Pinned straw:
Agreed, the older the aircraft, the more likely the excess costs of maintenance - hence QAN’s move to replace all its Fokker fleet with E190’s at the end of 2026 and Scott McM has flagged the AQZ Fokker fleet gone in 2029 and 2030. But the surprise was blaming part of the cost blow out on depreciation.
its also curious that such a deep introspection should occur now and it ‘seems’ there are others in the background involved in this decision. I’ll fess up and say I am a part conspiracist type of guy “the fatal JFK shot did come from the grassy knoll” - so, here’s my theory:
Someone has been looking over the books of AQZ and they’re not convinced the accounts reflect a true and fair view. Auditors have become involved, hence the likely adjustment to depreciation. Maybe a new methodology of providing for additional future costs has been formulated. I’m thinking we have someone in the background arguing for a lower price based upon lower future NPAT projections. When you invert this issue, would AQZ management be bothered with a debatable depreciation adjustment if not pushed to consider it by a third party.
Whilst our debt is high, it is very manageable and well within the companies ability to repay out of existing cash balances and large cash ops.Plus the company is immediately on selling 8 of the 10 E190’s to be acquired this year.
shifting sands at AQZ, but it’s definitely not quicksand.
As aircraft age, maintenance becomes one of the most significant and unavoidable cost drivers for any airline. Unlike a car, you can’t simply “pull over” when something needs fixing. Every component on an aircraft is certified, tightly regulated, and maintained according to strict schedules. That means no shortcuts, and often, no cheap parts.
Take the Fokker 100 fleet, for example. The last F100 rolled off the production line in 1997, 28 years ago. That makes even the “youngest” F100s in operation older than many of the pilots flying them. Over time, components wear down, metal fatigue sets in, and systems become increasingly difficult and expensive to support. Sourcing parts for out-of-production aircraft can be a logistical nightmare, with prices that would shock most people outside the industry. When you’re dealing with mission-critical components, where certification and reliability are non-negotiable costs climb quickly.
For Alliance Aviation, which operates one of the world’s largest Fokker fleets, this reality translates into longer maintenance downtimes and rising operating costs. Technological obsolescence compounds the problem: older avionics, hydraulics, and systems require specialist expertise and sometimes even custom fabrication to keep them airworthy.
The introduction of newer Embraer 190s into the fleet was a smart strategic move. In the short term, these younger jets offer lower maintenance costs and better fuel efficiency. Their parts are readily available, and the support network is modern and robust. However, like any aircraft, their advantage is temporary. As flight hours accumulate and cycles add up, the same wear-and-tear principles apply just on a different timeline. Certain components are “life-limited,” meaning they must be replaced after a set number of hours or cycles, regardless of their condition.
In aviation, maintenance isn’t a choice it’s a regulatory and operational necessity. While older aircraft can still deliver reliable service, they do so at a growing cost. For airlines like Alliance, the challenge is balancing those maintenance costs with the economics of newer aircraft acquisitions.
The bottom line? Keeping aging aircraft in the air is becoming an expensive balancing act. For Alliance Aviation, the shift from the aging Fokkers to the Embraer 190s isn’t just about fleet modernization—it’s about cost control, reliability, and long-term sustainability.
Sad to see Scott go. Truly impressive what he's built, and I always liked his straight-talking, no-nonsense style.
Still, looks to be a amicable and smooth transition. And he'll still have a load of shares.
Brutal response to Alliance's guidance "update" yesterday. 43% nosedive! In trying to make sense of the reasons provided, I can see why. In order:
$15 million!?! That's insane. Depreciation is the easiest expense to forecast by a mile. They say it's a combination of planes/engines and base improvements. From their accounts they depreciate the former over 5-18 years and the latter over 4-30 years. Let's generously say the blended average is 10 years. That would mean you would have to capitalise $150 million more than you budgeted. But it gets worse. You would have to capitalise that $150 million more than you expected on 1 July. If you instead assume they're going to incur the extra costs on a fairly even basis over FY26, you would need to capitalise $300 million extra over the year. Not $300 million total. It's $300 million more than you budgeted. Compare that to the $176 million total they spent on PP&E in FY25 and $114 million in FY24.
R&M is just one element of it, but it tends to be instructive what you list first. In FY24 they spent $1.9 million on R&M and in FY25 they spent $2.4 million. How do you get to a $12 million blowout? Maybe there's some R&M hidden in the wages line but still...
I'm not sure if this is the first time they've disclosed this. I couldn't find anything in the annual report with a quick scan. Compare that figure to their doubtful debt provision at 30 June of $355k.
I can't get my head around this one at all. How much earlier than expected did they implement it? Let's say they implemented it a full three months earlier than expected. Unlikely but let's pretend. Presumably you'd budgeted the implementation cost at some point in the year so the earlier cost is just a timing difference, which gets resolved within the financial year. So if it's not implementation, the extra cost is the subscription, which you're going to incur for an additional three months. But that would mean the annual sub is $14 million for this one system. Compare that to total IT and comms cost of $6.7 million in FY24 and $7.8 million in FY25.
I'm calling Bullshit. Just to be clear, I don't think they are capitalising $300 million more than expected in FY26 or that the AVIAN system has a $14 million annual sub. I think Finance has just shat the bed. Big time. They didn't take into account the impact of past decisions, they "forgot" to budget various costs, and that led them them to guide the Board to a much rosier outlook than is the case. We're supposed to believe that it's coincidence his "step down" just happens to be on the same day they announce this plane wreck. Don't piss on my leg and tell me it's raining.
Alliance is one that I keep on my watchlist and semi regularly take a look at. What keeps me away is that I find it opaque. I'm not sure they do it deliberately but when they're carrying as much debt as them, I really want to see the runway to takeoff, beyond their insistence that it's just a year or two out. I question their on-time performance. I hope it's not terminal.
[Not held]