Alliance Aviation Services

(AI video summary)

This video was created on 7 November 2025 for IG audiences by ausbiz.

ASX code: AQZ

Alliance Aviation shares plunge after earnings downgrade

Alliance Aviation Services shares fell sharply after exiting a trading halt and warning of materially lower financial year (FY) 2026 earnings due to rising costs. Adjusted earnings are now expected at $77 million to $85 million, with profit before tax around $50 million. Higher aircraft and engine prices, maintenance costs and a contract dispute drove the downgrade.

Qantas shares also eased, as the airline holds a 20% stake in Alliance and operates some aircraft for the Qantas Group.

FY2026 guidance cut as costs soar

Maintenance costs of about $1 million per month are significant, but analysts sugges the sell-off may be overdone. Alliance has invested heavily in its fleet, which should improve returns over time.

Despite the hit, the company remains profitable, guiding for $45 million to $50 million profit before tax versus $80 million last year. At current levels, the stock trades on roughly five times profit before tax, considered cheap for a business with a strong operating history.

Investment outlook

The key risk lies in the balance sheet, which carries $436 million in net debt, mostly asset-backed by aircraft. Questions remain about depreciation schedules and asset valuations.