Air Transport Services Group (ATSG) has seen revenues rise 19 per cent to $176.5 million in the second quarter (Q2) ending 30 June, compared to the same quarter last year.
ATSG says the increase included contributions from 35 Boeing 767 cargo aircraft leased to external customers at 30 June, six more than a year earlier. Eight of those 35 leased 767s were operating for Amazon Fulfillment Services, a subsidiary of Amazon.com, which ATSG began serving in September 2015.
Pre-tax earnings from continuing operations were $18.8 million, compared with $17.2 million in the prior-year period. Adjusted pre-tax earnings from continuing operations, declined slightly to $16.3 million from $16.7 million, which ATSG says reflects the $2.6 million in ramp-up costs stemming primarily from flight crew compensation and training for the expanding Amazon and DHL CMI operations.
Adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) from continuing operations, as adjusted for the same items excluded from adjusted pre-tax earnings, increased two per cent to $52.1 million.
ATSG president and chief executive officer, Joe Hete says: “Our operating performance across the board in the second quarter was strong, and yielded financial results that met or exceeded our targets. Last week, we leased and began operating the tenth of twenty 767 freighters we will fly for Amazon.
“We expect margins to improve substantially in the second half as we approach our year-end 2016 target of 43 dry-leased 767 freighters, and increase from 22 to 30 the number of those we operate for customers under multi-year CMI agreements. We have increased acquisitions of 767-300 airframes, and have secured the conversion slots to satisfy strong customer demand.”
ATSG’s cargo aircraft management (CAM) aircraft leasing and related revenues increased six per cent to $48.4 million for Q2. Revenues from externally leased freighters and aircraft engines surged 23 per cent, driven by six more external Boeing 767 dry leases than a year earlier.
Pre-tax earnings for Q2 increased 12 per cent from the prior-year period, but depreciation expenses on CAM’s expanded fleet were higher than a year ago.
CAM owned 56 Boeing cargo aircraft in serviceable condition as of June 30, the same number as in the first quarter, but two more than last year. Eight CAM-owned 767-300s were awaiting, or in passenger-to-freighter modification. In June, one 767-200 was being prepared for deployment in the third quarter.
The 20 767s CAM will lease and operate for Amazon include twelve Boeing 767-200s and eight 767-300s. Ten of the 12 767-200s are now in operation for Amazon; the two others will be delivered in the fourth quarter. Three of the 767-300s will be leased to Amazon and placed into service by year end, and the remaining five by the end of the first half of 2017.
CAM began an eight-year lease of a 767-300 freighter to Amerijet in July. Additionally, CAM expects to lease a 767-300 to DHL under an eight year term starting in September, bringing to 17 the total portfolio of 767 aircraft leased to DHL.
Revenue diversification continued to increase in Q2 for ATSG. DHL accounted for 37 per cent, Amazon 22 per cent, and the US Military 13 per cent of Q2 2016 revenues, compared with 48 per cent of revenues for DHL and 18 per cent for the US Military in Q2 of 2015.
First-half capital expenditures were $125 million, versus $76 million in the first half of 2015. That included purchases of seven Boeing 767-300 aircraft, three in Q2, plus freighter modification costs for those and other aircraft, capitalised maintenance costs, and payments for other ground and maintenance equipment.