| Investor | Approach | Verdict | Conviction | In one line |
|---|---|---|---|---|
| A | Quality, long-term value | Avoid | 7 | A real niche, but in FY26 the fleet cost more to keep flying than the business made in cash. |
| B | Deep value, margin of safety | Watch | 5 | A haircut asset value sits only 7.5% above the market cap, too thin a cushion to rely on. |
| C | Global macro, reflexivity | Watch | 8 | A credit workout first. The equity only works if asset sales and the bank both come through. |
| D | Growth, fundamental stock picking | Watch | 7 | A sound mining-transport franchise with no room to grow until the balance sheet is repaired. |
Not one of the four voted Buy. Alliance Aviation needs three to enter a basket, so it does not.
Bottom line
On EBITDA, Alliance Aviation looks like a bargain at about 2.9 times the company's own FY27 guidance. Take out the cost of keeping the fleet flying and it is 12.6 times. The auditor has flagged a material uncertainty about going concern in both FY26 reports, and the directors tie covenant compliance to the A$40M raise or to selling surplus aircraft and hangars by December 31, 2026. On the free cash flow the committee expects, we think the A$109.2M market cap is roughly fair. What worries us is the downside: if this goes wrong, shareholders get diluted again rather than waiting longer for a recovery. The half-year report, due by February 28, 2027, is the first real test.
Key takeaways
- The core flying business holds up. FIFO contract revenue rose 7.0% to A$319.2M on flat flight hours, and about 90% of revenue is contracted (FY26 results presentation, August 26, 2026).
- The balance sheet is the problem. Pro forma net debt is A$419.8M, about 2.5 times underlying EBITDA. The bank facility matures in September 2027, and equity is about 21% of enterprise value.
- Cash lags profit. Operating cash flow was A$17.7M after A$32.8M of interest, against underlying pre-tax profit of A$38.2M (Annual Report).
- The biggest customer is also the biggest shareholder. Qantas holds 19.69%. It repriced its wet lease upward from July 1, 2026, and is cutting the aircraft it takes from 30 to 23 over FY27.
- The seats split on what decides it. A: whether the fleet can earn its keep at all. B: the thin asset cushion. C: the bank. D: the used aircraft market.
The business in 60 seconds
Alliance flies people for other organisations. FIFO contract work, mostly flying mine crews to remote sites under 25 major contracts, was 46% of FY26 revenue. Wet leasing was 45%: Alliance supplies aircraft, crew, maintenance and insurance, and an airline, Qantas or Virgin Australia, sells the seats. Charter, a small scheduled network and a parts trading arm being wound down make up the rest (FY26 results presentation). The filings do not split profit by segment.
The fleet is 80 aircraft: 45 Embraer E190s and 35 Fokker 100s and 70s. Five Fokker 100s are in storage and five aircraft are on dry lease to another operator (Annual Report, June 30, 2026). Both types are out of production, and the Fokker maker has been gone since 1996 (general knowledge, not in the filings we read). The company says it is the only Australian contract and charter operator with IATA's IOSA safety certification (FY26 results release).
The register is tight. Before the raise the top 20 holders owned 78.57%, led by Qantas at 19.69% (Annual Report). In 2023 the competition regulator opposed a Qantas bid for the rest of the company, and Qantas walked away.
What changed
- FY26 ended in a A$90.9M statutory loss. A$164.8M of impairments and write-downs fell mostly on the Fokkers, their engines and parts. Underlying pre-tax profit halved from A$82.1M (Appendix 4E, August 26, 2026).
- The Qantas contract was repriced. On August 5, 2026, Alliance announced higher pricing from July 1 and a new annual escalation formula. The fleet committed to Qantas steps down from 30 aircraft to 23 over FY27. In the first half of FY26 the company had described this arrangement as commercially unviable and cash flow negative.
- The company raised A$40.1M by issuing about 57.2M new shares, 35.5% of the old count. Qantas and the second largest institutional holder, whose senior partner sits on the board, took their full pro rata. Retail holders took up 10.6% of their entitlement and sub-underwriters took the rest (ASX releases, August 27 and September 16, 2026).
- The bank extended. In June 2026 the bank lender pushed its A$145.7M of term loans out to September 2027 and deferred scheduled repayments. The leverage and loan-to-value covenants were renegotiated, effective June 30, 2026 (Annual Report, note B2).
- New CEO. Steven Greenway, who ran the Saudi low-cost carrier flyadeal, started on October 1, 2026, replacing Stewart Tully after 11 years (ASX release, August 18, 2026).
- Directors bought shares. One director, Simon Lange, bought 555,075 shares on market in September for about A$348,000. The chair also bought on market and took up his rights. No director sold in 2026 (director interest notices).
