Alliance (ASX:AQZ) share price edges lower despite positive update

The Alliance Aviation Services Ltd (ASX: AQZ) share price is backtracking today despite releasing an positive update. Here’s what the company announced.

| More on:
airplane on the ground at airport terminal

Image Source: Getty Images

The Alliance Aviation Services Ltd (ASX: AQZ) share price is slightly in negative territory during mid-afternoon trade. This comes despite the company announcing an update to its wet lease agreement with Qantas Airways Limited (ASX: QAN).

At the time of writing, the aviation services company’s shares are selling for $4.17, down 0.4%.

What did Alliance announce?

Investors appear unfazed by the company’s latest announcement, sending Alliance shares lower.

According to its release, Alliance advised that Qantas has exercised its option to call up 5 additional Embraer E190 aircraft. This follows a wet-lease agreement signed in early February, enabling Qantas to lend 11 aircraft based on market conditions.

Previously, Qantas asked Alliance for 3 E190 aircraft to service its route network, which is expected to commence 25 May.

However, with today’s update, Qantas will now take delivery of 8 aircraft. The E190 planes will be based in Adelaide and commence operating from 21 June 2021 onwards. Qantas recently created a new Adelaide-Gold Coast route which will service 4 times per week, beginning 25 June.

The planes are expected to compete for market share against Regional Express Holdings Ltd (ASX: REX) and ASX-delisted company Virgin Australia.

Alliance managing director, Scott McMillan welcomed the extended agreement, saying:

This is an exciting development for Alliance and further extends on previous wet leasing arrangements that Alliance has had with Qantas.

The extension of the arrangements with Qantas is also further confirmation that the E190 is the perfect aircraft to take advantage of the new route network that is developing in the post- COVID aviation recovery.

Each option has an initial 3-year period, with the remaining aircraft available at Qantas’ disposal.

About the Alliance share price

In the last 12 months, Alliance shares have climbed to register a 100% gain, with year-to-date performance just below 10%. The company has been on an upwards trajectory citing a recovery in the aviation sector from COVID-19.

At today’s prices, Alliance has a market capitalisation of roughly $670 million, with approximately 160.4 million shares on issue.

Wondering where you should invest $1,000 right now?

When investing expert Scott Phillips has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for more than eight years has provided thousands of paying members with stock picks that have doubled, tripled or even more.*

Scott just revealed what he believes could be the five best ASX stocks for investors to buy right now. These stocks are trading at near dirt-cheap prices and Scott thinks they could be great buys right now.

*Returns as of May 24th 2021

Motley Fool contributor Aaron Teboneras has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

More on Industrials Shares