ATSG Q2 revenue up 4%, hikes 2023 earnings outlook marginally
Projects record 2023 freighter lease deployments; reduces capex for 2023 by $65 million to $785 million
Nasdaq-listed Air Transport Services Group (ATSG) reported a four percent increase in revenue at $529 million for the second quarter ended June 30, 2023 compared to the same period last year.
"Adjusted pretax earnings of $58 million was down from $67 million in Q22022," says an official release.
Adjusted earnings per share (EPS) from continuing operations declined to $0.57 from $0.59, and adjusted EBITDA was $157 million.
The company has repurchased 3.9 million shares since October 2022 including 950,000 shares in Q22023, the release added.
Rich Corrado, President and CEO, ATSG
“Our results in the second quarter reflect a rebound from the first quarter in our passenger airline operations, including both improved revenues and cost efficiencies, and the benefit of 13 more Boeing 767-300 freighters in service at June 30 this year versus a year ago," says Rich Corrado, President and CEO, ATSG. "Adjusted EBITDA was in-line with the prior year period, despite continuing inflationary effects on our operations versus the second quarter of 2022. We remain confident in executing our plan to lease 19 newly converted freighters in 2023 including nine leased to date. We continue to expect attractive returns on what we now project will be $785 million in 2023 capital spending, down $65 million compared with prior guidance.”
Pre-tax earnings from cargo aircraft management (CAM) declined 22 percent to $31 million. "Earnings were impacted by the scheduled return of ten 767-200s since June 2022, including seven in the second quarter this year.
Four 767-200s leased to Amazon returned during the quarter while seven remain in service, the company said during the results presentation.
"CAM deployed one 767-300 leased freighter to an external customer during the quarter. Six more leased freighters have been deployed since June 30, 2023, including four more 767-300s, and two A321-200s.
"Twenty-three aircraft are currently in or awaiting conversion to freighters. That total includes seven A321 aircraft and sixteen 767-300s."
ACMI services pre-tax earnings increased 10 percent to $24 million "driven by improved performance of passenger operations, including both military and commercial flying, and greater operating efficiencies."
2023 Outlook
ATSG continues to expect adjusted EBITDA for 2023 to be in a range of $610-620 million, and adjusted EPS in a range of $1.65-1.80, 10 cents higher than prior guidance "based on second-half leased freighter deployment projections and stronger ACMI services performance."
Corrado adds: "A solid July for both freighter leasing and passenger flying has positioned us to achieve our second-half 2023 goals with sequential improvement each quarter."
ATSG has lowered its capital spending projection for 2023 by $65 million to $785 million, including $240 million in sustaining capex and $545 million for growth. "The decrease in growth capex principally reflects two fewer A321 aircraft purchases this year for conversion in 2024. Lower sustaining capex reflects fewer than planned overhauls of engines for Boeing 767-200 freighters."
The fundamental driver of midsize freighter leasing - rapid fulfilment of e-commerce purchases via air express networks - will persist over the long term, says Corrado. “Global e-commerce growth projections remain strong, and our owned fleet and conversion pipeline stand ready to meet future demand, further supported by the need to replace ageing, less fuel-efficient aircraft over the next decade. Our freighters, including Boeing 767s, Airbus A321s, and Airbus A330s, remain the most efficient and reliable solutions for these markets.”
Capital investments in 2024 are now expected to be lower than 2023 levels. "That gives us the option to pursue other capital allocation alternatives that may yield even better returns for shareholders,” says Corrado.
