ATSG to operate 10 additional B767-300 freighters for Amazon

The medium wide-body cargo aircraft leasing, air cargo transportation and related services provider Air Transport Services Group announced an agreement to operate ten additional Boeing 767 freighters for Amazon.com Services in the Amazon Air network by the end of 2024, with the potential to add up to ten more aircraft.

The operating agreement through which ATSG’s airlines operate those aircraft will be extended to May 2029, with extension rights for five additional years.

ATSG has also agreed to extend the exercise period for vested warrants for 21.8 million shares it previously issued to Amazon, amend the vesting conditions and extend the exercise period for unvested existing warrants for 2.9 million shares, and issued new warrants for up to 2.9 million additional shares to Amazon.

Earlier, the March 2024 Amazon Air brief by Chaddick Institute For Metropolitan Development reported that Amazon Air simplified its North American network while expanding cargo capacity by emphasising larger planes and major hubs and dropping flights to six U.S. airports.

In the last one year, Amazon Air’s tonnage capacity grew by 4.9 percent over the past year by adding three Boeing 767-300 freighters, all operated by Air Transportation International, and an Airbus 330.

The brief reads, “Amazon Air has 4.9 percent more tonnage capacity and 4.6 percent more payload capacity than a year ago despite having one fewer plane. While total daily flights fell by 1.8 percent, its available tonne-miles grew. Plus, Amazon apparently still intends to expand its A330 fleet to 10, all of which are being converted from passenger service. If this occurs, Amazon Air’s tonnage capacity will grow by 17.1 percent, and its volume capacity will expand by 15.6 percent.”

Meanwhile, ATSG wrote in its 2024 outlook that, taking into account the flying opportunities from ten more Amazon 767 freighters, it expects Adjusted EBITDA of approximately $516 million in 2024, an increase of $10 million from the outlook provided in February 2024.

“This projection assumes the startup of all ten Amazon-provided 767-300s prior to December 1, 2024, and costs associated with bringing them into service and adding over 50 additional pilots at ABX Air,” it reads.

"The changes to our Amazon arrangement announced earlier today are a testament to the high quality of service we provide to our customer," wrote Joe Hete, chairman and chief executive officer of ATSG in the first quarter 2024 results.

“We’re pleased to further expand our leading role in the Amazon Air network that we started in 2016. Our operating capabilities will continue to support Amazon’s customer-centric commitments for years to come,” he said.

“These additional aircraft will allow us to leverage our existing infrastructure and capabilities for expanded operating revenues. This expanded and extended operating agreement is a testament to the dependability of our employees and the reliability we bring to the Amazon Air network. Our mission is to continue to provide Amazon with exceptional service while creating value for all of our shareholders,” he added.

Additional information about these agreements is provided in a Form 8-K that ATSG expects to file with the U.S. Securities & Exchange Commission.

In its first quarter results, ATSG also reported that its Cargo Aircraft Managment (CAM) deployed four newly converted B767-300 freighters to external lessees during the quarter.

It also reads, “Three 767-200 freighters and one 767-300 freighter were returned upon lease expiration, with the 767-300 and one of the 767-200s subsequently leased to ABX Air. At the end of the first quarter, ninety CAM-owned freighter aircraft were leased to external customers, two fewer than a year ago. Twenty-four CAM-owned aircraft were in or awaiting conversion to freighters at the end of the first quarter, three fewer than at the end of the prior-year quarter. This included thirteen 767s, six A321s, and five A330s.”