Qantas takeover target Alliance Aviation upgrades profit guidance, expands fleet
The airline Qantas wants to buy just got more attractive, as Alliance Aviation is on target for a strong profit in 2023 as well as an expanded fleet.
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The airline Qantas wants to buy has upgraded its profit guidance as it expands its fleet of Embraer 190 jets to 67 in response to demand.
Alliance Aviation expects a full-year profit of $56.9m, exceeding its previous guidance of a gain between $50m and $55m.
Annual results will be released after the close of trade on the ASX on August 9.
The improvement was attributed to an increase in flying in the second half of the 2023 financial year, thanks to more aircraft being deployed into service under a deal with Qantas.
Of Alliance’s 33 E190 jets, up to 30 are being contracted to Qantas for the operation of regional routes, and three to Airnorth.
Another 30 E190s from AerCap Ireland Limited will start being delivered from September and the final jet is due to arrive in January 2026.
The order includes 11 E190s that may be disassembled to provide spare parts and engines for the operational fleet.
Despite the incoming aircraft, Alliance identified a looming shortfall next year and has now sourced another four E190s from leasing company Azorra Aviation Holdings.
A statement to the ASX said the jets would be delivered to Alliance without engines fitted, in Costa Rica next month.
The airline then planned to use engines from the disassembled aircraft to get the additional E190s into operation from November to March.
Managing director Scott McMillan said the plan meant Alliance would have the capacity as it required it, to deliver on the demand it was experiencing in the market.
He also announced Alliance had signed a five-year contract with Incitec Fertilisers Operations to provide eight weekly services between Townsville and the company’s mine at Phosphate Hill.
The contract was one of 15 fly-in, fly-out deals held by Alliance, which contributed the lion’s share of the airline’s revenue.
Alliance received $152m in revenue from FIFO contracts in the first half of the 2023 financial year, out of a total of $238.5m in revenue across all operations.
Mr McMillan said Alliance was focused on delivering safe, reliable and on-time services for customers.
“Longevity of customer relationships based upon the high standards we provide is the cornerstone of our success in the FIFO sector,” he said.
Qantas’ planned takeover of Alliance was in limbo due to the Australian Competition and Consumer Commission’s opposition to the deal.
After examining the proposed $614m buyout, the ACCC ruled that it would reduce competition in the FIFO sector to the detriment of customers.
Alliance’s board and executive were supportive of the deal, under which Qantas would pay $4.75 for each Alliance share, currently trading at $3.22.
In May, Qantas CEO Alan Joyce said they were continuing to review their options, and remained of the belief Alliance was a good investment.
“We think there is a huge benefit to customers in the fly-in, fly-out charter market and we’re talking to the customers about that,” Mr Joyce said.
Originally published as Qantas takeover target Alliance Aviation upgrades profit guidance, expands fleet
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