My observations on the half year profit announcement:The NPBT...

My observations on the half year profit announcement:

• The NPBT was pretty much spot on the early December update. The financial result is a huge plus given the aviation scene. Costs and staff numbers have been well contained.
• The increase in charter flying to 3,065 hours for the half year (from 931 in the December 19 half) is huge. While there is a risk that charter hours drop of as the COVID impact subsides, It is pleasing to see the comment that charter revenue is expected to remain strong due to the expectation that the majority of new closed charters will remain permanent.
• Wet lease flying was virtually non-existent for the six months. A key question is to what extent the previous Virgin wet lease hours will resume any time soon.
• No announcement yet on expanded regional wet lease flying for Virgin. Perhaps the new Virgin management is seeking to play hard ball and drive down pricing? Given the ACCC interim clearance in Mid November, surely a deal would have been announced by now if there was alignment between Virgin and Alliance. The Qantas wet lease announcement further ups the stakes imo. Is Qantas seeking to wound Virgin through tying up Alliances wet lease capacity?
• No dividend is sensible given the need to secure funding for the second batch on E190's. Current net debt is $6.9m will capital commitments of a further A$117m, so I assume is is low or no dividends for the next few years until debt levels are brought under control. Any further expansion of the fleet or vertical business opportunities will surely necessitate a further capital raise.
• The next six months are pretty important - will a satisfactory Virgin deal be finalised to expand regional flying, will Qantas take up their option to fly additional E190's, will the international borders open resulting in a resumption of tourist flights, how quickly can the spare E190's be deployed, can satisfactory bank funding be put in place, can a new aircraft type be put in service in an operational and financially efficient manner, will passengers flock to the E190 experience, will the Virgin relaunch be successful or will Rex cause them a real headache, will commodity prices remain strong? If a few of the unknowns fall into place favorably, then Alliance will be well placed to capitalise on the great foundation blocks management has laid out over the last nine months or so.