Alliance Aviation Services reports hefty lift in full year profit

written by australianaviation.com.au | August 9, 2019
Alliance Aviation Services reported soaring profits for 2018/19. (Seth Jaworski)
Alliance Aviation Services reported soaring profits for 2018/19. (Seth Jaworski)

Alliance Aviation Services has posted a big lift in full year profit and says the outlook for the year ahead is positive amid high commodities prices and increased mining production.

The company said net profit for the 12 months to June 30 2019 rose 25.5 per cent to $22.7 million, from $18.1 million in the prior corresponding period.

Revenue rose 11.9 per cent to $277.12 million, Alliance said in a regulatory filing to the Australian Securities Exchange (ASX) on Wednesday.

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Alliance chief executive Lee Schofield said it was the best financial results in the company’s history.

“This financial result is underpinned by the continued focus of all Alliance employees on ensuring the safe, on time and cost effective provision of services to all of our clients,” Schofield said in a statement.

“This is what makes Alliance the pre-eminent aviation services company in Australia.”

Looking ahead, Schofield said financial and operational growth would continue to be part of Alliance’s strategy.

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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.

That has led to a significant increase in flying hours and fleet growth, as the company commenced regular public transport (RPT) flights in regional Queensland which are sold as Virgin Australia codeshare services, signed contracts with United States tour operator Tauck and Japanese travel company JTB.

Alliance has also strengthened its position in the FIFO market through a partnership with Virgin Australia that received Australian Competition and Consumer Commission (ACCC) approval in May 2017.

Total flight hours rose 9.9 per cent to a record 38,326 hours in 2018/19, compared with 34,612 hours in the prior corresponding period, Alliance said in its financial results. The bulk of the increase was in wet lease flying.

Flight type
2018/19
2017/18
Change

Contracted flight hours

19,660

18,828

+4.4%

Wet lease flight hours

11,555

9,447

+22.3%

Regular Public Transport
flight hours

5,158

4,814

+7.1%

Charter flight hours

1,095

1,027

+6.6%

Other flight hours
(including maintenance)

558

496

+12.5%

Total flight hours

38,026

34,612

+9.9%

Source: Alliance Aviation Services

Alliance grew its fleet to 38 aircraft in 2018/19, an increase of five from a year earlier. While this was less than the nine aircraft expected to be added in the year, Alliance said in its financial results statement this was due to additional maintenance requirements on the existing fleet and the availability of maintenance slots for the additional aircraft.

At June 30 2019, the fleet comprised five Fokker 50s, 10 Fokker 70s and 23 Fokker 100s.

The company said it expected to add two Fokker 100s and five Fokker 70s in the current financial year. These were the last of the 21 aircraft purchased from Austrian Airlines in 2015.

In July 2019, Alliance purchased five Fokker 100s from Switzerland-based Helvetic Airways, as well as all tooling, spare engines and parts.

One of Alliance's Fokker 70s. (Rob Finlayson)
One of Alliance’s Fokker 70s. (Rob Finlayson)

Alliance said the outlook for 2019/20 was positive as high commodity prices and increasing mine production levels led to more flights for resources clients.

There would also be growth in the tourism sector, such as the upcoming flights between Melbourne and Kunnanurra it will operated on behalf of Virgin Australia, as well as more wet lease flying.

The Alliance annual report listed Qantas as the company’s largest shareholder at 19.8 per cent.

Qantas announced the investment in February 2019 and stated its intention was to eventually move to a majority stake. In the meantime, it has not sought a seat on the board and has expressed confidence in current management.

In early August, the ACCC released a statement of issues following its review of the transition, which expressed concerns about the shareholding.

“The ACCC is concerned that the acquisition has, or is likely to have, the effect of substantially lessening competition in markets for the supply of fly-in fly-out (FIFO) charter airline services, and regular passenger transport (RPT) services on routes serviced by Alliance Airlines aircraft,” the ACCC said.

In response to the statement of issues, Qantas said its current shareholding was “not contingent on reaching a majority position”, indicating it remained committed to holding on to the 19.8 per cent stake.

A file image of a QantasLink and Alliance Aviation aircraft at Cairns Airport. (Seth Jaworski)
A file image of a QantasLink and Alliance Aviation aircraft at Cairns Airport. (Seth Jaworski)

3 Comments

  • Lucas

    says:

    Now that’s an airline going places… No doubt a lot of their profits come from their contracts from Virgin. Perhaps they could teach virgin’s management how to run a successful airline.
    Well done!

  • Rod Pickin

    says:

    Lucas I tend to agree with you however there is a considerable difference between the two airlines and I think that the upcoming financials from VAH may enlighten us all. Their new CEO hasn’t had that much time to oversee the needed financial turnaround and their four biggest investors are in parts showing some concerns. HNA has its own problems so who knows what will happen to heir 19.86% holding, SQ has recently laid some blame on VOZ for their lower reported profits and with no return on their 20.03% investment, they won’t be happy. It has been reported that Etihad may well be rethinking their global direction so their 20.97% could either increase or decrease which leaves Nanshan Capital Hldgs and their 20.01% and one wonders why such a company which appears to be in the main a private equity group would invest in a zero return operation. We must not forget our fiend Sir Richard with his 10.02% Corvina group so he may well up his interest but then he is concentrating on things Galactic at the moment. VOZ’s upcoming alliance with Virgin Atlantic out of HKG and LAX can only be a good thing but overall VOZ has to check its expenditure and some of it’s operations. The latest move on new winglets to only some of the fleet and the costs involved is a good example and in addition it only confirms that the routes involved are being operated by equipment either at the limits of or beyond their intended capabilities. It would probably be better to add more A330’s and offload some B737’s in order to attract more customers and thus more potential profits with a less critical operational envelope. But then I don’t have to pay the bills.

  • Mike

    says:

    On 11August former Helvetic F100 HB-JVG has departed DRW/Darwin enroute to TSV/Townsville and onwards to its new home in BNE/Brisbane.

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