Alliance Aviation hits cruising altitude

6 February 2020, Written by David Simmons

Alliance Aviation hits cruising altitude

Fly-in fly-out aircraft operator Alliance Aviation (ASX: AQZ) has reported its best first half results ever in 1H20 on the back of record flight hours.

The company recorded profit before tax of $15.5 million, up 10 per cent on the prior corresponding period, and total revenue of $151.3 million representing a growth of 9.8 per cent.

Alliance says the results reflect its commitment to principles of safety, time performance and sustainable long-term financial results.

During 1H20 a record number of flight hours were operated during the half year of 19,710 hours from its fleet of 40 aircraft.

The company renewed a number of expiring contracts in the first half of the year, cementing its status as the preferred airline for the Australian mining and resources sector.

"Alliance has had a great start to the 2020 financial year by delivering the best first half result in the company's history," says Alliance CEO Lee Schofield.

"We believe our fleet size of 40 aircraft (increasing to 42 in mid-February 2020) is optimal to deliver an appropriate return on capital for our investors and service the immediate addressable market. Moreover, we have four aircraft which are in storage and can be commissioned if growth over and above what is forecasted comes to pass."

Looking forward the company expects its inbound tourism operations to be affected by the ongoing softening of visitors into Australia but hopes to offset that by the launch of its new seasonal Melbourne to Kununurra services commencing in May 2020.

The company is currently in the midst of a partial takeover from aviation giant Qantas (ASX: QAN) who hopes to grab 20 per cent of the regional flight operator.

In August the Australian Competition and Consumer Commission (ACCC) raised concerns about the partial takeover, saying that Alliance is Qantas' only competitor on regular passenger routes between Brisbane and the regional centres of Bundaberg and Gladstone.

"Alliance Airlines is a close, important and growing competitor to Qantas, including through its partnership with Virgin. It provides consumers and companies with a crucial alternative to Qantas in markets that are already highly concentrated," said ACCC chair Rod Sims at the time.

"We consider this shareholding has the potential to impact Alliance's future growth and its ability to be a strong competitor. It may impact Alliance's ability to grow through raising funds from investors, or to consider rival takeover approaches. It may also impact whether Alliance's customers perceive it to be an independent rival to Qantas."

Shares in AQZ are up 3.17 per cent to $2.60 per share at 12.02pm AEDT.

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Author: David Simmons

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