Alliance Aviation Services managing director Scott McMillan says the benefits of the proposed partnership with Virgin Australia should start flowing through later in 2016/17.
In September, Virgin Australia Regional Airlines (VARA) and Alliance sought Australian Competition and Consumer Commission (ACCC) approval to work together in the charter market on joint tendering for corporate fly-in/fly-out (FIFO) contracts.
The pair’s application said the proposed charter alliance would allow them to compete more effectively against the “one-stop shop” offering from Qantas, including offering through check-in on multi-leg itineraries featuring both regular public transport (RPT) and charter flights.
“This is a complimentary partnership for both operators, with Virgin having a significant network, strong brand presence and distribution and Alliance being specialists in regional and remote operations of aircraft in the sub-100 seat market,” McMillan told shareholders at the company’s annual general meeting on Thursday in prepared remarks.
“The benefits of this partnership will not be seen until the second half of this financial year.”
In addition to the joint-bidding for FIFO contracts, McMillan said Alliance also supported Virgin’s schedule and fleet strategy with wet lease operations.
Alliance also provided support for Virgin’s engineering needs with parts and aircraft “either as an outright sale or lease in the future”, he said.
The ACCC was currently considering the application.
In terms of market conditions, McMillan said the outlook was stable.
“Flying activity in the first three months of the year was a little slower than anticipated; however contributions from new activities are better than anticipated,” McMillan said.
“Accordingly, the directors maintain a stable outlook.”
Alliance posted a return to profitability in 2015/16, with net profit for the 12 months to June 30 2016 coming in at $13.5 million, compared with a statutory net loss of $36.6 million in 2014/15 when the company wrote down the carrying value of its fleet in response to changing market conditions.
McMillan said two significant contracts due for renewal in the current year were “progressing as forecast”.
“We expect that these renewals will be completed during the 2017 financial year,” McMillan said.
The company was in the midst of a transition into a “broad based aviation business” with a diversified revenue stream that covered charter opportunities in tourism, aircraft sales, wet and dry leasing and spare parts sales.
Part of that included the purchase of 21 Fokker aircraft from Austrian in November 2015.
So far eight aircraft have been delivered, with three sold, one brought into Alliance’s Australian fleet and two used for parts, while opportunities for the remaining two were being considered.
“This project represents a real opportunity for Alliance be it in sales opportunities, supporting cost effective parts supply in the future and also allowing the brines to quickly expand its fleet operations to secure future contracts,” McMillan said.
“Both the Austrian Airlines fleet acquisition and the Virgin partnership are important strategies and provide wide ranging opportunities for the future.
“That said, we have other major projects underway that will further diversify our earnings and underpin future growth.”
The 15 Fokker 100s and six Fokker 70s were expected to be delivered over a roughly two-year period from December 2015, Alliance said at the time of the acquisition.