Thank you. I would now like to turn the call over to the Chairman, James Jackson. You may begin.
Thank you, and good morning, everyone, and thank you for joining Alliance Aviation's FY 2026 full-year results and equity raising presentation. I am James Jackson, the Chair of Alliance, and I am joined here today by our Managing Director and CEO, Mr. Stewart Tully, and our Interim Chief Financial Officer, Mr. Simon Vertullo. The agenda for today, I will start by taking you through an overview of the year. Then I will hand over to Simon to cover the FY 2026 financial performance in more detail. Stewart will then provide more detail on the strategic reset that is underway and the action we are taking to position Alliance for improved performance. I will then take you through the balance sheet initiatives we have announced today.
Including a AUD 40 million fully underwritten equity capital raising, before providing an update on our strategy and the outlook for FY 2027. Following that, we will then open the call for questions. Starting off on slide seven, Alliance delivered an underlying profit before tax AUD 38.2 million for FY 2026 within our revised underlying guidance range. To improve the company's performance and position Alliance for long-term sustainability, we have taken a series of decisive decisions and actions and an end-to-end review of the business, resetting key commercial arrangements, sharpening our focus on FIFO, and implementing a more disciplined focus on costs and capital allocation to position Alliance for ongoing success. Our core contracted FIFO operations continued to perform well.
This is the foundation of Alliance's business, supported by long-term customer relationships, operational capability, and ongoing demand from the Australian resource sector. Importantly, improved cost control, stronger charter performance, and early benefits from the strategic reset and performance improvement programs did improve performance in the second half of this year, with underlying PBT, profit before tax, increasing by 61% from first half to second half. Slide eight. Turning to the headline numbers for FY 2026. The underlying revenue, AUD 712.6 million. Underlying EBITDA, AUD 177.5 million. Underlying PBT, AUD 38.2 million. Underlying NPAT, AUD 26.8 million. Operating cash flow before aircraft purchases and AerCap payments was AUD 17.7 million. Revenue and flight hours were lower than FY 2025, reflecting the planned end of aviation trading activity and the reduced wet lease flying under the revised Qantas arrangement as flagged.
Core FIFO activity remained resilient through the year. Statutory PBT was a loss of AUD 129.9 million, and statutory NPAT was a loss of AUD 90.9 million, mainly reflecting the non-cash impairment and asset write-downs on the Fokker aircraft fleet. Our net debt increased to AUD 459.8 million at 30 June 2026, reflecting lower cash generation, elevated maintenance expenditure, ongoing fleet investment, including the final stage of the AerCap fleet expansion program. Alliance remains compliant with its banking covenants. The fleet of 80 aircraft at year-end include 45 Embraer E190s and 35 Fokker aircraft. During the year, we continued to simplify and optimize the fleet as part of our fleet renewal strategy, which I will cover shortly. Slide nine. A strengthened Alliance Aviation. FY26 was a year of decisive action across both operations and the balance sheet.
On the operational side, we have reset the economics of our largest wet lease contracts, commenced a business-wide efficiency program, we have progressed our fleet transition, and we have strengthened the leadership team with the appointment of Mr. Steven Greenway as incoming CEO. At the same time, we have taken steps to strengthen the balance sheet. Today's fully underwritten equity capital raising, together with amended debt facilities and a planned asset sale program, provides a clear pathway to reduced leverage and improved financial flexibility. Importantly, these initiatives are not stand-alone actions. Together, they support a de-leveraging profile targeting approximately 2.1 times net debt to underlying EBITDA by June 30, 2027, while continuing to position Alliance to improve our profitability, our cash generation capability, and shareholder returns.
Slide 10. While we are navigating a challenging period for the company, it's important to consider Alliance's important role in the Australian aviation industry. We remain Australia's leading provider of contract and charter services, operating a fleet of 80 aircraft and delivering approximately 110,000 flight hours each year. More than 90% of our reven ues are contracted, supported by long-term relationships with blue-chip customers across the resources sector, government, and aviation. We operate in a market with high barriers to entry. We have a fully owned fleet, and we have a strong track record of safety and operational excellence, thanks to our hardworking employees. This includes an on-time performance of approximately 95%, which in the industry is a very high measure. The board remains confident in the underlying strength of the operating business.
