Pandemic contracts help Alliance Aviation beat air travel’s downturn

Alliance Aviation has done what no other airline is likely to achieve this year, increasing its annual profit by 24pc.

Alliance Airlines' (L-R) Managing Director Scott McMillan and CEO Lee Schofield. Picture: Lyndon Mechielsen

Alliance Aviation has managed to increase its before-tax profit by 24 per cent for the 2020 financial year, in a feat unlikely to be matched by any other airline in the current COVID crisis.

The Brisbane-based operator, which Qantas has declared as a takeover target, posted a record $40.7m before-tax profit, up $7.9m on the previous year.

Its net profit of $27m was up from $22.7m in the 2019 financial year and total revenue improved 7.6 per cent to $298.2m.

The main driver of revenue and the reason for Alliance’s seemingly COVID-resistant performance was a 22.5 per cent increase in contract revenue, to $202.5m.

Income from charter flights almost doubled to $26.4m, helping to offset a 16 per cent fall in revenue from scheduled services, and the suspension of a wet lease arrangement with Virgin Australia.

Managing director Scott McMillan said as devastating as the COVID crisis had been for the global aviation industry, the pandemic had actually strengthened their business.

“It’s meant our customers have found a new way of operating their resource projects much more efficiently because they can dovetail the charters into their shift changes and they get a significant improvement in productivity,” he said.

“To that extent, most if not all of those customers are saying they’re going to stick with charter full-time in the place of scheduled services which is largely beneficial to us.”

Alliance’s flexibility and network had also worked in its favour throughout the crisis, with most flights operating intrastate which meant they were unaffected by border closures.

In addition, the airline picked up large amounts of government work, flying firefighters around the country during bushfire season and more recently nurses.

Mr McMillan was hopeful Alliance would once again partner with Virgin Australia, to fly the airline’s regional routes as demand recovered.

Although no specific guidance was offered for the 2021 financial year, he said analysts had forecast a result similar to 2020 which would be “very good”.

“We feel for our colleagues in the aviation industry who have not enjoyed the same experience as us (in the COVID crisis). It’s been absolutely devastating on individuals and companies and it’s going to be a long, long road back,” said Mr McMillan.

“Anyone who tries to predict how long is deluded, every day is different, but it is going to take years.”

Alliance cancelled its planned dividend payment early on in the crisis, with the funds retained for expansion.

As announced on Monday, the airline will start taking delivery of 14 second-hand Embraer E190 jets from October, at a total cost of $111m.

The jets will join 42 Fokker aircraft in the Alliance fleet, and be used to meet ongoing demand for FIFO and charter services.

The airline employed 551 people in 2020, up from 532 the previous year and hoped to start recruiting for the Embraers early next year.

The Australian Competition and Consumer Commission is continuing to examine Qantas’ 19.9 per cent stake in the airline, for any sign of anti-competitive behaviour.

At the time of the purchase in February 2019, Qantas CEO Alan Joyce said it was the group’s long term intention to take over Alliance which he described as “well-managed”.