Alliance Aviation Executes Strategic Sale of Airframes and Engine Cores
AQZ (AQZ) Share Update November 2024 Wednesday 27th
Alliance Aviation Announces Sale of Airframes and Engine Cores
Alliance Aviation Services Limited (ASX: AQZ) has announced the execution of significant contracts for the sale of airframes and engine cores, aiming to optimize its inventory and financial position.
Instant Summary:
- Sale of six Embraer E190 airframes to Scissortail Aviation and Bellinger Asset Management.
- Sale of 13 surplus Rolls-Royce engine cores to Airline Technical Support Caribe B.V.
- Estimated cash benefit of $20-23 million from these sales.
- Reduction in future annual capital expenditure by $10-15 million from FY26.
Details of the Sale
Alliance Aviation Services Limited has entered into binding contracts with Scissortail Aviation, LLC and Bellinger Asset Management Pty Ltd for the sale of six Embraer E190 airframes. These airframes are part of the 30 initially acquired under the 'Aercap Transaction' announced in February 2023.
The delivery of these airframes is scheduled to commence in December 2024, with completion by February 2025. Four of these airframes are already owned by Alliance, while two are pending settlement with Aercap in early 2025.
Engine Core Sale
Additionally, Alliance has contracted with Airline Technical Support Caribe B.V. for the sale of 13 surplus Rolls-Royce Tay 620/650 engine cores. These engine cores are no longer needed due to recent acquisitions of serviceable engines, which will replace the Rolls-Royce 'Total Care' program starting January 2025.
Financial Impact
The transactions are expected to yield a cash benefit between $20 million and $23 million, primarily reflected in the second half of FY25 results. The cessation of the Rolls-Royce program will further reduce future capital expenditures by approximately $10 million to $15 million annually from FY26 onwards.
The sale of airframes and engine cores is a strategic move by Alliance Aviation to streamline its operations and improve financial efficiency. The expected cash inflow and reduction in future expenditures could positively influence the company's stock, as investors may view these actions as prudent financial management.
Investor Reaction:
Analysts are likely to view this announcement positively, given the immediate cash benefits and long-term cost savings. The market may respond favorably if Alliance demonstrates effective reinvestment of these funds into growth opportunities.
Conclusion:
Investors should consider the potential benefits of Alliance's strategic sales and the resulting financial improvements. Monitoring the company's future moves in reinvesting these funds could provide further insights into its growth trajectory.