Highlights

• Underlying Revenue declined 7.4% to $712.6m following cessation of Aviation Trading and lower wet-lease activity

• Underlying EBITDA fell 14.4% to $177.5m, with higher maintenance costs also weighing on earnings

• Second half underlying PBT improved 62% over the first half, signalling operational recovery momentum

• Alliance raised $40m in a fully underwritten Equity raising to strengthen the balance sheet

Alliance Aviation Services (ASX:AQZ) is Australia's leading specialist aviation company, providing charter, contract and wet-lease aviation services primarily to the resources, energy and government sectors. The company is the dominant provider of fly-in fly-out (FIFO) aviation services to Mining and resources operations across Western Australia, Queensland and the Northern Territory, while also operating wet-lease services for commercial airlines and maintaining an aircraft trading and leasing business. Alliance has long been regarded as a high-quality Business with strong contractual revenue, but FY26 has marked a significant reset in its Earnings profile.

Latest Developments

Alliance Aviation's FY26 results showed a substantial earnings reset. Underlying revenue declined 7.4% to $712.6m, mainly because of the planned cessation of Aviation Trading and lower wet-lease activity. Underlying EBITDA fell 14.4% to $177.5m, with higher maintenance costs also weighing on earnings. The more encouraging aspect was the second half, where management achieved a significant recovery in contract revenue and cost control, with underlying PBT improving 62% from 1H to 2H. Alliance simultaneously announced a $40m fully underwritten equity raising to strengthen the balance sheet. The business is therefore in turnaround mode, with FIFO/contract aviation becoming increasingly important to the earnings mix.

Industry Context

Australia's FIFO aviation market is structurally linked to the mining and resources Investment cycle. With significant Capital Expenditure continuing across lithium, iron ore, coal and gas projects, the Demand for specialist charter aviation services remains robust at the contract level. However, the wet-lease market — where Alliance operates E190 aircraft for commercial airline capacity — has experienced Volatility as domestic airline capacity management has changed. The cessation of Alliance's Aviation Trading segment removes an earnings stream that was previously a differentiator but also introduced earnings volatility.

Key Risks

• Resources sector capital expenditure slowdown could reduce contract flying activity and new contract wins

• Higher aircraft maintenance costs — a significant headwind in FY26 — may persist as the fleet ages

• Integration and execution risk following the $40m equity raising if proceeds are deployed into new aircraft or infrastructure

• Wet-lease market conditions remain competitive with domestic airlines managing their own capacity carefully

• Regulatory risks around pilot licensing, airspace changes and aviation safety requirements

Key Catalysts to Watch

• Sustained 2H momentum carrying into 1H FY27, demonstrating that the contract revenue recovery is durable

• New long-term FIFO contracts with Blue-Chip mining operators that provide multi-year earnings visibility

• Maintenance cost normalisation as the fleet cycle moves past peak inspection requirements

• Wet-lease demand recovery if domestic airline capacity tightens and third-party wet-lease demand increases

• Strategic use of the $40m equity raising proceeds in accretive fleet or capability investments

Conclusion

Alliance Aviation (ASX:AQZ) is executing a reset from a diversified aviation services model toward a more focused FIFO and contract aviation business. The 2H FY26 improvement in PBT is the most important recent data point — it suggests the underlying contract business is fundamentally sound even as the overall FY26 numbers look weak. The $40m equity raising addresses near-term Balance Sheet concerns. For investors focused on Australia's resources aviation market, AQZ at current levels represents a compelling turnaround story, provided the 2H momentum extends into FY27.