Brisbane-based Alliance Airlines is emerging as one of Australia’s most successful airlines. The airline is one of the very few airlines globally that made money in 2020. Alliance Airlines successfully dodged the travel downturn bullet and continued to grow with a focus on charter and fly-in-fly-out (FIFO) work and minimal exposure to scheduled passenger flights.
A fast deal with Qantas helps underpin Alliance’s strong performance
These days, Alliance Airlines is best known for buying 30 former American Airlines and Copa Airlines Embraer E190s last year. Most are yet to arrive, but some of those that have landed were promptly wet-leased to Qantas in a three-year deal. Qantas now has options to take 18 of the 30 Embraers.
It is a slick move that will see Alliance Airlines bank checks from Qantas for some time. Alliance Airlines operates 52 aircraft, mostly jet and turboprop Fokkers. In the six months to December 31, the airline generated a profit before tax of US$20 million on revenues of US$116.2 million.
It is a small profit, but a profit nonetheless. Managing Director Scott McMillan attributed this to the underlying diversity and robustness of the airline’s business model.
Contract flying underpins Alliance Airlines
Alliance Airlines has five important revenue streams. They are contract flights, wet-leasing, regular passenger transport flights, ad-hoc charters, and allied aviation services.
Contract flying refers to long term contract flying for corporate customers. Contract flying revenue grew last year to US$79.4 million and involved 13,106 flying hours. It is a core piece of business for Alliance Airlines. Much of the work is flying miners and other resource workers in and out of remote sites. Planeloads of miners will fly in for, say, two weeks of work before flying out for a week off. Multi-billion dollar mines require lots of workers, and the planes frequently come and go.
Last month, Alliance Airlines announced it would keep flying BHP Western Australia Iron Ore workers into the Pilbara for another two years. Alliance Airlines has been flying for BHP since 2009.
Alliance Airlines will fly services for Australia’s two major airlines
In addition to flying for Qantas, Alliance Airlines also has a history of flying for Virgin Australia. As Virgin gets back on its feet again after last year’s near-death experience, they want to use Alliance’s smaller planes to fly into airports where there’s not enough demand for a 737-800.
Alliance Airlines wet-leased aircraft to Virgin Australia up until last year. That relationship is to continue, notwithstanding Alliance’s recent deal with Qantas and that airline’s 20% stake in Alliance Airlines. The Alliance Airlines/Virgin Australia deal demonstrates Alliance’s independence from Qantas, despite that ownership stake.
Mixed results for Alliance’s regular passenger transport flights
Less well known than Alliance’s FIFO and wet leasing flying is its regularly scheduled flying. It’s a smaller part of the airline’s business, comprising 2,567 flying hours in 2020 and generating just US$12.5 million. It was one segment of Alliance’s business model hit by the global travel downturn.
As domestic flying recovers in Australia in 2021, Alliance continues to dip its toes in regular passenger transport flights. In addition to flying to some regional centers, Alliance offers some interesting regular passenger flights out of airports like the Sunshine Coast (MCY) and is now the sole operator on routes such as MCY-Canberra (CBR) and MCY-Cairns (CNS). Alliance Airlines is quietly confident about its regular passenger transport flying with Australians stuck at home and domestic travel picking up again.
Ad-hoc charters are also shaping up as a useful growth area for Alliance Airlines. Last year, ad-hoc charter revenue was worth US$22.2 million, up 176% from the previous year. Alliance expects charter demand to remain strong. The airline has even got into the scenic flights business, offering dinosaur-themed scenic flights into Western Queensland. They’ve sold well, with extra flights later added.
The numbers are small at Alliance Airlines compared to many other airlines. But unlike most other airlines, Alliance Airlines isn’t drowning in a sea of red ink. Flying miners to the Pilbara isn’t as glamourous as flying long-haul first-class passengers around the world. But in 2021, it’s the former business model that’s proving the better one. Alliance Airlines expects to better its 2020 performance this year.
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