The bull case on Alliance Aviation
Remote mines still need their crews flown in, and Alliance is the biggest operator doing it. FIFO revenue grew 7% in a year when wet lease and trading shrank, and nine-tenths of revenue sits under contract. Fuel is largely passed through to customers (ASX release, March 25, 2026). Investor D called the core "an essential transport utility for Australian miners with steady organic growth."
The repairs have started. The money-losing Qantas terms are repriced. Second-half labour costs fell 15.4% on a 14% drop in flying hours. The company guides FY27 underlying pre-tax profit to A$55M to A$60M, with A$27M of cost savings that year and A$38M a year from FY28. With equity only a fifth of enterprise value, a modest improvement in the business moves the shares a lot. Investor A saw the risk of its own position: "My framework systematically misses turnarounds, and this may be one."
The bear case on Alliance Aviation
EBITDA flatters this fleet. Maintenance capex of A$135.6M, A$33.6M above depreciation, included A$62.2M of parts drawn from inventory that were paid for in earlier years, so the FY26 cash line understates the true cost. Investor A put the core of the case in one line: "A business that needs a bank's continued goodwill to stay a going concern is not one I can hold for 5 to 20 years with confidence."
The company's own timetable has already slipped once. The half-year report said six AerCap E190s would be sold before June 30, 2026 to fund their own purchase. By year end two E190s were held for sale, and the last AerCap payments had slid into the first half of FY27 (half-year report, February 20, 2026; Annual Report, note J4). Investor B rejected the book discount as protection: "the discount to accounting equity is not equivalent to a realizable margin of safety." Investor C called the stock "a corporate credit workout disguised as an equity stub."
On today's evidence we lean bear. This may well be a good business. The FY26 cash flow just doesn't show it yet.
Valuation
What the price requires. The company's own impairment test used a 9.69% post-tax discount rate and 2.38% terminal growth (Annual Report, note D2). At those rates the A$109.2M market cap needs about A$8M a year of free cash flow to equity, growing from there. Shareholders in a leveraged company with a going-concern flag will want more than 9.69%; at 15% the figure is about A$14M (our arithmetic). The company guides FY27 underlying free cash flow to A$10M to A$20M, before a A$33M AerCap payment it excludes from the measure.
What the committee expects. Free cash flow in FY29 under each seat's three scenarios, with the probability it attached, in A$M.
| Investor | Bear | Base | Bull | Probability-weighted, year 3 |
|---|---|---|---|---|
| A | 35%, negative to about 0 | 45%, 10 to 25 | 20%, 30 to 50 | 15.9 |
| B | 35%, -25 | 45%, 15 | 20%, 45 | 7.0 |
| C | 35%, -20 | 45%, 25 | 20%, 55 | 15.3 |
| D | 35%, -20 | 45%, 25 | 20%, 55 | 15.3 |
| Average | 13.4 |
We took ranges at their midpoints and Investor A's bear at zero, which flatters it. The A$13.4M average sits close to the A$14M the price needs at a 15% rate, so on the central number the stock is about fairly priced. The average hides a lopsided spread, though. Every seat gave the bear case 35%, and in every bear case free cash flow is negative. With A$489.0M of secured debt, negative cash flow means another raise on worse terms.
Equity against enterprise. The midpoint of guided free cash flow, A$15M, is a 13.7% yield on the market cap. Count the debt and it is 2.8% on an enterprise value of about A$529M, below the roughly 6.7% the company pays on its borrowings (interest paid over drawn debt, our arithmetic). We could not source the Australian 10-year yield for this note. The equity yield looks high because the lenders get paid first.
Our adjustments from the filings. EBITDA less total maintenance capex was A$41.9M in FY26, which puts enterprise value at 12.6 times (our arithmetic). Other income inside the underlying result rose from A$8.8M to A$18.9M, about half of underlying pre-tax profit. The filings we read do not break it down. Until they do, we treat the underlying profit as less reliable than the cash flow statement.
Comparables
Our comparables tool reads SEC filings only, and no US-listed airline does contract mining work. The obvious peers, Qantas and Virgin Australia, are Alliance's own customers and neither files with the SEC, so we left the table out. For reference, enterprise value is about 7 times FY26 underlying EBIT (our arithmetic).
Key risks
Ranked by the desk. Raised by shows where each risk came from.
