The share price of Qantas Airways Limited (ASX: QAN)'s takeover target Alliance Aviation Services Ltd (ASX: AQZ) is taking off after the charter operator posted its full-year earnings after the market closed on Wednesday.
After opening 1.5% lower at $3.31, the Alliance Aviation share price has rebounded to trade at $3.42 at the time of writing – representing a 1.79% gain.
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Alliance Aviation share price lifts despite $7.1 million loss
- Underlying before tax profit of $45.3 million – an 11% drop on that of the prior corresponding period (pcp)
- Statutory loss before tax of $7.1 million
- Revenue came in at $367.5 million – a 19% increase
- Underlying earnings before interest, tax, depreciation, and amortisation (EBITDA) of $91 million – a 1% improvement
- Underlying operating cash flow of $99.3 million – down 52%
- Declined to pay a dividend.
The ASX airline share posted a loss for the financial year 2022 despite recording higher revenue after being hit with additional costs and write-downs.
It incurred $14 million in E190 expansion related-costs in the second half, bringing the full year total to $39.1 million. It also incurred a non-cash $12.1 million write-down of its Fokker 50 fleet, a $400,000 inventory stocktake adjustment and $750,000 in fees relating to the Qantas takeover.
The company saw 4% more contract flight hours last financial year but 57% fewer charter flight hours. It also recorded a 612% jump in wet lease flight hours.
It noted an expected uplift in financial performance in the June quarter didn't occur due to the ongoing impacts of COVID-19.
What else happened in FY22?
Of course, the major news from the airline in the financial year 2022 was the takeover bid posted by Qantas.
The national carrier's offer to hand over one Qantas share for each Alliance Aviation share – implying an equity value of $764.5 million at the time – was recommended by the smaller airline's board in May.
The Alliance Aviation share price surged 21% on the takeover news.
However, the acquisition must jump through many regulatory hoops before it can be implemented.
What did management say?
Alliance Aviation managing director Scott McMillan commented on the company's earnings, saying:
For Alliance to be able to service the capacity demands of all our clients in the 2023 financial year and beyond it was essential that the company continued to invest in growth during the second half of the year with the full knowledge that forecast activity growth would only commence from April 2022.
What's next?
The company hasn't provided any new guidance today. Though it did outline several steps it will take going forward.
The company noted it has recently experienced greater pilot turnover. In reaction, it will increase training and recruitment of pilots and provide non-monetary incentives to those staying with the airline.
It will also converge the Unity Aviation Maintenance operations into those of Alliance Airlines and retire its Fokker 50 fleet early in a bid to simplify the business.
It maintains a positive outlook amid continually strong wet lease demand. The company also expects that, by the end of January 2023, it will have deployed all 33 of its E190 aircraft.
Alliance Aviation share price snapshot
It's been a rough year for the charter services provider's stock.
The Alliance Aviation share price fell 13% over the six months ended 30 June. That was in line with the All Ordinaries Index (ASX: XAO)'s performance.
It's currently 15% lower than at the start of 2022, while the index is recording an 8% fall year-to-date.
