Alliance and Virgin advance proposed strategic partnership, sign long-term agreement

An Alliance Fokker 50. (Rob Finlayson)

Alliance Aviation Services and Virgin Australia’s proposed strategic partnership has taken a step forward with the signing of a long-term agreement.

In a statement to the Australian Securities Exchange on Thursday, Alliance said the strategic partnership, which was first announced in February, would involve a charter partnership to jointly grow their charter businesses.

The two carriers would also provide and procure services for each other on a preferential basis, including aircraft procurement, spare parts pooling, maintenance, ground handling services and customer benefits.

Alliance managing director Scott McMillan said the partnership meant both carriers would be “better placed to compete for charter tenders, with the ability to offer a wider range of aircraft, connectivity, services and facilities”.

“Today’s announcement, in conjunction with our acquisition of the Austrian Airlines Fokker fleet in November 2015, continues our transition into a broad based aviation company that offers an extensive range of services that will have the potential to significantly grow our revenue base over the coming years,” McMillan said in a statement on Thursday.

Virgin Australia Regional Airlines (VARA) chief executive Merren McArthur said: “We are looking forward to partnering with Alliance to build upon the strengths of each airline and to grow our charter businesses.”

In May, McArthur told Fairfax Media Alliance and Virgin has complimentary businesses given Alliance’s operations were mainly on Australia’s east coast and South Australia, while VARA’s biggest base was in Western Australia.

The proposed partnership required Australian Competition and Consumer Commission (ACCC) approval.

On face value the partnership appears to make a lot of sense. Fly-in/fly-out (FIFO) flying has declined following the end of the so-called mining boom, leaving the market – where other major players include QantasLink (Network), Cobham Aviation Services and Skippers – considerably more competitive.

Further, Alliance and VARA also both operate the Fokker 100 jet. (VARA also operates A320s and inFebruary withdrew its Fokker 50s).

With its recent acquisition of Austrian Airlines’ entire Fokker 70 and Fokker 100 fleet, Alliance has moved into aircraft and spare parts brokerage and leasing.

On August 11, Alliance reported net profit of $13.5 million for 2015/16, returning to profitability after a statutory net loss in the prior year when the company wrote down the carrying value of its fleet in response to changing market conditions.

 

Australian Aviation

Alliance Aviation Services and Virgin Australia announce “strategic partnership” for FIFO charter

FOKKER 50 ALLIANCE HBA JUL13 RF IMG_9934 crop

Alliance Aviation Services and Virgin Australia have announced a partnership agreement that will see them cooperate in the fly-in/fly-out (FIFO) resource charter market.

“Both airlines will benefit from the ability to leverage each other’s strengths, particularly in terms of network, brand, product and service offering, and technical expertise,” the two companies said in a joint statement to the ASX on Monday.

“This will allow Alliance and Virgin Australia to develop a compelling customer proposition and to more effectively compete in the Australian FIFO market.”

The “long-term strategic partnership” will see Virgin and Alliance form a “charter partnership” to “jointly grow” their charter businesses. The two companies say existing FIFO contracts will remain with their current operators, “with all new contracts to be operated under the Charter Partnership”.

Further, “Alliance and Virgin Australia Regional Airlines [VARA] will enter into agreements to provide and procure services for each other on a preferential basis. This includes, but is not limited to, aircraft procurement, spare parts pooling, maintenance and ground handling services” the statement reads.

On face value the partnership appears to make a lot of sense. FIFO flying has declined following the end of the so-called mining boom, leaving the FIFO market – where other major players include QantasLink (Network), Cobham Aviation Services and Skippers – considerably more competitive.

Further, Alliance and VARA also operate the same fleet types, the Fokker 100 jet and Fokker 50 turboprop (VARA also operates A320s). With its recent acquisition of Austrian Airlines’ entire Fokker 70 and Fokker 100 fleet, Alliance has moved into aircraft and spare parts brokerage and leasing. Virgin Australia, meanwhile, has announced the retirement of all its Fokker 50s by the end of the current financial year – aircraft that perhaps could either join the Alliance fleet, or be brokered for sale by Alliance.

“We look forward to collaborating with Alliance to further build a competitive, efficient and sustainable charter business,” Virgin Australia CEO John Borghetti said in the statement.

Alliance managing director Scott McMillan said: “We look forward to partnering with Virgin Australia to leverage the operational and commercial expertise of our respective businesses. With our combined services and expertise we see a great deal of logic in working together.”

The two airlines note the deal is subject to ACCC approval.

 

Australian Aviation