ALLIANCE AXES ADELAIDE DIVISION

ALLIANCE AXES ADELAIDE DIVISION

ALLIANCE Aviation Services Limited (ASX:AQZ) will discontinue heavy maintenance of aircraft at Adelaide Airport to cut costs.

The Brisbane-based FIFO provider will outsource operations to Austrian Technik Bratislava in Europe, a Lufthansa subsidiary that specialises in servicing Fokker aircraft.

The move will impact 22 staff members at the site and 10 contractors, with Alliance providing some employees alternative positions within the company.

Staff being made redundant will be offered support to transition to other employment opportunities.

Alliance anticipates the measure will result in minimum cash savings of $1.7 million a year.

Redundancy expenses are expected to be in the range of $400,000 and $800,000.

Alliance managing director Scott McMillan (pictured) says the cost benefit will boost profitability in the long run.

"The closure is part of structural and operating changes to improve the company's long term profitability that were outlined in the half yearly results presentation," McMillan says.

"We have already foreshadowed a reduction in the company's fleet and the consequent improvement in productivity through increasing aircraft utilisation.

"Through these and other measures we will maintain our position as the leading provider of contracted aviation services in Australia.

"The change at Adelaide will have no effect on our services to the resources sector, or our diversification into tourism-related and other sectors across Australasia."

The company posted a decline in underlying profit for the first half of $6.3 million, down from $7.1 million in the previous corresponding period.

A tourism-related charter service has been implemented to combat the downturn in the resources sector.

Alliance will continue heavy maintenance in Brisbane and line maintenance at Brisbane, Perth, Adelaide, Cairns, Townsville, Melbourne and Auckland.

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