| # | Risk | Why it matters | Severity | Raised by | First signal |
|---|---|---|---|---|---|
| 1 | Going concern and covenants | All debt is secured; if sales slip, lenders can force a sale or another raise | High | Annual Report note K2; Analyst; Investors A, B, C, D | Held-for-sale assets not sold by December 31, 2026 |
| 2 | Bank refinancing | A$145.7M of term loans mature in September 2027 | High | Annual Report note B2; Investors A, B, C | No extension announced by mid-2027 |
| 3 | Maintenance above depreciation | The fleet costs more to keep than it writes off, on types no longer built | High | Analyst; Investor A, weakest link | FY27 cash maintenance plus inventory draw above depreciation |
| 4 | Asset sale prices | A$60M to A$75M guided, "subject to timing and execution risk" | High | FY27 guidance; Investors C and D, weakest link | Sale prices below carrying value at the half-year |
| 5 | One customer, also the top shareholder | Wet lease is 45% of revenue, terminable for convenience, and the price rise is undisclosed | High | Results presentation, Appendix B; Analyst; Investors A, B | Any further cut below 23 aircraft |
| 6 | Earnings quality | Inventory up A$37.4M, parts drawn into capex, other income doubled | Medium | Investors A, B; desk arithmetic; forum (unverified) | Other income's share of underlying profit at the half-year |
| 7 | Leadership change mid-turnaround | New CEO without listed FIFO experience, interim CFO | Medium | Results presentation, Appendix B; Analyst | CFO seat still interim at the half-year |
| 8 | Mining cycle | FIFO demand follows mine activity; some customers are in fossil fuels | Medium | Results presentation, Appendix B; Annual Report | FIFO flight hours down at the half-year |
Fuel is missing on purpose: wet lease customers pay for it and FIFO contracts reprice for it (ASX release, March 25, 2026).
What to watch
| Date | Event | What it decides |
|---|---|---|
| November 26, 2026 | Annual general meeting (ASX release, September 17, 2026) | The new CEO's first public account |
| By December 31, 2026 | Sale of held-for-sale aircraft and hangars, and the final AerCap settlements (Annual Report, notes K2 and J4) | Whether the covenant bridge holds |
| By February 28, 2027 | Half-year report, due under ASX rules | Sale proceeds, profit against guidance, going-concern wording |
| Over FY27, to June 30, 2027 | Qantas fleet steps down from 30 to 23 aircraft (ASX release, August 5, 2026) | Whether repricing outweighs the lost flying |
| September 2027 | Bank term loans mature (Annual Report, note B2) | Refinancing or another raise |
| By August 31, 2027 | FY27 annual report, due under ASX rules | Leverage against the 2.1 times target, free cash flow against guidance |
Owning it onchain
Neither xStocks nor Backpack lists a tokenized version of Alliance Aviation.
The committee record
| Investor | Verdict | What would change its mind |
|---|---|---|
| A | Avoid 7 | Watch, and only if all hold: no going-concern note in the FY27 report, bank loans refinanced past September 2029, FY27 maintenance at or below depreciation with free cash flow of A$20M or more, A$60M of asset sales by the half-year, first-half underlying pre-tax profit of A$27.5M or more |
| B | Watch 5 | Breaks its thesis on negative FY27 underlying free cash flow, leverage above 3.0 times at June 30, 2027, or FY27 asset sales under A$60M. Lenders pulling back pushes it toward Avoid |
| C | Watch 8 | Buy if the bank extends past September 2027 with covenant room, Avoid if it demands repayment. Breaks its thesis on asset sales under A$50M, leverage above 2.4 times, or FY27 EBITDA under A$160M |
| D | Watch 7 | Buy if asset sales clear A$75M, Avoid if the used aircraft market freezes. Breaks its thesis on sales under A$60M at the half-year, leverage above 2.5 times, or a going-concern note in the FY27 report |
Data
| Item | Figure | Source |
|---|---|---|
| Market cap | A$109.2M | A$0.50 last trade, ASX market data, October 9, 2026; 218,352,403 shares, Appendix 2A, September 18, 2026 |
| Underlying EBITDA, FY26 / FY27 guidance | A$177.5M / A$175M to A$190M | Results release, August 26, 2026 |
| Underlying pre-tax profit, FY26 / FY27 guidance | A$38.2M / A$55M to A$60M | Results release |
| Statutory net result, FY26 | loss of A$90.9M | Appendix 4E |
| Operating cash flow, FY26 | A$17.7M | Annual Report |
| Maintenance capex / depreciation, FY26 | A$135.6M / A$102.0M | Results presentation; Annual Report |
| Drawn debt / pro forma net debt | A$489.0M / A$419.8M | Results presentation |
| Underlying free cash flow, FY27 guidance | A$10M to A$20M | Results release |
| Short interest | not sourced for this note |
Method. Four investors with different philosophies, each on a different AI model, read one identical fact sheet and voted independently; three Buys put a name in a basket. A non-voting analyst wrote the business breakdown and risk register. Alliance files nothing with the SEC, so we built the sheet by hand from its ASX filings, with each figure tied to its announcement.
Correction. Investor C's usual model was unavailable, so C ran on its fallback, the same model Investor D uses. Read C and D as closer to one voice than two this time. Both also wrote as if the whole A$60M to A$75M sale program were due by December 31, 2026. The filings put only the held-for-sale aircraft and hangars on that date and spread the rest across FY27, and our tables follow the filings.
As of October 9, 2026, BagsCapital manages no outside capital and holds no position in Alliance Aviation Services. Nothing here is investment advice.