ALLIANCE AVIATION SERVICES LIMITED ACN: 153 361 525 ASX Code: AQZ ANNUAL REPORT for the Year Ended 30 June 2020

Alliance Aviation Services Limited ACN 153 361 525 | ABN 96 153 361 525 PO Box 1126, Eagle Farm QLD 4009 T +61 7 3212 1212 | F +61 7 3212 1274 www.allianceairlines.com.au ALLIANCE AVIATION SERVICES LIMITED ACN: 153 361 525 ASX Code: AQZ ANNUAL REPORT For the year ended 30 June 2020 TABLE OF CONTENTS DIRECTORS REPORT .......................................................................................................................................................2 INFORMATION ON DIRECTORS ......................................................................................................................................8 MEETINGS OF DIRECTORS .................................................................................................................................. ………… 9 REMUNERATION REPORT ............................................................................................................................................ 10 AUDITOR'S INDEPENDENCE DECLARATION .................................................................................................................. 24 FINANCIAL STATEMENTS ............................................................................................................................................. 25 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS ............................................................................................ 30 DIRECTORS DECLARATION ........................................................................................................................................... 69 INDEPENDENT AUDITOR’S REPORT .............................................................................................................................. 70 SHAREHOLDER INFORMATION .................................................................................................................................... 76 COMPANY DIRECTORY ................................................................................................................................................. 78 Alliance Aviation Services Limited 1 | Page Annual Report 30 June 2020 Directors Report For the year ended 30 June 2020 DIRECTORS REPORT Your Directors present their report on the consolidated entity (referred to hereafter as the “Group”) consisting of Alliance Aviation Services Limited (the “Company” or “Alliance”) and the entities it controlled at the end of, or during, the year ended 30 June 2020. DIRECTORS The following persons were Directors of Alliance for the entire financial year ended 30 June 2020: Name Role Period of Directorship Stephen Padgett, OAM Chairman, Non-executive Director Appointed 26 October 2011 Scott McMillan Managing Director Appointed 26 October 2011 Peter Housden Independent non-executive Director Appointed 26 October 2011 David Crombie, AM Independent non-executive Director Appointed 26 October 2011 Lee Schofield Chief Executive Officer Appointed 28 May 2015 PRINCIPAL ACTIVITIES The principal activities of the Group are the provision of contract, charter and allied aviation services to the mining, energy, tourism and government sectors both domestically and internationally. The Group also provides specialised aviation services to airlines and clients including aircraft wet leasing, airport management, aircraft trading, parts sales, engine leasing and engineering services. KEY MESSAGES The key messages from this report are: The Group, to date, has successfully navigated the COVID-19 pandemic and has delivered a profit before tax (PBT) for the year of $40.7 million, an increase on the previous year of $7.9 million or 24.1% (2019: $32.8 million); The Group has been able to continue to operate profitably during the pandemic due to its diverse business model and its unmatched ability to react quickly in changing environments; Revenue from continuing operations increased to $298.6 million (2019: $277.1 million); Flight hours were stable at 37,620 for the financial year (2019: 38,026 hours); Four additional aircraft were added to the fleet bringing the total fleet numbers to 42 as at 30 June 2020 (2019: 38); Debt reduced by $6 million during the year, bringing the debt balance to $54.4 million as at 30 June 2020 (2019: $60.0 million); and In June 2020, the Group successfully executed on a placement to institutional investors for an amount of $91.9 million. This was followed by a raising of $3.9 million as part of the Group’s Share Purchase Plan (SPP) which finalised in July 2020. These proceeds will allow the Group to acquire additional aircraft to further expand its operations. FINANCIAL REVIEW Alliance Aviation Services Limited has recorded an increased statutory net profit before tax of $40.7 million and a statutory net profit after tax of $27.0 million for the financial year ended 30 June 2020. This is an increase in net profit before tax of $7.9 million or 24.1% when compared to the year ended 30 June 2019. Alliance Aviation Services Limited 2 | Page Annual Report 30 June 2020 Directors Report For the year ended 30 June 2020 Key financial metrics in respect of the current financial period are included in the table below with the prior financial period included to facilitate a direct comparison between years. 