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Alliance eyes three-fold growth as it cashes in on wet leasing

written by Hannah Dowling | June 21, 2021
VH-UYZ Alliance Airlines E190 AA (Dave Soda)
VH-UYZ Alliance Airlines E190 AA (Dave Soda)

Alliance Airlines has said it hopes to triple its annual flight hours after taking delivery of all 30 Embraer E190 aircraft, ordered at a discount last year, as it bolsters its position in the wet-lease market.

Speaking with The Sydney Morning Herald, co-founder and managing director Scott McMillan said the carrier won’t look to expand its current offering of regularly scheduled commercial services on regional routes, which would put the carrier increasingly in direct competition with Qantas, Virgin and Rex.

McMillan told the publication he is “absolutely equivocal” that the airline will not pursue additional regular passenger services, stating it’s just “too hard to make money”. Instead, the regional carrier hopes to solidify its place in both the FIFO and the wet-lease markets, to service the major airlines, rather than compete with them.

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It comes just days after Qantas announced it increased its wet-lease agreement with Alliance to now operate 18 of the regional carrier’s Embraer E190 aircraft on regional routes, which allows Qantas to better cater to current demand.

Meanwhile, prior to entering Administration in April 2020, Virgin had a similar long-standing wet lease arrangement with Alliance for its regional network in Queensland, which it has reinstated in part.

“We see ourselves as a wholesaler,” McMillan said, explaining why this tactic is what he sees as the future of the carrier.

“There’s a global trend that Qantas is following which is to have much higher frequency, smaller aircraft flying point-to-point, so bypassing the large hubs. You’ll be able to fly city pairs [non-stop] that you’ve never thought of and that’s really good for the flying public.”

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In addition to wet-leasing, Alliance was able to cash in on an unprecedented drop in domestic commercial airline flights, which McMillan said resulted in a new surge of demand for FIFO services, ultimately seeing Alliance’s shares spike by 67 per cent since the beginning of 2020.

McMillan said this, along with its wet lease operations, means the airline is well-placed to fund even further fleet expansion into the future, even as it plans to construct its own heavy maintenance facility in Rockhampton this September.

“We’ll be ready to jump on any opportunities to increase our fleet or increase the scale of what we do,” he said. “We are actually very bullish about the state of domestic aviation.”

Ailevon Pacific Aviation Consulting director Matthew Findlay said the model Alliance is using could easily see the kind of expansion McMillan is eyeing.

“At the moment they’re being heavily used by Qantas. They’ve been used by Virgin in the past and I’m sure there’s every intention to use them more,” Findlay said.

“That’s the beauty of this model that they have: they can work with practically anyone.”

Alliance is considered to be one of the few success stories of the pandemic, capitalising on the reduced schedule of larger carriers and the need for COVID-adapted planes.

In May 2020, the carrier announced it had actually increased profits that financial year by $7 million.

The good results allowed it to sign a deal for 14 new E190 jet aircraft in June 2020 and then a further 16 in December 2020. The aircraft will join its existing fleet of Fokker F100s, Fokker 70LRs and Fokker 50 turboprops.

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