May 06, 2016: Atlas Air Worldwide Holdings will provide air cargo services to support major e-commerce player, Amazon with package deliveries to its customers. The new agreements are expected to be meaningfully accretive to Atlas Air Worldwide's earnings and cash flows over time.
The long-term commercial agreements will include the operation of 20 B767-300 converted freighters for Amazon on a CMI (crew, maintenance and insurance) basis by Atlas Air Worldwide's airline subsidiary, Atlas Air, as well as dry leasing by its Titan Aviation leasing unit. The dry leases will have a term of 10 years, while the CMI operations will be for seven years (with extension provisions for a total term of 10 years). Operations under the agreements are expected to begin in the second half of 2016 and ramp up to full service through 2018.
As part of the inherent value creation and to align interests and strengthen the long-term relationship, Atlas Air Worldwide granted Amazon warrants to acquire up to 20 percent (after the issuance) of AAWW's common shares at a price of $37.50 per share over a period of five years, with vesting tied in part to the commencement of operations of the 20 B767-300 freighter aircraft and other conditions.
The agreements also provide for future growth of the relationship as Amazon may increase its business with Atlas. Atlas Air Worldwide granted Amazon warrants to acquire up to an additional 10 percent (after the issuance) of AAWW's common shares at the same exercise price, over a period of seven years, with vesting tied to payments made by Amazon in connection with that business.
Morgan Stanley & Co. LLC is serving as financial advisor and Cravath, Swaine & Moore LLP is serving as legal advisor, both to Atlas Air Worldwide, in connection with the transaction.
“We are excited to begin a strategic long-term relationship with Amazon to support the continuing expansion of its e-commerce business and to enhance its customer delivery capabilities,” said William J. Flynn, president and chief executive officer, Atlas Air.
Atlas Air Worldwide is a leading global provider of outsourced aircraft and aviation operating services.
Earlier this year, Amazon announced a deal to lease 20 freighters from ATSG. It would also take a stake in the company. The ATSG deal includes both B767-300s and B767-200s.