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Alliance Airlines says it is “reviewing its wet lease contracts and business model”, with high costs likely to impact its financial results for the year.
The FIFO, wet lease and charter operator in earnings guidance this month said it expected its EBITDA for the year ending 30 June 2026 to be “materially lower than analyst consensus estimates”, at around $190-$210 million.
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According to Alliance, this is due to a “combination of factors”, 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 told the ASX.
“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.
“Implementation of the AVIAN Inventory Management agreement commenced earlier than expected. While this has contributed to improving on-time performance, an additional cost of $3.5 million was incurred in the first quarter.”
Alliance has stressed that it is still profitable and said it is undertaking a full review of the current basis of depreciation being expensed, a cost-reduction program targeting purchasing and logistics processes, the sale of “non-core assets” and the evaluation of its property portfolio.
“The company has a robust operating platform and is managing these impacts on the business as a priority,” the airline said.
“Services for our customers are unaffected and continue at the highest standards of safety and on-time performance.”
Following the release of the guidance, the airline’s managing director Scott McMillan brought forward his resignation, announced last month, with joint managing director Stewart Tully taking over as of last week.
“Scott has been instrumental over more than two decades in building Alliance into a successful aviation business with an established reputation for operational reliability, safety and service to its clients and communities,” said chairman James Jackson.
“The Board are very grateful for Scott’s unparalleled contribution to Alliance from start-up phase to creating one of Australia’s aviation industry market leaders.”
Alliance in 2024–25 saw a statutory net profit after tax of $82.1 million, down 4.9 per cent on its record profit in 2023–24, though revenue from operations was $760.9 million, up 19.4 per cent.
