Flying high – a remarkable track record
Back in 2002 Alliance Aviation Services (ASX:AQZ) commenced flying with just two aircraft. Today, the operating aircraft fleet size has grown to 43, with a further 14 new aircraft set to arrive in the next 12 months. AQZ’s business is literally flying! The company operates fly-in fly-out charter services for Australian mining companies and a range of ancillary aviation services, and has a strong track record of consistent profits and growth. AQZ delivered record profits in FY20 despite the global COVID pandemic. The aviation market is very cyclical, boom and bust, so how has Alliance developed such a remarkable track record?
Alliance’s share price at $3.60 today has flown high since listing on 20 December 2011 with an IPO price of $1.60. Long term shareholders have enjoyed a total return including dividends of 149.1 per cent since then – that’s an annual compound rate of return of 10.9 per cent – smashing the rate of return for the Small Ords Accumulation Index at 6.3 per cent over the same period.
Operating low unit capital cost aircraft, with high cost structure flexibility, means the company has consistently made good returns. Gary Rollo catches up with Lee Schofield to discuss the how COVID-19 impacted the business and the next milestone, acquiring 14 E190’s, to again position the company for its next growth phase.
“Typically when you’re leasing aircraft, there’s this driver to work them hard and to fly them for the sake of flying them, even in difficult markets. One of the reasons why we’ve been able to be so predictable, even during tougher times in our business is that owning our own aircraft, we’re not forced to operate them that hard. We have a very low utilization, which sits very comfortably with our low capital costs. So, we can park aircraft and wait until it’s a better time to deploy them.” Lee Schofield
The Montgomery Small Companies Fund owns shares in Alliance Aviation Services. This video was prepared 15 October with the information we have today, and our view may change. It does not constitute formal advice or professional investment advice. If you wish to trade Alliance Aviation Services you should seek financial advice.
You can read more on Alliance Aviation Services here: WHY WE OWN SHARES IN ALLIANCE AVIATION
Gary Rollo is the Portfolio Manager of the Montgomery Small Companies Fund. Gary joined Montgomery in August 2019 after spending three years at MHOR Asset Management in Sydney as a Founder and Portfolio Manager. Prior to this, Gary was a Portfolio Manager at Renaissance Asset Manager in Sydney for six years. Before moving to Australia, Gary spent five years in London running Morgan Stanley’s Technology Sector Equity Research Team, as well as two years covering technology companies for JP Morgan.
This post was contributed by a representative of Montgomery Investment Management Pty Limited (AFSL No. 354564). The principal purpose of this post is to provide factual information and not provide financial product advice. Additionally, the information provided is not intended to provide any recommendation or opinion about any financial product. Any commentary and statements of opinion however may contain general advice only that is prepared without taking into account your personal objectives, financial circumstances or needs. Because of this, before acting on any of the information provided, you should always consider its appropriateness in light of your personal objectives, financial circumstances and needs and should consider seeking independent advice from a financial advisor if necessary before making any decisions. This post specifically excludes personal advice.
