Alliance Aviation Services reported a $105.8 million half-year loss driven by significant impairments on its Fokker fleet, even as revenue rose 7.9% on wet lease and aviation services growth. The company is executing a strategic turnaround including fleet renewal and operational realignment.
- Half-year loss of $105.8 million due to $164.8 million impairments
- Revenue increased 7.9% to $359.3 million, led by wet lease and aviation services
- Fleet renewal strategy underway with progressive retirement of Fokker aircraft
- Operating cash flow negative $5.8 million; capital expenditure $97.8 million
- Material uncertainty on going concern due to capital commitments and fully drawn debt
Financial Results and Impairments
Alliance Aviation Services Limited has reported a stark turnaround in its half-year results ending 31 December 2025, posting a statutory loss after tax of $105.8 million. This contrasts sharply with a profit of $28.9 million in the prior corresponding period. The loss was primarily driven by significant impairment charges totaling $164.8 million, mainly related to the Fokker F70 and F100 aircraft fleet, associated engines, and right-of-use assets.
The impairments reflect the ageing profile of the Fokker fleet, rising operating and maintenance costs, and a strategic decision to progressively retire these aircraft. An independent valuation confirmed the Embraer E190 fleet’s value exceeds its book value by approximately $67 million, but no upward revaluation was recognised in accordance with accounting standards.
Revenue Growth Amid Operational Challenges
Despite the heavy impairments, Alliance’s total revenue increased by 7.9% to $359.3 million, driven by growth in wet lease services and aviation-related activities such as parts and engine sales. Wet lease revenue rose 6.3%, reflecting full aircraft deployment and strong on-time performance, reinforcing Alliance’s reputation in high-utilisation markets.
However, contract and charter revenues saw slight declines, with contract revenue down 0.7% amid a downturn in the nickel market, and charter revenue slipping 1.4%, constrained by aircraft availability. Regular Public Transport (RPT) revenue also decreased as the company strategically focuses on higher-yield wet lease and contract operations.
Strategic Turnaround and Fleet Renewal
Alliance is undertaking a comprehensive business review aimed at improving profitability, cash flow, and capital productivity. This includes initiatives to increase contract income, grow wet lease margins, reduce maintenance and overhead costs, and enhance operational efficiency. A key element is the fleet renewal strategy, addressing the end of economic life for the Fokker aircraft by considering lease and purchase options and redeployment plans.
The fleet composition shifted slightly, with the total fleet increasing to 81 aircraft, including 45 Embraer E190 jets, up by four from the prior period, and reductions in Fokker 70 and 100 aircraft by one each. The company has also commenced selling six Embraer E190 aircraft to fund capital commitments, though no unconditional sale contracts have been finalised yet.
Cash Flow and Capital Management
Operating cash flow was negative $5.8 million, an improvement from the prior year’s $15.1 million outflow, despite higher interest costs linked to increased debt. Capital expenditure totalled $97.8 million, down from $145.7 million previously, including $31 million on new aircraft acquisitions and $66.8 million on existing fleet maintenance and upgrades.
The Group’s borrowings rose to $491.8 million, with full utilisation of its $322.3 million Pricoa facility. While the company remains compliant with all financial covenants, it acknowledges material uncertainty regarding its ability to continue as a going concern, primarily due to capital commitments and fully drawn debt facilities. Management remains confident in securing aircraft sales and maintaining covenant compliance over the next 12 months.
Outlook and Market Position
Alliance’s operational metrics show resilience, with a 1.4% increase in flight hours and a 3 percentage point improvement in on-time performance to 96%. The company continues to prioritise safety, operational excellence, and long-term client partnerships as it navigates a challenging market environment marked by softening wet lease demand and contract disputes.
With a strategic focus on fleet renewal and cost optimisation, Alliance aims to restore profitability and strengthen its balance sheet. However, the path forward will require careful execution of turnaround initiatives and successful capital management amid ongoing market uncertainties.
Bottom Line?
Alliance’s significant impairments and strategic reset mark a pivotal moment; the success of its fleet renewal and operational realignment will be critical to restoring investor confidence and financial stability.
Questions in the middle?
- Will Alliance secure unconditional sales contracts for the six Embraer E190 aircraft to fund capital commitments?
- How will the progressive retirement of the Fokker fleet impact operational capacity and client contracts in the near term?
- What are the prospects for wet lease demand recovery amid current market softness and contract disputes?