work without significant additional investment in aircraft.”
No dividend was declared.
Alliance shares were down 3.5 cents, or 6.6 per cent, at 49.5 cents in afternoon trade.