While most airlines are downsizing their fleets, charter airline Alliance Aviation (ASX:AQZ) is doing the opposite and expanding.

Alliance has escaped the worst of COVID-19 as demand for its charter flights holds up.

Having completed a $122m capital raising back in June, it is spending $US79.4m ($111.4 million) to buy a fleet of 14 Embraer E190 aircraft.

The Embraer E190 is a narrow-body aircraft, built in Brazil, that is designed for regional routes. The type was once operated by Virgin Australia (ASX:VAH) before being retired in early 2018.

The deal includes an option for another five Embraers and necessary equipment and training devices for the initial fleet. Deliveries will occur over an eight-month period beginning in September.


Acquisition ‘more than opportunistic’

Managing director Scott McMillan labelled the spending spree a growth opportunity, saying the new Embraers will not replace Alliance’s existing Fokker 100 aircraft.

Production of the Fokker 100s ceased in 1997, along with its parent company, forcing Alliance to find a new supplier.

“With many airlines not flying and the increased demand for a 100-seat narrow body configured aircraft in the Australian market, this acquisition is more than opportunistic, it underpins our expected growth,” McMillan said.

“Our Fokker fleet remains the core of our fleet and we believe will remain in service for many years to come, especially given our significant spare parts and inventory stores.

“With limited Fokker aircraft acquisition opportunities, it was also the time to acquire a newer aircraft in order to position us for our next growth phase.”


The ASX’s only aviation winner

Alliance shares began the year at $2.58 and now sit at $3.39, a 32 per cent gain.

Alliance Aviation (ASX:AQZ) share price chart


In contrast, Alliance’s peers have experienced a horror 2020. Qantas (ASX:QAN) is down 55 per cent, as was Virgin Australia (ASX: VAH) before it entered administration in April.

While the latter has found a new buyer — US private equity firm Bain Capital, Deloitte has indicated this will end in the company being delisted and shareholders’ equity being wiped out.

Victoria’s second COVID-19 wave and the re-closure of Queensland to Sydneysiders have hit both airlines further.

Regional airline Regional Express Holdings (ASX:REX) hasn’t been hit as badly but shares are down 9 per cent in 2020.

This is despite announcing expansion plans of its own. The company intends to launch capital city routes utilising jet aircraft next year.

REX, QAN & VAH share price chart