2020 2019 Change Item $m $m $m Total revenue ($m) 298.2 277.1 21.1 Earnings before interest, tax, depreciation and amortisation 78.6 67.0 11.6 Profit before tax 40.7 32.8 7.9 Income tax expense* 13.7 10.1 3.6 Net profit after tax 27.0 22.7 4.3 Earnings per share - cents 21.1 18.7 2.4 Total dividends paid / payable in relation to the financial period - cents 0.0 15.6 (15.6) Net assets 282.1 168.9 113.2 Net operating cash flow 44.0 37.0 7.0 * This figure represents tax expense only. No cash tax was paid by the Group in FY20. REVENUE Revenue from continuing operations increased 7.8% to $298.6 million (2019: $277.1 million). During the second half of the financial year the Group’s revenue mixed changed substantially due to the impact of the COVID-19 pandemic. There were significant reductions in the wet lease and regular public transport (RPT) revenue streams with offsetting increases in contract and ad-hoc charter revenue. These movements are further explained below: Contract revenues were $202.5 million for the year, an increase on last year of 22.5% (2019: $165.3 million). The growth in contract revenue was derived from increases in scheduled services for a number of clients, the implementation of social distancing on flights and the full year impact of changes in yield; Wet lease revenue decreased by 46.3% in the year to $24.4 million. This is a direct result of the suspension of the Group’s contracted wet lease agreement as a result of COVID-19 in March 2020; Regular public transport (RPT) revenue decreased by $6.6 million, or 16.0% for the year. This decrease was also as a result of the COVID-19 pandemic and the subsequent restrictions of movement implemented by various states and territories within Australia; Charter revenue rose by 97.0% to $26.4 million when compared to the prior year (2019: $13.4 million). The increase in revenue is weighted towards the second half of the year ($15.8 million) with the Group performing charter services for a number of new resource sector clients, sporting teams and various emergency services agencies over this period. Inbound tourism charters ceased operations in March 2020 due to COVID-19 travel restrictions; and Aviation services revenue of $10.0 million (2019: $10.9 million) was generated in the financial year. This is consistent with forecast revenue and was slightly reduced in the second half due to the impacts of COVID-19 on the Group’s aviation services customer base. The addition of four aircraft in the financial year has increased the Group’s operating capacity, which has allowed the Group to expand services with existing customers and service the needs of new clients. Over this period Alliance has also expanded its operating network by servicing a number of new ports on a regular basis. CASH FLOW Operating cash flow for the year was $44.0 million, an increase of 18.9% or $7.0 million from the previous financial year. The second half operating cash flow was $29.4 million compared to the first half of $14.6 million. Increased flying for contract and ad-hoc charter clients positively impacted operating cash flow in the second half of the financial year. The one off purchase, maintenance and transportation charges associated with the Helvetic Airways aircraft and inventory package transaction that settled between July 2019 and October 2019 are included in operating cash flows ($7.5 million) in the financial year. The purchases of these aircraft are initially treated as inventory for cash flow purposes as there had not been an investment decision made as to entering the aircraft into the fleet, parting them out or selling the aircraft. To date none of these aircraft have entered the fleet and three have been parted out. Alliance Aviation Services Limited 3 | Page Annual Report 30 June 2020 Directors Report For the year ended 30 June 2020 Cash flows from investing activities were $30.8 million for the year (2019: $22.0 million) and were in line with forecast expenditure. These out flows related to heavy maintenance on the existing Fokker fleet, the introduction of additional aircraft and the costs associated with the Rolls Royce total care program. During the COVID-19 pandemic the Group implemented a number of cost control measures to preserve cash flow, support its balance sheet and ensure the ongoing profitability.

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