ATSG growth continues as midsize freighter leasing expands

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Air Transport Services Group (ATSG) has seen its revenues increase 43 per cent and $77 million to $253.2 million in the second quarter (Q2) of this year.

ATSG’s airline services operations, and maintenance and logistics businesses, all recorded double-digit revenue increases.

GAAP earnings from continuing operations were a loss of $53.9 million and included charges totaling $67.8 million for the warrants granted last year in connection with operating and lease agreements with Amazon Fulfillment Services.

GAAP pre-tax earnings from continuing operations were a negative $48.4 million, versus a positive $18.8 million a year ago. Adjusted pre-tax earnings, which exclude warrant effects along with additional non-cash items, increased 39 per cent to $22.7 million.

Adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) increased 23 per cent to $64.2 million.

ATSG’s results for the first half of 2017 included a revenue increase of 39 per cent to $491.1 million, and GAAP earnings from continuing operations of negative $44.1 million.

The Cargo Aircraft Management (CAM) division’s revenues increased $2.1 million to $49.5 million from Q2 last year, and included $3.3 million of non-cash amortization associated with the warrant-related Amazon lease incentive.

Excluding this lease incentive, CAM’s revenues increased nine per cent. CAM was leasing 45 Boeing 767s to external customers as of 30 June, 2017, 10 more than a year earlier.

Pre-tax earnings were $12.8 million for the quarter, down $3.4 million. Principal effects were the warrant-related lease incentive, increased depreciation, and higher pre-deployment expenses.

CAM owns 64 Boeing cargo aircraft, all of which were in service, including 56, 767s. Eight other aircraft were awaiting or undergoing modification from passenger to freighter configuration at the end of the quarter, including six 767s and two 737s.

In addition to the six 767s in mod, CAM expects to close on purchases of seven additional 767s in the last half of 2017. CAM currently has no 767 purchase commitments in 2018.

Production delays at CAM’s freighter modification contractor this year will defer two 767s expected to be deployed in the second half of 2017 into 2018.

ATSG president and chief executive officer, Joe Here says: “In addition to the outstanding financial results we are reporting today, I’m pleased to say that we are scheduled to deliver the twentieth leased Boeing 767 Freighter to Amazon later this week, 17 months after we formalised our relationship in March 2016.

“Our total leased-aircraft portfolio has grown by eight 767s as of June 30, compared to the same date a year ago. Excluding the two 767-300s required to complete Amazon’s twenty-aircraft order, our current purchase and conversion commitments will yield 12 additional 767-300s extending through the first half of next year.

“We currently have signed leases or are finalising others for nine of the 12 aircraft. The remaining three aircraft are under discussion with multiple parties.”

ATSG’s subsidiaries include ABX Air, Airborne Global Solutions, Air Transport International, Cargo Aircraft Management, and Airborne Maintenance and Engineering Services including its division, PEMCO World Air Services.