The operational and balance sheet initiatives outlined today are designed to improve returns and better position Alliance to realize the value of these foundations. Now, before I hand over to Simon to go through the FY26 financials in more detail, I will touch briefly on the outlook for FY27. I will cover this in more detail later in the presentation, but it's important to state that we do expect the actions we have taken to result in improved earnings, cash generation, and balance sheet strength in FY27. Now, I will hand over to Simon Vertullo, our interim Chief Financial Officer.
Thanks, James, and good mo rning, everyone. Turning on to the income statement on page 13, I note that underlying revenue for the year was AUD 712.6 million. Underlying EBITDA was AUD 177.5 million, and underlying profit before tax was AUD 38.2 million. The main drivers of year-on-year performance change were the end of aviation trading activity, lower wet lease utilization, elevated maintenance expenditure, and higher depreciation and financing costs tied to prior fleet investment. We saw improved earnings momentum in the second half with the benefits of the strategic turnaround initiatives beginning to show through. Contract revenue increased, repairs and maintenance costs fell by AUD 4.9 million, and overhead expenditure stabilized. There is still work ahead, but these results are early evidence of the strategic reset and the improvement to financial performance.
Moving to the underlying EBITDA bridge on page 14. This shows the movement in FY 2026 underlying EBITDA compared to FY 2025. The most significant drivers were the planned exit of aviation trading and higher repairs and maintenance expenditure, partly offset by growth in FIFO contract revenue. The bridge also showed the impact of increased fuel costs being fully offset by fuel recovery mechanisms in our FIFO and wet lease contracts. Turning to slide 15, you can see how underlying profitability improved in the second half. This bridge compares H2 with H1 and shows how our improved performance initiatives began to translate into earnings in H2. The improvement was supported by higher contract revenue, lower repairs and maintenance expenditure, and reduced employee costs, partly offset by lower wet lease revenue.
Importantly, the underlying EBITDA margin also expanded across the half from 24% to 26%. The direction of travel is encouraging, with the business delivering improved profitability in H2 despite lower wet lease hours. That reflects the early impact of restructuring, cost discipline, and a more active approach to managing the cost base in line with revenue. Turning to the balance sheet on page 16. Total assets reduced to AUD 1.1 billion, mainly reflecting the Fokker fleet impairment and write-down of related inventory and assets. This flows through to net assets, which decreased to AUD 373 million. Net tangible assets were approximately AUD 2.32 per share. Assets held for sale relate to surplus and non-core aircraft assets identified under the fleet review program. Net debt increased to AUD 459 million, reflecting lower cash generation and ongoing fleet investment.
Alliance remains compliant with all banking covenants. The balance sheet position at 30 June was affected by the impairment and cash performance in FY 2026. This impairment was non-cash. James will provide more on the balance sheet initiatives shortly. Slide 17. Capital expenditure reduced materially in FY 2026, with total capital expenditure decreasing 40% to AUD 162 million. Existing fleet maintenance expenditure was AUD 135.6 million, broadly similar to FY 2025, while growth CapEx was AUD 26.6 million, including two AerCap E190 aircraft and associated entry into service costs. Maintenance CapEx stayed elevated despite lower flying activity, reflecting the age profile of parts of the Fokker fleet, ongoing heavy maintenance requirements, inflation in maintenance, and labor costs. Growth CapEx has fallen sharply as we have moderated the fleet expansion program.
This will continue in FY 2027, with fleet renewal CapEx expected to wind down as the AerCap tra nsaction completes in H1. Slide 18. Turning to cash generation. Operating cash flow before aircraft purchases and AerCap payments was AUD 17.7 million for FY 2026. Statutory operating cash flow was AUD 17 million, compared with AUD 105 million in FY 2025. Cash flow was affected by lower profitability, elevated maintenance expenditure, higher interest costs, and fleet investment activity. Cash performance improved in H2, reflecting the early benefits from the strategic reset, including lower maintenance expenditure, better working capital management, and reduced capital requirements. The cash flow bridge shows both sides of the story. FY 2026 was a peak investment year for the business, but H2 showed improvement as CapEx and working capital requirements fell.
With that, I will hand over to Stewart to discuss various operational initiatives underway.
