Qantas does deal to lease Alliance Airlines Embraer 190 jets for SA and NT routes

Qantas has revealed how it plans to grab a bigger share of the domestic market by doubling flights from Adelaide, Alice Springs and Darwin within months.

Alliance Aviation’s purchase of second hand Embraer jets has led to a new deal with Qantas.

Qantas will pursue an even larger share of the domestic market as it seeks to recover from the COVID crisis, with the help of Alliance Aviation.

Under a three-year deal announced to the ASX on Thursday, Qantas will wet lease at least three of Alliance’s recently acquired Embraer 190 jets, and possibly as many as 14.

Under the wet lease agreement, Alliance will operate the flights on behalf of Qantas, initially servicing Adelaide-Alice Springs; Darwin-Alice Springs and Darwin-Adelaide.

The Embraer jets are considered an ideal fit for such routes, given their five-hour range, and seating for 94 passengers.

The first Alliance Aviation Embraer 190, landing at Brisbane airport last year. Picture: Lyndon Mechielsen

Although the crew will be provided by Alliance, it’s possible a number of A380 pilots currently stood down without pay by Qantas, will be retrained to operate the Embraers.

QantasLink chief executive John Gissing said they expected to have all other domestic crew stood up by the time the Embraers began flying in mid-2021.

“The 737s we currently use on these routes will move to other parts of our network,” Mr Gissing said.

“The ability to switch on extra capacity with Alliance will help us make the most of opportunities in a highly competitive environment and having the right aircraft on the right route helps us deliver the schedule and network that customers want.”

He said instead of one or two flights a day with larger aircraft, Qantas would be able to offer three or four flights a day on the Embraer jets, giving customers more choice about when they travelled.

“We’ve already opened up 20 new city pairs with our existing fleet as more people seek to holiday at home, so there are a lot of possibilities once we get past this cycle of sudden border closures,” Mr Gissing said.

It’s understood the Qantas Group expects to increase its domestic market share post-COVID from 65 per cent to more than 70 per cent, as a result of Virgin Australia emerging from administration as a smaller carrier.

Alliance managing director Scott McMillan said the wet lease deal with Qantas was an “exciting transaction”.

Managing Director of Alliance Airlines Scott McMillan. Picture: Lyndon Mechielsen

“This further cements Alliance as the pre-eminent wet lease operator in Australia and the Pacific and confirms Alliance’s view that the circa-100 seat regional jet will be the sweet spot in the global aviation market’s post COVID-19 recovery,” Mr McMillan said.

The agreement was expected to account for at least 5 per cent of Alliance’s total revenue, or $15m to $20m, once the first three aircraft had been fully deployed.

“We look forward to providing Qantas with our renowned high-quality service and operational reliability,” he said.

“It is also pleasing to be able to provide new job opportunities in the Australian aviation landscape, as well as for our existing staff and potentially some Qantas Group staff who would normally be flying internationally.”

Alliance shares soared 12 per cent following the announcement, and closed up 9.4 per cent at $4.29.

The Brisbane-based operator has bought 30 second-hand Embraer 190 jets from American Airlines and Azorra Aviation in deals worth almost $200m.

Mr McMillan said the agreement with Qantas would have no bearing on Alliance’s partnership with Virgin Australia to operate dozens of regional routes.

Qantas has a 19.9 per cent stake in Alliance but does not have a board seat, and plays no role in company decisions.