Why the Alliance Airlines’ share price is surging higher

Alliance Airlines’ share price jumped 4.7% today after it announced increased flights and firmed up its FY20 guidance.

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The Alliance Aviation Services Ltd(ASX: AQZ) share price has jumped 4.7% today. This comes after the Queensland state government announced a deal to revive tourism in the area. The airline will soon be flying from Brisbane to Proserpine 4 times a week.  

QLD Premier, Annastacia Palaszczuk said of the announcement: “Tourism supports one in three jobs in the Whitsundays. We know how crucial this industry is to the livelihoods of people in this region.”

Whitsunday Coast Airport COO, Craig Turner stated, “These flights present the opportunity for WCA to develop a partnership with Alliance Airlines through this challenging period and beyond.”

Flights can be booked from today and will begin on 22 June.

Alliance Airlines, the nation’s workhorse

The move further cements Alliance Airlines as a reliable travel partner. The company’s core offering is fly-in-fly-out services for resource projects across the country. These flights increased during the coronavirus pandemic to maintain social distancing. 

This swift and agile approach from Alliance allowed them to increase flights during the pandemic and win new resource clients. On 20 March the company also reported a large increase in charter revenue. This was driven by social distancing and the lack of operating alternatives. 

The company is one of the unsung heroes of the COVID-19 period through its support of resource projects. In a recent market update, Alliance provided guidance of a likely $40 million dollar profit.

This is in large contrast to small airline competitor, Regional Express Holdings Ltd (ASX: REX). The airline entered the pandemic demanding money from Western Australia and Queensland state governments. 

Alliance Airlines’ share price performance

Alliance Airlines’ share price has outperformed the aviation sector and is up 8.7% year-to-date. It has a price-to-earnings ratio (P/E) 4 points higher than its 8-year average.

In 2019, Qantas Airways Limited (ASX: QAN) took a 19.9% interest in Alliance, making it the airlines largest shareholder. This acquisition is currently under investigation by the Australian Competition and Consumer Commission. Issued have been raised regarding purchasing the large stake in an “important and growing competitor”. I fully agree with this as the airline’s strength has come from its independence and agility.

Foolish takeaway

Alliance Airlines continues to win both work and favour across the country. It has been a rock-solid partner for the resources sector throughout the pandemic. I believe its ability to deliver continued service has set up this organisation for sustained incremental performance. 

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Motley Fool contributor Daryl Mather has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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