Alliance Aviation's Turbulent Reset: Contract Renegotiation, Capital Raise, and a New Pilot
Qantas wet lease revamped, AUD 40M equity raising, and asset sales target 2.1x leverage by FY27.
AQZ.AX · Earnings Call · 2026-08-25
A Decisive Turn
Alliance Aviation's FY2026 results are far from routine. The company has executed a strategic reset that touches every part of its business: renegotiated the largest wet lease contract, launched a company-wide cost optimization program, raised AUD 40 million in fresh equity, and announced a CEO transition. The market cap of just over AUD 113 million underscores the scale of this pivot—this is a small-cap industrial making bold moves to reshape its balance sheet and operations. The most significant change is the wet lease renegotiation with Qantas. As CEO Stewart Tully explained, "The revised Qantas agreement addresses that directly. It raises prices from the 1st of July 2026, adds a mechanism that escalates prices annually to better reflect future cost increases, and delivers a stage reduction from 30 to 23 aircraft over FY 2027." “This is a commercial reset. It strengthens the economic sustainability of the wet lease arrangement, improves margins and cash generation, and gives us more flexibility as we progress fleet renewal and refocus capital on our core FIFO business.” — Stewart Tully, Managing Director and CEO · 2026-08-25 This is not just a tweak—it's an acknowledgment that the prior economics were unsustainable.Cost and Capital Discipline
The company is also attacking its cost base. The cost optimization program targets AUD 27 million in savings for FY2027 and AUD 38 million annualized by FY2028, driven by lower maintenance expenditure, staff rationalization, and tighter procurement. Simon Vertullo, Interim CFO, noted that "the direction of travel is encouraging, with the business delivering improved profitability in H2 despite lower wet lease hours. That reflects the early impact of restructuring, cost discipline, and a more active approach to managing the cost base in line with revenue." “The turnaround is moving from planning to execution.” — Simon Vertullo, Interim Chief Financial Officer · 2026-08-25 Complementing the cost moves is a asset sale program targeting AUD 60–75 million. Surplus aircraft, hangars, engines, and parts are on the block. The chairman, James Jackson, emphasized that these are not standalone actions: "These initiatives are not stand-alone actions. Together, they support a de-leveraging profile targeting approximately 2.1 times net debt to underlying EBITDA by June 30, 2027." “We have reset the economics of our largest wet lease contracts, commenced a business-wide efficiency program, we have progressed our fleet transition, and we have strengthened the leadership team.” — James Jackson, Chairman · 2026-08-25Balance Sheet and Equity Raising
The balance sheet had been stretched to AUD 459.8 million net debt by June 30. A fully underwritten equity raising of AUD 40 million, priced at AUD 0.70 per share, provides immediate relief on a pro forma basis, cutting net debt to roughly AUD 420 million. The company also amended its ANZ facility, deferring amortization and extending maturity to September 2027. "The combination of the equity raising announced today, the revised facility arrangements, the planned asset sales, and improving operational performance gives us a credible pathway to a more and required sustainable capital structure," Jackson said. The urgency is clear from the leverage trajectory. Pro forma net debt to EBITDA drops from 2.7x to 2.5x, but the target is 2.1x by FY27. As Simon Vertullo put it,We need to get the debt under control, as James mentioned, or at a lower level. We achieve that through the asset sales, the capital raise, and the progression of a turnaround plan.