Thank you, Simon. We are on to slide 20, wet lease update. A central part of the FY 2026 reset was to renegotiate our largest wet lease arrangement with Qantas. As we have previously discussed, parts of our wet lease portfolio had become commercially unsustainable. Cost inflation across labor, maintenance, logistics, and compliance reduced profitability under the previous arrangement. The revised Qantas agreement addresses that directly. It raises prices from the 1st of July 2026, adds a mechanism that escalates prices annually to better reflect future cost increases, and delivers a stage reduction from 30 to 23 aircraft over FY 2027. That stage reduction in committed aircraft does not simply mean less flying. It means better utilization of that fleet, lower capital intensity, and more flexibility to reallocate aircraft to other customers and opportunities that generate the best returns.
This is a commercial reset. It strengthens the economic sustainability of the wet lease arrangement, improves margins and cash generation, and gives us more flexibility as we progress fleet renewal and refocus capital on our core FIFO business. At the same time, we continue to value the Qantas partnership. This revised arrangement is designed to put that relationship on a more sustainable footing for both parties. Moving on to slide 21. The revised Qantas arrangement is one of a number of actions we have taken to improve the performance of the business. During FY 2026, we started a groupwide improvement program focused on three priorities: improving capital allocation, improving free cash flow, and improving sales and customer management.
On capital allocation, we have revised our fleet plan and identified surplus and non-core assets for sale, including aircraft, hangars, engine cores, and surplus parts inventory. The objective is to simplify the business, reduce capital intensity, and direct capital to where it earns the right returns. On free cash flow, we have put a more disciplined engine procurement strategy in place, reduced maintenance expenditure, started an organizational staff review, and tightened controls around operating costs. On sales and management, we are reviewing customer contracts against required return thresholds and have acted where arrangements fall short of our profitability and return targets. The Qantas contract renegotiation is the clearest example of that discipline in action. While important prog ress has been made, the job is not yet done.
Our focus remains on executing further initiatives to strengthen the balance sheet and improve shareholder returns. Moving on to slide 22, and cost optimization program. Turning to cost optimization, we have seen the impact of these actions in the second half with the turnaround moving from planning to execution. As the wet lease block hours fell in H2, we acted to align the cost base with lower flying activity. Block hours fell 14% in H2, labor costs fell 15.3%, and repairs and maintenance fell 14.6%. There is more work to do, but we are beginning to see the cost base respond to lower flying activity. We have also introduced tender in contract arrangements across parts procurement, rotables, heavy maintenance programs, and achieving cost reductions. Overhead growth has ceased with further cost-out initiatives underway.
Looking into FY 2027, as the number of aircraft committed under the revised Qantas arrangement progressively reduces, we are continuing to adjust our operating model and cost base to reflect future flying activity. This also includes changes to our workforce, with employee consultation underway. These decisions are never easy, and I want to thank our people for their professionalism, commitment, and continued focus on our customers and safety during this period of change. In aggregate, these benefits are expected to result in AUD 27 million of cost savings in FY 2027, and an annualized cost reduction of AUD 38 million from FY 2028, supporting the long-term sustainability and profitability of the business. I will now hand back to James to provide more detail on balance sheet initiatives we have announced today.
Thank you, Stewart. Today, on slide 24, we are undertaking a fully underwritten equity raising of AUD 40 million. The raising comprises an institutional placement and a pro-rata accelerated non-renounceable entitlement offer. The entitlement offer will provide eligible institutional and retail shareholders with the opportunity to participate at the offer price of AUD 0.70 per new share. All new shares will rank equally with the existing Alliance shares. The proceeds from this capital raising will be used primarily to support working capital and to reduce debt. This provides an immediate improvement in the company's financial position and complements the other de-leveraging initiatives that are already underway. The board carefully considered the size and the structure of this raising.
It is designed to provide a meaningful reduction in leverage immediately while preserving the company's capacity to deliver the strategic turnaround and complete the fleet transition. The offer is fully underwritten by Barrenjoey, with the institutional component opening today and the retail entitlement offer to follow in accordance with the timetable set out later in the presentation. All eligible directors intend to exercise their rights under the retail entitlement offer and take up their rights. We move on to slide 25. This slide shows how the proceeds form part of the broader balance sheet plan, and the equity raising will generate approximately AUD 40 million in gross proceeds. After the transaction costs, the allocation of working capital, the balance will be applied to debt repayment and enhanced liquidity.
