Alliance leases 4 more E190s as profits hit $57m

The FIFO and charter operator also said in a statement released to the ASX on Thursday that it now expects to record a net profit before tax of nearly $57 million in FY23, up slightly from its previous estimate.

The strong performance significantly comes after the ACCC blocked Qantas’ purchase of Alliance in April. However, the larger airline’s CEO, Alan Joyce, has hinted the business will attempt to appeal the ruling.

FIFO and charter operators are being buoyed with strong demand from the mining sector, with its significant profits counteracting a stagnating recovery in commercial aviation post-COVID.

Alliance’s announcement that it will acquire four more E190s comes after it said it would lease 30 additional E190s in February and following its announcement that it would purchase a fleet of the aircraft outright back in 2020.

“Alliance took delivery of its first Embraer E190 in September 2020 and now has 33 E190s in Australia, all of which are owned,” said Alliance in a new statement.

“This significant fleet expansion has taken considerable investment to build the internal infrastructure and operating capability.

“The business is now in a strong position to grow the E190 operational fleet and its profitability.

“As announced in February 2023, Alliance entered into a contract to acquire 30 additional E190 jet aircraft from AerCap Ireland Limited.

“These aircraft are scheduled to commence delivery from September 2023, with final delivery in January 2026.

“The rationale for this acquisition was twofold: to provide capacity for growth and to provide aircraft for disassembly to provide spare componentry and spare engines.

“This will support both the company’s operational fleet and provide inventory for the company’s Aviation Services business which continues to see increasing demand.

“As is the case with the company’s Fokker spare parts holdings, Alliance will provide E190 spares to other operators in Australasia and around the world.

“Separately, Alliance identified a capacity shortfall in the first quarter of 2024 due to an increase in demand, contractual commitments, the timing of the AerCap Deal deliveries and related fleet logistics.

“To address this, Alliance has entered into a contract to acquire an additional four E190 airframes from Azorra Aircraft Holdings.

“These airframes have a long maintenance life remaining and are ‘sister ships’ to the aircraft being acquired under the AerCap Deal.

“These airframes will be delivered to Alliance in Costa Rica (without engines fitted) starting in August 2023. Alliance will utilise spare engines from the disassembled aircraft mentioned above to bring the four additional aircraft into operation between November 2023 and March 2024.”

The acquisition means Alliance’s final fleet will comprise of:

• 13 x 80-seat Fokker 70s;
• 24 x 100-seat Fokker 100s;
• 67 x 94–100-seat E190s.

Australian Aviation reported in May how Qantas CEO Alan Joyce said the airline was “reviewing its options” into whether it would fight on in its attempt to purchase Alliance. Qantas already owns nearly 20 per cent of the smaller carrier and has an existing deal to fly up to 30 of its aircraft.

“We do think Alliance will be a good investment. It has been a very good investment for Qantas [so far] – we now will have 18 E190s operating on wet lease. Over half their revenue comes from Qantas,” Joyce said.

“We think there is a huge benefit to customers in the fly-in, fly-out and charter market, and we’re talking to our customers about that. Once we have a decision on what our next steps are, we will inform the market at that stage.”

The consumer and competition watchdog knocked back the deal after four delays, saying that allowing the merger to go ahead would likely substantially lessen competition, thus threatening “increased prices and reduced service quality” for resource industry customers in WA and Queensland.

“Qantas and Alliance currently strongly compete with each other in markets where there are few effective alternatives. The proposed acquisition would combine two of the largest suppliers of charter services in Western Australia and Queensland,” said ACCC Chair Gina Cass-Gottlieb.

“Flying workers in the resource industry to and from their worksites is an essential service for this important part of the Australian economy, so it is critical that competition in this market is protected.”

Earlier this month, the ACCC also denied a request for Virgin and Alliance to continue to collaborate, meaning the two airlines can no longer jointly tender for mining companies’ contracts and must quickly unwind their current deal.

Since then, Rex-owned rival FIFO operator National Jet Express has announced an expansion into the Alliance heartland of Queensland after signing a deal with mining company BHP Mitsubishi Alliance.