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Alliance Airlines appears to be seeking a renegotiation of its wet-lease arrangement with Qantas, which involves 30 Embraer E190 regional jets.
In his speech at the company’s AGM, Alliance Aviation Services chair James Jackson said the charter, FIFO and wet-lease operator has been looking “to review and seek to renegotiate a major ACMI [aircraft, crew, maintenance and insurance] contract” due to unexpected high costs.
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While Alliance could not confirm the name of the client as the matter is commercial in confidence, Jackson said the contract “was originally entered into in 2021 for 14 aircraft, before being expanded to include a total of 30 Embraer E190 aircraft”.
Coupled with his note that the last of these aircraft was delivered in February this year, his comments would seem to indicate that Qantas’ regional arm, QantasLink, is the client in question.
“The repricing mechanisms in this contract are not sufficient to reflect industry-wide cost inflation and have resulted in Alliance absorbing the impacts of significant increases in wages, operating expenses and maintenance capital expenditure that would typically be passed on to the customer,” he said.
“This has resulted in significant margin erosion since the contract was originally executed. The contract, which was based on aircraft and engine purchases that were below market value during COVID-19, resulted in low, short term operating costs.
“As replacement engines and other heavy maintenance expenses were incurred, the ACMI contract cost base increased significantly.
“Alliance values our relationship and partnership with all our ACMI customers. We are working towards a commercial resolution and will keep the market fully informed.”
Alliance had indicated in an ASX statement earlier this month that it would be “reviewing its wet lease contracts and business model”, citing ballooning costs, including an “unresolved material ($4.2 million) contract dispute with a major customer”.
“Increased purchase price of aircraft and engines operating shorter sectors, coupled with higher than budgeted capitalised base maintenance costs, have resulted in an increase of FY26 depreciation charges of $15 million (on an annualised basis),” the airline said.
“Repairs and maintenance, compliance and logistics costs have exceeded budget expectations by $1 million per month, resulting in an annualised cost increase of $12 million, reflecting price inflation across our supply chain and inefficiencies.”
Qantas has been contacted for comment.