This delivers an immediate reduction in net debt on a pro forma basis. The raising is only the first step, and I must emphasize that, first step in our de-leveraging program. We're also pursuing the sale of surplus and non-core assets, including surplus aircraft, two Brisbane hangars that are no longer fit for our use, engine cores, and parts inventory. We are currently targeting proceeds from the sale of these assets of approximately AUD 60 million to AUD 75 million or more through this financial year. These proceeds will be additional to the equity raising and will be directed towards further strengthening liquidity and reducing leverage. Our liquidity plan, though, does not rely on every asset sale occurring at a particular point in time. However, successful execution of that asset sale will provide additional capacity to accelerate de-leveraging.
Taken together, the equity raising, asset sales, and improved operating performance support our objective of reducing net debt to underlying EBITDA to approximately 2.1 times by 30 June 2027. Moving on to the balance sheet on slide 26. This slide illustrates the immediate effect of the raising on the balance sheet. At June 30, the reported net debt was AUD 459.8 million. On a pro forma basis, after applying the proceeds of the offer, pro forma net debt reduces to approximately AUD 420 million. Available liquidity increases from AUD 29.2 million to approximately AUD 69.2 million before the transaction costs, providing greater headroom to manage normal working capital requirements, complete the remaining fleet transition commitments, and operate the business through the turnaround. Pro forma net debt to underlying EBITDA reduces from 2.7 times to 2.5 times.
This is an immediate improvement, as you would expect, but again, as you would also expect, we recognize further de-leveraging is required. That further improvement is expected to come from three sources. Stronger earnings from the revised wet lease economics and cost out program, lower capital growth expenditure as the AerCap transactions complete, and proceeds from the asset sale program. Our objective is to establish a balance sheet that is appropriate for the earnings, cash flow profile of the business, with sufficient flexibility to manage operational requirements without returning to the elevated investment levels experienced during the recent now completed fleet expansion. Moving on to slide 27. Debt facility overview. In parallel with the equity raising, we have worked constructively with our lenders to align the debt facilities with the company's business plan and de-leveraging program.
We've been able to amend terms with the ANZ, including the deferral of scheduled amortization and extension of the relevant facility maturity to September 2027. This provides additional time for the operational initiatives, the asset sales, and improved cash generation to translate into lower debt. Following the raising, the company will have a pro forma debt position of approximately AUD 420 million and leverage of 2.5 times net debt to underlying EBITDA. Our remaining debt maturities are spread across the ANZ facilities, COA notes, and the NAIF facility. The extension reduces near-term financing pressure and provides greater flexibility as we continue to work to execute the turnaround of the business. We remain focused on careful cash management, disciplined capital allocation, and reducing leverage.
The combination of the equity raising announced today, the revised facility arrangements, the planned asset sales, and improving operational performance gives us a credible pathway to a more and required sustainable capital structure. Moving on to slide 28, which is the equity raising timetable. This sets out the key dates for the raising. The institutional offer is expected to be complete first, with the existing shares recommencing trading on 27 August. The retail entitlement offer is scheduled to open on 2 September and close on 11 September, with the new retail shares expected to commence trading on 21 September. Eligible retail shareholders should refer to the retail offer booklet for full details of the offer, including eligibility, key dates, and instructions on how to participate.
Taken together, these actions represent a significant strengthening of our balance sheet and establish a clear pathway to further de-leveraging through FY 2027, one of our significant objectives. Before we turn to strategy and outlook, I'd also like to address the announcement we made last week that Stewart Tully will step down as Managing Director and CEO at the end of October. On behalf of the board, I'd like to acknowledge Stewart's contribution over more than 11 years as CEO at Alliance, and the key role you've played in leading Alliance through a very challenging period and positioning the business for long-term success. We're also very thankful that Stewart's agreed to stay on to effect an orderly transition with Steven Greenway, due to commence in the role as CEO as of 1 October 2026.
W ith Stewart at this point staying on to help the transition through to the end of October and maybe longer. Steven brings more than 25 years of international aviation leadership experience across Asia, Australia, the Middle East, and North America, including senior roles at flyadeal, which is in the Middle East, WestJet in Canada, Scoot in obviously Singapore, and Mango Aviation Partners. The board believes Steven has the experience and capability to lead Alliance through its next phase of strategic execution. I look forward to introducing Steven to you all at our FY 2026 AGM. Alliance's strategic priorities remain unchanged. Performance improvement, fleet transition, customer relationships, safety, reliability, cash generation, and improved returns. Turning to slide 31, strategy and outlook.
