Interest comments from Annual Report for those that haven't read...

Interest comments from Annual Report for those that haven't read them. What they say the underlying cashflow for the half was $40 if you take out additional training required and the cost of buying aircraft. What I hear the Board also says they are confident of funding future aircraft purchases from cashflow, but the auditors require evidence of the money up front.

"Cash flow
Statutory operating cash flow for the half year was $12.0 million. Importantly operating cash flow includes material outflows of $28.4 million for two E190 and two Fokker F100 aircraft and a smaller package of spare E190 parts. Whilst these are classified as inventory, they are part of a build-up of spare parts which will facilitate lower maintenance costs in the future or increased part sales. These items have been classified as inventory (rather than PPE and as such normally accounted and investing cashflow). The underlying operating cash flow was $40.1 million.The operating cash flow continues to include the cost of pilot, cabin crew and engineering recruitment, training, and other overhead costs necessary for the deployment of additional E190 aircraft. As per earlier guidance it is expected that this investment, which occurs ahead of significant revenue generation, will continue at least to 30 June 2024 when the programme will transition to a consistent training program.Capital expenditure cash outflows were $42.4 million (HY23: $55.0 million). The fleet sustaining cash capital expenditure of $37.5 million was slightly above forecast due to increased payments for the engine program as a result of increased utilisation. $3.6 million was expended on entry into service checks and associated costs on the two E190 aircraft that entered the operational fleet in the half year.The fit out of the Rockhampton maintenance facility continued with $3.6 million being expended in the half year. The first E190 aircraft from the AerCap transaction is currently being parted out in the facility with a second aircraft, to be parted out, arriving later this month.The Company continues to fund growth and accordingly will not pay a dividend.Growth Expenditure

The settlement of the additional 30 E190 aircraft from AerCap has been delayed in the half year with two aircraft settled in the period. The delays are expected to continue in the future with aircraft settlements being extended by an average of three months. A further seven aircraft are expected to settle in the second half of the year.Nine aircraft deliveries are now estimated to settle in FY2024, 13 in FY2025 and eight in FY2026. Up to 11 of these aircraft may be disassembled for parts (these will be classified as Inventory), 10 required initially for Alliance contract and wet lease commitments (classified as Capital Expenditure) and the balance are unallocated and available for future growth or sale.

Funding and Commitments

Debt increased in the half year by $46.3 million which consisted of a drawdown of $50 million for the purpose of aircraft acquisitions and loan repayments of $3.7 million. Gross debt was $281.6 million at the end of the reporting period with net debt of $244.6 million.All covenants have been complied with and our debt providers ANZ, NAIF and PRICOA continue to be supportive, especially given the earnings performance of the Group and the expected longer-term growth in cash flows.Page 4Alliance Aviation Services Limited 7th February 2024The Group however is at an inflection point when viewed using the scope of an auditor. Strictly contracted commitments for future aircraft purchases need to be matched by dedicated funding. Given the settlements are over the course of 2.5 years the Company perceives this to be low risk but understands the accounting policies and audit procedures.The Group has committed to significant future capital expenditure. This has been committed so as to transform the Group to take advantage of opportunity in the market for ~100 seat aircraft. The size of the capital commitment is uncertain with aircraft acquisition price dependent on the remaining maintenance life. To date the latest aircraft acquisition price has varied from $7 million to $12 million. However, the higher price means more value which leads to lower future maintenance costs.The Board has a range of funding options including debt facilities, sale of aircraft (at a profit) and the operating cash flow from increased activity. The Board is confident in funding this growth phase. As the source of funding is not fully committed, the auditors are required to note an Emphasis of Matter."