Good find @Magneto

QantasLink going with E190s seems like a win for Alliance. They already fly a bunch for Qantas under a wet lease agreement, and can handle maintenance and parts for these birds.

Or is that just wishful thinking?

Guess depends where they source these E190s from. They might come with parts or they might chop up few E190s for parts?. When Qantas brought Network Aviation they went and brought around 10-11 F100s from Avianca (Colombian Airline) and from memory I think they did chop a few for parts or I might be getting confused with Alliance (back around 2011). Anyway one of the two were chopping F100s for parts.

There be four airlines operating E190s out Perth, VARA (Virgin), Alliance, National Jet Express and now Network. Guess the E190 must do ok in Pilbara heat!!

From my reckoning, 25 of the 30 QAN wet lease E190’s are in the QANLINK stable.

Network Aviation (NA) is wholly owned by QANLINK and its focus is on smaller FIFO airstrips, hence the aging F100’s.

On the QANLINK site, AQZ is listed as a strategic partner…as indeed it has been for quite some time.

Now, let’s study the timelines. May 2022 QAN lobbed its $4.75 offer against each QAN share and this had the approval of the AQZ Board.

Around early 2023, AQZ made the curious announcement to buy an additional 30 E190’s from AERCAP…this together with other small purchases made

some 63 E190’s. It seemed absolutely excessive at that time…but wouldn’t you think that QAN were in on this decision, just as AQZ were thinking about

replacements for their F50’s and F100’s?

Then, after this announcement the ACCC announced their initial decision to oppose. Ultimately they abandoned in early 2024, but I suspect they may have another crack at it. Time and circumstances might be conducive.

i have no doubt that QAN’s intention was to roll all of the FIFO stuff and regional travelling into one company with all of the E190’s of AQZ available and serviced by the Rockhampton base.

Conclusion: AQZ is front & centre to get the 14 E190’s to replace the NA F100’s commencing in late 2026. Either they will come from the existing EASTLINK E190’s coming off wet lease (which should appease the Thomas the Doubters on what happens post the 3 year leases) or they will come from current 13 AQZ E190 deliveries post 1HFY25.

Actually, with 11 of the E190’s down for parting out (which is brilliant because we’ve got to be making 30% to 50% gross profit on them) we may even be short on numbers to replace our fleet of 38 F100’s.

AQZ are playing this wonderfully and todays sale of surplus inventory is the cherry on the top.

Firstly, debt to be reduced by as much as $112m from these two announcements AND AQZ might now be in a position to think about a dividend in the near term

Plus, they have built up a damn good 'little black book' of global big hitters in the world of E190's.

I don't think the market has joined the dots on what’s happening here. .

I agree @Strawman, it’s difficult (possibly intentional for competitive reasons) to put the pieces together on the sale of parts – but this is how I see it.

 The two sales to date effectively represent the sale of 6 whole E190’s. Whilst there is something like 3,000+ parts to an E190, let’s assume the value is in the frames and engines.  

 The Sep 24 sale was for 6 air frames and some surplus support stuff (not engines) for circa $21m. The most recent announcement of the sale of the 12 engines for $62m.

 Thus, each of the six planes have been sold for $13.8m. As best as I can determine, the raw upfront cost is around $6.44m per plane (12 were delivered in FY23 at $77.3m).

Sure, there were costs of repositioning them in Australia and the usual general maintenance, but we are talking about a 100% mark up here or 50% gross profit.

 Did they over order on the second tranche of 30 E190’s, I would have thought so, but I can see a beautiful new stream of income emerging here as we cannibalize the planes.

 Given we will be retiring the Fokkers (38 of) over the next 5 years or so, the E190’s are ready to slot in and meet our FIFO gravy boat of locked in revenue and profits.

 I had shares in ASX listed PTB before it was sold to USA private company interests and I can tell you there are profits in plane parts.

 I suspect the market is concerned about

(a) continuation of the mining boom and FIFO requirements – personally this doesn’t stress me. I am more worried about whether we will be speaking Mandarin when talking to our new mine operators following a Xi march south.

(b) what happens to the wet leasing to QAN and Virgin at expiration of contracts (they were for 3 years from memory)

(c) the bird which Air India dropped recently (crazy but look at the graph, AQZ reacted negatively the moment it occurred.)

(d) The magnitude of the debt. Now this is the one that concerned me the most – but this recent sale and some $62m to hit the deck over coming months, ameliorates this big time.

 Not that we should have worried about the debt that much when comparing the net debt to EBITDA of 2.0x v other airlines.  

Qantas Airways: 3.1x

Singapore Airlines: 2.7x

Emirates Airlines: 4.0x

 Delta Air Lines: 3.2x

American Airlines: 4.5x

United Airlines: 3.8x

 Overall, this is a terrific announcement, and I like the building association with Beautech Power Systems who appear to control the worldwide market on the resale of engines etc. Looks like we will be habitual cannibals going forward.

The Alliance F100s are getting pretty old now and starting to show their age. Just for context, on larger jet aircraft, when you buy them new, around 25% of the total cost is typically for the engines alone — and that’s on top of everything else. I’ve heard the E190 is quite a new piece of kit in comparison.