Australian Charter Operator Gets Opportunistic About Tourism Surge

Alliance Airlines has clinched a major aviation charter contract with giant Japanese tourism operator JTB as the carrier continues to diversify and look for niches in a market dominated by the Qantas-Virgin duopoly.

Alliance, based in Brisbane, has signed a three-year service contract with JTB to provide air charters for inbound Japanese tour groups.

The services will start in April, providing day trips from entry hubs including Cairns, the Gold Coast or Brisbane, allowing tourists to spend up to eight hours visiting Uluru (Ayer’s Rock) and returning back to their originating port the same evening.

“This unique charter will maximise tourist opportunities on the ground and also minimize their travelling time overall,” said Lee Schofield, the airline’s CEO.

The JTB charters follow on from a similar arrangement with U.S. tour operator Tauck, which uses Alliance as a key part of its package tours to Australia and New Zealand. Tauck runs around 60 tours a year, and these typically include private charter services from Melbourne to the Outback, the Great Barrier Reef and Sydney. Often, visitors will also visit New Zealand on an Alliance charter, according to Schofield.

The move into tourism charters adds another string to the bow of an airline operator that hasn’t been shy about entering the niche markets seen as too hard by competitors.

Growing with the mining boom

Alliance Airlines was founded in 2002 with two Fokker aircraft to tap into the growing fly-in, fly-out market, which accompanied Australia’s mining and resources boom. Fly-in, fly-out work continues to dominate the airline’s activities; Alliance has contracts with BHP Billiton and several other mining companies in its home state of Queensland.

The more recent mining surge in Western Australia saw Alliance step up its presence in the state, with 11 aircraft based in Perth to service “almost solely the resources sector,” Schofield noted.

“The owners have never been afraid to purchase aircraft in large batches in order to acquire them at a low cost base and give us the ability to expand,” Schofield told Skift. In 2015, Alliance agreed to purchase 21 aircraft from Austrian Airlines in a $15 million (A$19.1 million) cash and stock deal. The current fleet of 32 makes Alliance the world’s largest operator of Fokker aircraft, with a fleet of F100, 70LR jet aircraft, and F50 turboprop planes.

Besides long-term fly-in, fly-out contracts and charter operations, the airline has dabbled in scheduled passenger services since its early days, but struggled initially in the travel agent-dominated pre-online booking days.

Its big break in passenger services came in May when Virgin Australia pulled out of several regional services, removing eight of its 14 ATR 72-500/600s and ending turboprop operations in Queensland as part of its fleet simplification and cost reduction efforts. That move meant the end of services from Brisbane to Bundaberg, Gladstone and Port Macquarie – and an opportunity that Alliance could seize.

Alliance now runs these services as wet lease operations under a Virgin codeshare and takes advantage of Virgin’s direct and global distribution system participation, its lounges, and frequent flyer program.

“The partnership works really well. We have real complementary skill sets: I don’t think anyone operates regional jets as well as we do, but … our strengths do not lie in marketing, branding and distribution,” he said.

Schofield said while the Virgin partnership has been a success, scheduled passenger services “are on the bottom of the (priority) list,” as Alliance’s business is still dominated by long-term charter contracts, ad hoc charters, and wet lease activity.

Largest Fokker fleet in the world

Alliance is also capitalizing on its relatively large and growing Fokker fleet, moving into aircraft and parts sales. Schofield said the airline still has access to a number of ex-Austrian Airlines Fokkers which it may add to the fleet, onsell or dismantle for parts which are becoming harder to find as they are no longer manufactured.

In Europe, it has established a subsidiary, Alliance Aviation Services Slovakia, which provides wet and dry leasing, aviation maintenance services, and aircraft and parts sales. He also sees significant opportunities close to home, with around 80 Fokkers in service in Australasia – not just at Alliance, but also in the Qantas, Virgin and Air New Guinea fleets.

Looking forward, Schofield anticipates “more of the same for the next 12 to 18 months.”

“There’s still growth in our markets and the challenge is managing the growth as we keep up with the opportunities. The challenge is bringing more aircraft in, training more staff and keeping things going while focusing on our three very simple KPIs (Key Performance Indicators) of safety, on-time performance and financial sustainability,” he said.

And with a 2017 profit of $15.37 million (A$19.6 million), a 45 percent increase on the previous year, the airline is certainly meeting the challenges.