Alliance Airlines expects to increase total flying hours by almost 40 per cent in 2017/18 amid increased activity in the resources sector and its growing regular public transport (RPT) and wet lease operations.
The company said in its 2017/18 first half results it expected to reach 35,000 flight hours for the full year. The figure represented a 39 per cent jump from 25,117 total flight hours in the previous financial year.
It said the resources sector continued to improve.
“The business has seen a substantial increase in activity over the last six months and this is expected to continue,” Alliance managing director Scott McMillan said in a statement.
“The investment made in both fleet units and associated resources puts Alliance in a strong position to capitalise on additional capacity requests from existing and prospective clients.”
In recent years, Alliance has made significant strides in broadening its operations from fly-in/fly-out (FIFO) work to boost revenue in areas such as tourism, aircraft sales, wet and dry leasing and spare parts sales.
In 2017, the airline commenced RPT flights from Brisbane to Bundaberg, Gladstone and Port Macquarie with Fokker 70 regional jets which are sold as Virgin Australia codeshare services. Alliance said the routes were performing as expected.
Meanwhile, Alliance and Virgin Australia received Australian Competition and Consumer Commission (ACCC) approval in May 2017 to work together in the charter and (FIFO) market, allowing for the joint tendering for corporate FIFO contracts, as well as cooperating on aircraft maintenance, procurement of aircraft and parts, parts pooling, airport operations, airport handling, check-in, frequent flyer programs, lounge access, scheduling, pricing, sales and marketing and service policies.
And from March Alliance will operate three Newcastle-Adelaide nonstop flights a week on behalf of FlyPelican.
Another example includes a four-year contract to operate aircraft in Australia and New Zealand for US-based tour operator Tauck signed in 2015.
Total flying hours for the 2017/18 first half rose 34 per cent to 16,207 hours, compared with the prior corresponding period, Alliance said. Wet lease hours rose by 105 per cent, while RPT hours jumped 137 per cent.
Total revenue increased 16 per cent to $117.5 million.
“This increase is attributable to increased flying hours across all revenue streams,” Alliance said.
“Contract hours reflect incremental flying activity increases across a broad range of resource clients and the charter market has seen steady activity over the half year.”
Further, Alliance said charter revenue exceeded expectations in the first half.
Its contract flying represented 65 per cent of total revenue in the first half, down from 69 per cent in the prior year.
The increased flying has also led to an expansion of the fleet to 31 aircraft at December 31 2017, compared with 28 aircraft a year ago. Alliance, which is the world’s largest operator of Fokker aircraft with both the Fokker 70 and Fokker 100 in the fleet, said a further three aircraft would be introduced between now and June 30 2018.
“These aircraft will service further growth opportunities and allow for capacity coverage required due to the existing fleet heavy maintenance program,” Alliance said.
Meanwhile, the number of full time equivalent staff rose three per cent to 465, “predominately for flightcrew and engineering staff required for the increased flying activity”.
“Alliance will continue to pursue new opportunities in the resources sector along with additional wet leasing activities and expand on its current tourism and leisure work,” the company said in a slide presentation accompanying its first half results.
“Alliance has invested in the business in the half year with the establishment of a fully resourced part sales business and the addition of aircraft and crew. Further growth in the business in future periods is expected from all of these activities.”
Statutory net profit for the six months to December 31 2017 came in at $7.1 million, down from $8.7 million in the prior corresponding period.
The company said the statutory result was impacted by income tax expenses of $3.2 million.
However, it said there was “no cash tax payment associated with this expense as the Group is currently realising available tax losses now and over future financial years”.
Meanwhile, profit before tax (PBT) rose 19 per cent to $10.3 million.
The company also reduced its net debt by $6 million, which Alliance chief executive Lee Schofield said put the company in a better position to take advantage of new opportunities.
“Alliance has continued its debt reduction strategy over the half year whilst at the same time negotiated successfully with its financiers for a renewed facility,” Schofield said.
“This has further strengthened Alliance’s balance sheet which will allow Alliance to react quickly when further opportunities present themselves.”
Alliance also reinstated an interim dividend for shareholders, which for the 2017/18 first half will be at 2.5 cents per share, fully franked.