Qantas Airways (ASX:QAN)-backed Alliance Aviation Services (ASX:AQZ)has entered a trading halt after its shares surged 30% to 78.25 cents following an operational update released after the market closed on Wednesday.
The aviation services group said it would “right size” its business after finalising a revised wet lease agreement with Qantas that will reduce fleet and flying requirements.
Alliance described the agreement as an early step in a broader transformation program aimed at strengthening its operational and financial resilience.
Under the revised arrangement, the number of aircraft operated for Qantas will be progressively reduced from 30 to 23 during FY27, reflecting a planned decline in flying hours.
Alliance said the changes would reduce its committed capital and allow the company to pursue alternative opportunities for the affected aircraft.
The agreement also includes a meaningful increase in pricing from July 1, along with a revised annual escalation mechanism intended to better account for future cost increases.
Alliance managing director Stewart Tully said the revised terms were expected to deliver a material improvement in profitability.
“This agreement improves the expected returns and cash flow for Alliance and demonstrates the strength of our partnership with Qantas,” Tully said.
The company said it would adjust its workforce and operating model to align with future operational requirements, with a phased employee consultation process to be conducted over the coming months.
Alliance expects FY26 underlying profit before tax to be around the midpoint of its previous guidance range of $35 million to $40 million.
Qantas holds a 19.9% stake in Alliance, which employed 1,452 full-time staff at the end of June last year.
A proposed $614 million takeover of Alliance by Qantas was abandoned in October 2023 after the Australian Competition and Consumer Commission raised competition concerns.
Qantas shares were 1% higher at $10.71 in late morning trade.