As noted earlier, Alliance has a clearer strategic focus, improved commercial arrangements, and an operational improvement program into FY 2027. Our priorities for FY 2027 are quite clear. Improve profitability and free cash flow generation. Execute the strategic turnaround. Progress surplus asset sales. Redu ce leverage. Strengthen the balance sheet. Execute the fleet renewal strategy, and improve the returns on our investment capital. We will also deliver a smooth transition of leadership for our people, customers, and shareholders as Steven takes over from Stewart. We are guiding to underlying EBITDA between AUD 175 million and AUD 190 million for FY 2027, and an underlying profit before tax of AUD 55 million to AUD 60 million for FY 2027. That guidance reflects improved economics from the revised wet lease arrangements.
Expected benefits from the operational turnaround, cost reduction in initiatives, and continued investment in fleet renewal and operational capability, with much lower growth capital requirements from the second half. It also reflects timing and execution risk on surplus asset sales and is subject to the normal operating assumptions and risks, including aircraft utilization, customer demand, fuel costs, labor availability, and economic conditions. Alliance expects improved earnings, cash generation, and balance sheet strength in FY 2027. The actions taken over the past six months, including the wet lease reset, strategic improvement program, balance sheet initiatives, including today, and leadership succession plan, have established a much stronger foundation for the business going forward. While there still remains significant work ahead, Alliance is now better positioned to improve returns, target a reduced leverage.
As mentioned earlier, of 2.1 times net debt to underlying EBITDA by the end of FY 2027, and deliver sustainable long-term value for our shareholders. Thanks to Alliance's people across Australia for their continued focus on providing industry-leading safety and service to our customers, and to our shareholders for your continued support. I will now open the line to take questions. Thank you.
At this time, I would like to remind everyone, in order to ask a question, press star then the number one on your telephone keypad. Your first question comes from Phil Chippendale with Ord Minnett. Please go ahead.
Good morning, guys. Thanks for your time. First question, just on the asset sales, you have mentioned some aircraft hangars and parts. Can you just give us maybe a sense of the quantum of aircraft that you would be looking to sell as part of that portfolio? Just a related issue is just on the timing. That AUD 60 million to AUD 75 million presumably is going to be second half weighted. Is that a fair assumption?
Listen, Phil, it is actually, well, I do not know about percentages, but a certain amount is weighted to the first half, Phil. You will see there is assets held on the balance sheet. That comprises two Embraer aircraft. And some aircraft hangars, and the ROU assets associated with that. The balance is probably around about that 50%, but they are not categorized as assets held for sale. They are progressive, will be actually running from around September to the end of the year. They comprise Fokker aircraft coming to the end of their life, engine cores, which have no more cycles, and as well some parts that are no longer required in the business.
Okay. Just thinking about the profile of the net debt over the balance of the year, you are starting the year pro forma at AUD 420 million. You have that AUD 33 million payment to AerCap in the first half, and if we assume asset sales were spread 50/50, we would basically be looking at a net debt number of a similar level come 31 December. Does that sound broadly right? Then you see that improvement the second half, obviously with no AerCap payment.
Oh, yeah. Okay, I see what you are saying. So yeah, if you swap the capital raise for the settlement of the AerCap, they roughly offset. But we're hoping to progress those asset sales as quickly as possible.
Yep, understand. Just on the topic of the Qantas wet leasing arrangement, you guys have reduced the arrangement on seven aircraft there. Can you just walk us through the timing of that step down from the 30 aircraft to 23?
Thanks, Phil. The step-down has already commenced. We've taken one aircraft back from Qantas already and the second one soon. Then five additional E190s will step down between February and June next year. By July 1 next year, we'll be at 23 aircraft or 23 E190s for Qantas.
Okay. Then, in terms of those seven aircraft, you've highlighted that there's two E190s for sale currently. Obviously, there's a balance of 5. Can you just talk to your intentions there? I'm looking at the comment on one of your slides where you're talking about growth initiatives. Just wondering about those five aircraft. Some of them will be presumably going towards Fokker 100 replacement. Is that a fair assumption? Then is there any that are left over for perhaps, some growth opportunities or new business opportunities in either the contract or charter segments?
