Alliance Aviation Services posted a statutory loss of $90.9 million in FY2026, driven by a $164.8 million impairment on its Fokker fleet, while underlying profit remained within guidance. The company is realigning around core FIFO operations, fleet renewal, and cost discipline, supported by a $40 million equity raise and revised Qantas wet lease terms.
- Statutory net loss of $90.9 million due to $164.8 million fleet impairment
- Underlying profit before tax of $38.2 million within guidance range
- Strategic reset prioritises FIFO operations and Embraer E190 fleet renewal
- Revised Qantas wet lease contract improves commercial sustainability
- Fully underwritten $40 million equity raise and asset sales planned
Fleet Impairment Drives Statutory Loss Amid Strategic Reset
Alliance Aviation Services Limited (ASX:AQZ) reported a statutory net loss after tax of $90.9 million for FY2026, a sharp reversal from the prior year’s $57.3 million profit. The plunge was largely due to a non-cash impairment charge of $164.8 million related to its ageing Fokker fleet and associated inventory. This write-down reflects a reassessment of the fleet’s carrying value amid changing operating assumptions and a renewed focus on fleet renewal and utilisation.
Despite the statutory loss, the company delivered an underlying profit before tax of $38.2 million, comfortably within its guidance of $35 million to $40 million. Underlying EBITDA fell 14.4% to $177.5 million, impacted by elevated maintenance costs and lower wet lease utilisation, but showed signs of recovery in the second half of the year with improved cost discipline and contract revenue growth.
FIFO Operations and Fleet Renewal at Core of Reset
Alliance is pivoting its strategy to concentrate on its core fly-in fly-out (FIFO) operations, which remain resilient and form the backbone of its contract flying business. The company is progressively retiring older Fokker 100 aircraft, while expanding deployment of its Embraer E190 fleet, which now numbers 45 aircraft. This transition aims to improve fleet efficiency, reliability, and customer experience, while reducing operating complexity and capital intensity.
The strategic reset includes cost reduction initiatives, improved procurement, and sharper commercial discipline. Alliance has identified surplus and non-core assets for divestment, targeting $60 to $75 million in proceeds during FY2027 from sales of aircraft, Brisbane hangars, and engine cores. These moves, alongside a rightsizing of the workforce to align with reduced flying requirements, underpin the company’s efforts to strengthen profitability and cash generation.
Qantas Wet Lease Contract Revised to Enhance Sustainability
A key development was the renegotiation of Alliance’s largest wet lease contract with Qantas Airways (ASX:QAN). The revised agreement, effective from 1 July 2026, includes a meaningful price increase, an annual escalation mechanism, and a staged reduction of aircraft from 30 to 23 over FY2027. This adjustment improves the commercial sustainability of the arrangement and provides greater flexibility to deploy aircraft where they generate stronger returns.
The reduction in fleet commitments lowers capital requirements and supports the company’s fleet renewal ambitions. The revised contract also enables the redeployment of Embraer E190 aircraft to the FIFO fleet, enhancing operational flexibility.
Balance Sheet Strengthened by $40 Million Equity Raise
To bolster liquidity and balance sheet flexibility, Alliance announced a fully underwritten $40 million equity raising, comprising a 1-for-5.6 pro-rata accelerated entitlement offer and a placement to institutional investors. The offer price of $0.70 per share represents a 17.4% discount to the theoretical ex-rights price and a 22.2% discount to the last close price. Major shareholders, including Qantas and Viburnum Funds, have committed to participate pro-rata.
The capital raise, together with planned asset sales and operational improvements, is expected to reduce net debt to EBITDA leverage from 2.7x to approximately 2.5x pro forma at 30 June 2026, with a target of 2.1x by 30 June 2027. The company is also working with lenders to extend debt facility maturities to September 2027, providing additional liquidity headroom.
Leadership Transition and Outlook
Alliance’s Managing Director and CEO, Stewart Tully, will step down after more than 11 years, with Steven Greenway appointed as CEO effective 1 October 2026. Greenway brings over 25 years of international airline leadership experience, including successful turnaround roles.
Looking ahead, Alliance expects FY2027 underlying EBITDA between $175 million and $190 million and underlying profit before tax of $55 million to $60 million. The company plans to realise further cost savings, benefit from the revised Qantas contract, and continue fleet renewal. No dividend will be declared for FY2026 as capital is retained to support the turnaround program.
Climate Risks and Governance Disclosed Under AASB S2
In its first sustainability report prepared under the mandatory Australian Sustainability Reporting Standard AASB S2, Alliance disclosed climate-related risks and governance. The company identified physical risks from increasing extreme weather events and atmospheric turbulence, as well as transition risks related to evolving regulations and potential demand shifts due to fossil fuel divestment.
Alliance’s Board and management have enhanced governance structures to oversee climate matters, with the Executive Safety Action Group and Audit and Compliance Committee playing key roles. While no quantitative financial impacts from climate risks were reported due to data limitations, the company is developing capabilities for future reporting and integrating climate considerations into strategic planning.
The company reported Scope 1 emissions of 223,682 tCO2-e and Scope 2 emissions of 1,190 tCO2-e for FY2026, with ongoing efforts to improve data quality and emissions management.
Material Uncertainty on Going Concern
Alliance’s FY2026 financial statements highlight a material uncertainty regarding the company’s ability to continue as a going concern, dependent on the successful completion of the equity raise, asset sales, and execution of the turnaround plan. The company’s net debt stood at $459.8 million at year-end, with cash and cash equivalents of $29.2 million. Management and the Board remain confident that the initiatives underway provide a foundation for improved profitability, cash flow, and shareholder returns.
Investors should monitor the progress of the capital raise, asset divestments, contract performance, and leadership transition as key catalysts for the company’s recovery trajectory.
Bottom Line?
Alliance’s FY26 results mark a turning point with a painful fleet impairment behind it and a strategic reset underway, but execution risks remain high as the company levers its core FIFO strength and fleet renewal to restore profitability and reduce leverage.
Questions in the middle?
- Will the $40 million equity raise and planned asset sales deliver the liquidity boost Alliance needs to meet covenants and fund its turnaround?
- How smoothly will the leadership transition to Steven Greenway proceed amid ongoing operational realignment and cost cutting?
- To what extent will evolving climate regulations and fossil fuel divestment reshape Alliance’s contract portfolio and fleet strategy over the medium term?