Australia’s Alliance Air refinances debt for E190 expansion

Alliance Airlines (QQ, Brisbane Int’l) has refinanced its debt facilities, due to expire in January 2022, allowing the airline access to an extended amount of AUD176 Australian dollars (USD136.3 million) to conclude its E190 expansion. The arrangements include refinancing its current debt and introducing new, longer-term fixed loans, the company said in a stock market filing. As previously reported, Alliance Airlines has commitments with Jetran for the purchase of sixteen ex-American Airlines E190s in addition to fourteen ex-Copa Airlines E190s from Azorra Aviation. To date, twenty-two of the Embraer jets have been settled with five operating revenue services. The remaining units will be entered into service progressively throughout 2021 and 2022, providing the company with substantial growth capacity. It is using the incoming Embraer regional jets to replace its existing Fokker Aircraft fleet including twenty-seven F100s, four F50s, and fourteen F70s, the company said. The extended debt facilities will be used for the settlement of the balance of the E190 transactions and to fund the maintenance checks required to enter the aircraft into revenue service, including on a recently announced contract with Qantas that will see the replacement of B737-800s with smaller E190s on the QantasLink network this month. In terms of the capacity agreement, Qantas (QF, Sydney Kingsford Smith) will wet-lease fourteen E190s from Alliance Airlines.

The debt facilities consist of the following:

• AUD71 million (USD55 million) three-year revolving bank loan facility;
• AUD5 million (USD3.87 million) working capital loan facility;
• AUD25 million (USD19.36 million) 4.5-year fixed rate institutional loan;
• AUD25 million seven-year fixed-rate institutional loan;
• AUD50 million (USD38.7 million) 10-year fixed-rate institutional loan.

The weighted average interest rate applicable to these loans is between 2.7% and 2.9%, with the facilities providing significant headroom for further expansionary opportunities. The bank facility has been refinanced with one of Alliance’s existing lenders, the Australia and New Zealand Banking Group (ANZ). The new fixed-rate institutional loans have been entered into with Pricoa Private Capital (Pricoa), part of the Prudential Financial Group. “The new mix in facility structure aligns with Alliance’s view that the E190s are long-term assets and need to be funded as such. These new fixed-rate loans will allow Alliance to focus on E190 deployment whilst ensuring the Fokker fleet continues to be the backbone of its charter business,” the company said. Commenting on the refinancing, Managing Director Scott McMillan said: “Alliance has always taken a longer-term view of the assets it acquires, and we have now sourced funding that aligns with this view”. A charter and allied aviation and maintenance service specialist, Alliance Airlines provides essential services to the mining, energy, tourism, and government sectors in Australia. It has operational bases in Brisbane Int’l, Townsville, Cairns, Melbourne Tullamarine, Adelaide, Perth Int’l, Darwin, and Rockhampton, and a dedicated engineering base at Brisbane Airport.