Phil, I think that one of the benefits of doing the agreement the way we have agreed with Qantas was that there's optionality there for us, and this will be driven by obviously economics and return on capital going forward. So if we can redeploy those aircraft, then clearly there's a growth opportunity. If we have the contracts to apply them to. If not, in the short term, they could be seen as surplus, and we may seek to monetize them. There's also the opportunity to use them from a parts perspective and the engines. We believe that we haven't landed exactly because we don't actually have those contracts forward. But I can say that we are seeing new business opportunities at the moment.
And so, we've now got, let's say, a foresight into seeing, we will have some aircraft next year. Maybe we can actually move to service those potentially new customers as well.
Okay, thanks. I've got some questions on just the net debt to EBITDA ratios that you've got on slide 26, but I might take that offline with Simon after the call. I'll jump back in the queue. Thanks for your time.
Your next question comes from the line of James Ferrier with Canaccord Genuity. Please go ahead.
Good morning. Thanks for your time. On slide 18, what was the AUD 31.9 million that was spent on aircraft and engine deposits, I think is the reference. What did that relate to?
That is with respect to the AerCap transaction, James.
Okay. This is the six remaining aircraft to [crosstalk] If we take that 31.9, add it to the 33 you owe in first half 2027, that's essentially the full amount owing for the six remaining aircraft.
Yeah. That is right. That deal was recut, James. So basically, over the second six months, we received roughly one aircraft per month, and th en the deal closes out at December.
Yeah. Understood. Okay. Makes sense. So just in terms of the fleet movements then, and Phil sort of covered the asset sales components and how you are thinking there. When you look at FY 2027 guidance, and I guess your starting point is you had 80 aircraft in the fleet at the end of FY 2026, what assumptions are you making on fleet size and existing fleet CapEx and D&A for FY 2027 within that guidance?
I will go just on the BAU CapEx, it is AUD 137 million. I'll hand over to Stewart on the fleet.
On the fleet side, we'll see in the presentation a fleet of 80 there. But there's a footnote that during FY 2026, we have put into storage five Fokker 100s. We expect to do a few more during FY 2027. So that'll bring the operating fleet down to around 72. That's been part of our plan to refine the Fokker 100 fleet. With that seven aircraft coming back from Qantas, that doesn't reduce our fleet, it just redeploys them or, as James talked about, gives us functionality in that fleet.
Yeah. From that 72 then, Stewart, you would add on the six Embraers that will come in from AerCap?
No. No, that's not the case. We can talk about the AerCap.
Yeah, they are mostly parted out, James.
Parted out for sale or parted out for use in maintenance?
Yeah. Parted out for use with surplus, potentially going into sale as well. The y are old hulls with good engines. The full part-out does give us surplus major components, so we will consider the sale of those as well.
Yeah. The last part of that question was what is the D&A expense that you have embedded within the FY 2027 guidance?
Yeah. That number is AUD 90 million.
AUD 90 million. Yeah. Okay. In terms of the cost optimization initiatives there, that Slide 22 talks about AUD 27 million of benefit being captured in FY 2027. When you look at the EBITDA that was achieved in FY 2026, the normalized number, you compare that to FY 2027 guidance, the uplift in EBITDA is smaller than what the cost optimization is. So what is happening on the other side of the ledger headwind-wise that the business is still facing, which means you will not retain the full benefit of those cost optimization savings?
Yeah. You have got the reduction in the wet lease revenue. You do get an expansion of the overall margin from the cost out.
Yeah. Okay. Less aircraft equals less revenue b ut net, the costs come down.
Yeah. There is a progressive move from 28 or 30, but 28, but partic ularly in the first half of next year, James, where those five aircraft come out. They are coming out, and essentially they will not be obviously servicing that contract, and they will be roughly one a month. There is a cumulative effect in terms of the revenue and the hours flown on that agreement, and then it stabilizes at 23, and then it remains at that state.
Yep.
This period,
Last question from me.
Sorry.
No, please finish.
No, I was going to say, this period with respect to that revised agreement with Qantas is a transition period, and then we move to the 23 aircraft going forward.
Yeah. Understood. Last question then. When you look at that free cash flow guidance for FY 2027 that you've provided, that implies a very meaningful improvement on the PCP. A reasonably modest component of that is coming from the EBITDA guidance uplift. What else is contributing to the improved or the expectation of improved free cash flow?
