Virgin Australia and Alliance Aviation Enter Charter Partnership

15th Feb 2016

In an effort to boost their business amid the current downturn in the mining and oil & gas industries, Australian carrier Virgin Australia and Texas, US-based fly-in fly-out airline operator Alliance Aviation Services have agreed to a mutually beneficial, long-term charter partnership today.

According to the arrangement the two airline operators have made, the existing charters will remain under their current owner, but any future deals will be made and operated as a partnership between the two.

Virgin and Alliance are now waiting for the approval from the competition regulators in Australia and the United States.

Both the Australian and the American airline are using Fokker planes. Last year, Alliance bought 21 of these aircrafts from Lufthansa, Germany for a reported $20.7 million in cash and shares.

John Borghetti, Chief Executive of Virgin Australia said the partnership will enable both sides to better compete against the likes of QantasLink, Airnorth and Cobham Aviation Services and that it will improve their current charter market positions.

Managing director of Alliance Aviation Services, Scott McMillan said that partnering with Virgin Australia made a ?great deal of logic?.

Virgin signed a similar partnership with Skywest in 2011. A year later, Virgin Australia took over the Perth-based carrier for $100 million and later launched the Virgin Australia Regional Airlines.

According to the latest half-year results, Alliance Aviation Services are hit a bit hard by the downturn in the mining, oil and gas market and this is affecting its contract margin, operating schedule and payment terms.

The carrier reported a 35 per cent drop in net profit, which is now $4.1 million and has decided not to declare an interim dividend.

The airline said its flying hours are now stable, but its revenue still dropped by 10 per cent. The main reason for this is that Alliance passed on the fuel prices savings to its passengers.

Speaking about the downturn in the resources industry, Borghetti said it is putting a pressure on all charter airlines. According to him, Virgin ?had performed well against the backdrop of a slowing resources sector.?