ATSG keeps growing freighter fleet with e-commerce profits

Air Transport Companies Group, a supplier of leased cargo plane and outsourced airline working providers, on Thursday reported adjusted pretax revenue elevated 80% within the second quarter to $67 million as specific supply prospects continued to demand extra plane for time-sensitive e-commerce deliveries.

The outcomes got here hours after main competitor Atlas Air disclosed a $5.2 billion take-private buyout by three funding funds led by Apollo World Administration.

ATSG (NASDAQ: ATSG), primarily based in Wilmington, Ohio, generated $524 million in income, up 24% from the identical interval final yr. Adjusted earnings earlier than curiosity, taxes, depreciation and amortization elevated 23% to $158 million.

The earnings adjustment reductions one-time positive aspects final yr of $38 million in federal COVID-19 reduction for its passenger airline and $30 million from revaluation of inventory choices.

The corporate is leasing 9 extra Boeing 767 freighters to prospects than a yr in the past and that flying hours for subsidiaries ABX Air and Air Transport Worldwide elevated. Its prime three prospects are the Division of Protection, Amazon (NASDAQ: AMZN) and DHL Specific.

Administration mentioned inflation is growing prices for workers, contracted labor, crew journey and different airline bills. 

“Regardless of persistent inflation, we anticipate to succeed in our monetary targets for 2022, as demand for our specific bundle community belongings and flight operations stays excessive,” mentioned CEO Wealthy Corrado. “E-commerce buying habits, now nicely ingrained and strengthened by usually decrease on-line costs, will proceed to drive express-package supply networks that guarantee speedy, dependable supply. That development, in flip, will drive development in ATSG’s money circulation via the present financial cycle and past.”

ATSG’s leasing arm has 89 plane beneath contract and expects to lease six extra within the second half — 4 767-300s and two Airbus A321-200 narrowbody freighters as soon as they’re retrofitted to hold heavy containers on the primary deck. Cargo Plane Administration (CAM) bought 5 used 767-300 and 4 A321-200 passenger plane through the first half for conversion to freighters, the corporate mentioned. One 767 plane faraway from constitution passenger airline Omni Air’s fleet can even be despatched out for conversion.

A complete of 19 CAM-owned plane had been in, or awaiting, conversion to freighters, together with 5 A321s. 

ATSG earlier this yr mentioned the first two A321s will go to Dublin-based ASL Aviation Holdings, a contract airline for specific supply firms and Amazon Air. 

The A321 is a brand new airframe for ATSG, which till now has completely operated widebody Boeing plane. It additionally plans to transform 29 Airbus A330-300 equivalents to the 767 to entry extra plane because the pool of used 767s begins to dwindle and conversion services face manufacturing backlogs. The A321s additionally present entry into the recent regional bundle market, particularly every day shuttles between secondary cities and huge community hubs. 

ATSG has a 360-degree money-making technique for the A321 freighters, which can compete in opposition to the Boeing 737-800 transformed freighters and older 757s. It is usually a three way partnership companion in 321 Precision Conversions, which designed the conversion package — wider cargo door, strengthened ground and wing field, inflexible cockpit barrier and container conveyor system — and obtained approval  from U.S. aviation regulators. In-house upkeep and restore group Pemco is performing lots of the installations for the three way partnership. Finally, ATSG additionally may supply crews to fly the usual jets for patrons.

The corporate mentioned it expects to lease a document 18 freighters in 2023, together with 14 767s and 4 A321s.

“The vast majority of these orders are backed by buyer deposits, and almost all are from current prospects, giving us nice confidence about development in our core leasing returns over the subsequent 18 months,” Corrado mentioned. 

ATSG beforehand disclosed it has orders for 20 of the A330 transformed freighters. The primary remodels will start subsequent yr with deliveries beginning in 2024.

Administration is pulling ahead capital expenditures by $35 million to amass plane for conversion this yr reasonably than in 2023. Complete investments this yr, largely funded by free money circulation, are projected to be $625 million, together with $420 million for development.

Transport providers

ATSG’s devoted transport phase achieved a 27% enhance in revenues. Sharply greater passenger flying and using eight extra freighters — 4 from CAM and 4 offered by prospects to function — had been huge causes for the bounce.

The corporate’s turnkey product offers plane, crew, upkeep and insurance coverage beneath long-term contracts, whereas prospects assume duty for gas, working charges and producing shipments. 

ATSG mentioned income working hours for cargo plane elevated 7%. 

The corporate maintained full-year steering of $640 million for adjusted EBITDA, $100 million greater than final yr. 

Click here for more FreightWaves/American Shipper stories by Eric Kulisch.

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