Yeah. Broadly, the numbers, you start from a 190 EBITDA. There is an effect from, there's embedded restructuring costs in there. You've got a negative working capital movement. There's interest of AUD 40 million, and as I mentioned earlier, there's stay in business CapEx of AUD 137 million.
Yeah. Understood. Sorry, just to follow up there, the neg ative working capital move, you mean that's cash in the door or cash out the door?
Cash out the door. It's just timing related. Yeah. It's only timing related.
Okay, thanks.
Your next question comes from the line of Chris Creech with Morgans Financial. Please go ahead.
Hey, good morning, guys. Most of my questions have already sort of been asked by the other two guys. But just a quick question on the EBITDA to debt range. You have said you want to sort of get down to that sort of 2.1 times. Is that where we should be thinking about?
2.1, Chris. Yep.
Yeah. Is that where we should be thinking about it for the long term? Is that your sort of comfort factor, or do you want to sort of see it reduce a lot further from that, from sort of onwards?
Yeah. I think that's a starting point. We need to get the debt under control, as James mentioned, or at a lower level. We achieve that through the asset sales, the capital raise, and the progression of a turnaround plan. But yeah, I think into 2028, Chris, we'd love to de-lever further.
Yeah. Gotcha. Just in terms of some of those, I guess, asset sales, you've mentioned some of the E190s are potentially surplus, but is the hope to try and get rid of the vast majority of your Fokker fleet? Following on from that, what is the secondhand market for Fokkers at the moment? If there's a lot of Fokkers that come onto the market at any one time, does that sort of have a price decrease issue there, or is it pretty strong from potential customers?
So just answering the different parts there. I guess there's a progressive sale of Fokkers, and the Fokker 100s transition out by FY 2030. There's no sale of F70 Fokkers at this stage. I think they're very much fit for purpose going into smaller sites. In relation to the sales to date, they've basically sort of been at or arou nd the written-down value. When we'd given that proceeds of asset sale range, Chris, of AUD 60 million to AUD 75 million, to your point, I'd flag the risk factor driving that range is the Fokkers. I guess we've had a progressive sale process to date, but I guess the question in my mind is, if we put more onto the market, then that'll drop the realizable value, and that drives that range.
Yeah. No dramas at all. Just in terms of cash flow for FY 2027, and just with, I guess, the business rightsizing and whatnot, are you sort of expecting, I guess, a significant amount of cash out the door to sort of cover that rightsizing? Or how should we be thinking about that?
Oh, listen, restructuring costs in total are about AUD 12 million. They could be less. That is mostly associated with exiting or the rightsizing of the workforce, Chris. Particularly, we require less pilots in view of less hours on the wet leases.
Yes. Thanks very much. I will pass it on.
Your next question comes from the line of James Ferrier with Canaccord Genuity. Please go ahead.
Thanks for the follow-up. Since two, please. Just to clarify, Simon, what you were saying around the timing on the working capital. Is that essentially there was a positive benefit to cash flow in FY 2026 around timing, and then that reverses in 2027?
Well, I just sort of like how, James, the creditor run, say my payments run on a Friday, is about AUD 10 million. Yeah. More once you add fuel in. It is one of those things on whatever the day of the week the end of the period is, it can just drive a material movement in the working capital. So I wouldn't overread the working capital movement. It's just timing-related.
Yeah, no, I absolutely understand that. It's quite common. But more the question was the benefit of timing was in FY 2026.
Oh, sorry. Th ere's an outflow in 2027.
Yeah. Okay. Understood. Second follow-up was the AUD 137 million of maintenance CapEx expected in FY 2027. Given you're parting out these Embraers from AerCap and whatever else is sitting on the balance sheet. Is the cash component to that going to be quite low? I am just looking at the splits for 2026. It was 73 cash of 136 total.
Yeah. No, the cash component is around that level. Yeah, to answer the question.
Okay.
I think this is it.
Thanks for your time.
Sure.
There are no further questions at this time. I will now turn the call back over to James Jackson for closing remarks.
Thank you, and I would like to thank for those questions. Thank you all for attending, and we look forward to keeping you up to date with what we are doing in the future, and please be welcome to come to our AGM. Okay. Thank you.
Ladies and gentlemen, that concludes today's call. Thank you all for joining. You may now disconnect.