The Insider from the outside: Checking in on Alliance Aviation

When Yarra Capital’s Joel Fleming picked an aviation company as a business poised for growth back in January, even he admitted it was an unexpected choice in the tail-end of a pandemic.

When Yarra Capital’s Joel Fleming picked an aviation company as a business poised for growth back in January, even he admitted it was an unexpected choice in the tail-end of a pandemic.

Speaking on Reach Markets’ ‘The Insider: Meet the Fund Manager’ on 29 January, the former UBS analyst-turned-fund manager likely turned a few heads when he named Alliance Aviation (ASX: AQZ) as one of his three favourite companies.

International flights were still grounded and interstate travel was hampered by sporadic interstate border closures. A cautious public were nervously booking their flights fully expecting postponements and cancellations closer to their take-off date. 

But Mr Fleming assured guests on the webcast that these concerns were unlikely to clip Alliance’s wings, given the relatively small airline’s niche market base and strong ties to the mining industry. 

Unlike its larger commercial peers, Alliance focuses chiefly on the ‘fly-in, fly-out’ (FIFO) sector, providing both regular and ad hoc charter services in Australia and New Zealand.

The company was founded in 2002 with only 3 aircraft, and has since grown to employ 500 staff and manage a fleet of 40 Fokker aircraft.

“Australia is a big country, and many Australians need to travel for work – particularly those working in the resources industry,” Mr Fleming said in January.

“[Those workers] used to rely on the domestic aviation network. Given that that almost came to a complete halt, and Virgin is a much more slimline business these days, we see a real opportunity for Alliance Aviation to take a significant part of that market opportunity”

In the months since, Alliance has gained 9.3%, signed an agreement with Qantas to ‘wet lease’ (leasing aircraft with crew and fuel included) several planes and extended existing contracts with miners BHP and Newmont.

The company also delivered a record statutory half year profit before tax  ($33.6 million)  off the back of similarly record-beating operating cash flows ($47.5 million).

“Alliance has achieved a significant number of milestones over the course of the first half of the 2021 financial year,” the company’s managing director, Scott McMillan, said.

“The robustness of our business model, the commitment of our staff, and the relationships we have with our clients ensures Alliance will continue to grow the business in future years.”

Mr McMillan’s comments seem to be reflected in the $5.25 price target set for the company by ratings agency Morgans.


You can watch a full recording of Joel Fleming’s ‘The Insider: Meet the Fund Manager’ presentation below.


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