FIFO CONTRACT HELPS ALLIANCE AVIATION PROFITS TAKE-OFF

AN Eagle Farm aviation company has finalised a fly-in fly-out (FIFO) agreement with the resource industry for what is promised to be Australia’s longest ever FIFO contract term.

Alliance Aviation Services (ASX:AQZ) has ended final-stage negotiations with a mining company to provide FIFO services for the next 10 years.

Releasing first-half results for the 2012 financial year today, managing director Scott McMillan (pictured) described the term as the longest an Australian FIFO pact has ever been signed for.

“We cannot name the client just yet, but we have flown and supplied them for four years. They like what we do,” he says.

“They recognise that long-term relationships with suppliers are as important for them as us. There will be no additional proceeds from the pact, but it will add more stability and security to us and the client.”

The business reported a net profit after tax (NPAT) of $6.6 million for the six months to December 31, 2011 – 20.3 per cent up on the previous corresponding period. Revenue was up 45 per cent to $84.7 million, while earnings before interest, tax, depreciation and amortisation were $18.2 million in the same period.

McMillan – who receives an annual base salary of $358,000 – believes AQZ is on track to achieve its NPAT target of $16.4 million and revenue goal of $176.8 million in FY12 based on growing FIFO demand from resource companies.

The carrier has commissioned three aircraft in the first half with an additional plane commissioned in January.

“Our Fokker fleet continues to perform well as it is uniquely suited to service the resources sector. It has a Rolls-Royce engine that performs well in the heat,” says McMillan.

AQZ’s geographic coverage will expand on an ad-hoc basis.

“We do not tell our customers where to fly, they determine where we fly. Essendon Airport in Victoria is one of our growth hotspots. In the next six months Melbourne will form a larger part of what we do,” says McMillan.

“We will also have more flights operating from Cairns, Townsville and Brisbane. We have aircraft capable of operating to Papua New Guinea and other parts of Asia.”

AQZ shares today remained flat at $1.93 a unit.