ATSG Q22024 net earnings drop 80% on lower block hours, returns

Air Transport Services Group (ATSG) reported an 80 percent decline in net earnings for the second quarter of 2024 at $7.4 million on seven percent lower revenue at $488 million.

"Our second quarter results were affected by fewer block hours by our airlines and the scheduled return of Boeing 767-200 freighters from a year ago," says Mike Berger, Chief Executive Officer, ATSG. "We beat our internal expectations for the quarter, however, and are positioned for further improvement in the second half of the year, particularly in the fourth quarter. We're encouraged by the free cash flow we're generating and have again raised our full year guidance for adjusted EBITDA.

"We have leased four aircraft to customers since the end of June and are encouraged by the momentum we're seeing in the global markets we serve. We remain proud of the service levels we deliver every day and are particularly pleased that we met commitments to our customer Amazon during this year's Prime Week."

Cargo Aircraft Management (CAM)
*Aircraft leasing and related revenues declined seven percent for the second quarter, including the benefit of revenues from 14 additional freighter leases, including eleven additional 767-300s and three Airbus A321-200s since the end of June 2023. These lease revenues were more than offset by the scheduled returns of nine 767-200 freighters and four 767-300 freighters over that same period. Revenue reductions associated with the 767-200 fleet include the effect of fewer cycles operated by lessees under our 767-200 engine power programme.

*CAM’s second quarter pretax earnings decreased 51 percent to $15 million versus the same period last year. The biggest driver of the year-over-year decrease was the reduction in 767-200 freighter lease and engine power programme revenues.

*As many as 23 CAM-owned aircraft were in or awaiting conversion to freighters at the end of the second quarter, six fewer than at the end of Q22023. This included twelve 767s, six A321s, and five A330s. Two of the A330s are expected to complete conversion and be leased to an external customer in the fourth quarter 2024.

ACMI Services
*Pretax loss was $7 million in the second quarter versus earnings of $24 million in the second quarter of 2023.

*Revenue block hours for ATSG's airlines declined 10 percent compared to Q22023. Cargo block hours decreased 11 percent, reflecting the removal of certain 767-200 freighter aircraft from service and less international flying versus the prior year.

*In addition to the reduced flying hours and reduced revenues, ACMI Services experienced increased expenses for crew training, maintenance, travel and ground service rates. Of the decrease in pretax earnings, $3 million was attributable to an increase in non-cash amortisation for Amazon warrants.

2024 outlook
Taking into account the four aircraft leases that commenced at the end of June, ATSG expects adjusted EBITDA of approximately $526 million in 2024. That is an increase, concentrated in the fourth quarter, of $10 million from the earlier outlook.

ATSG expects capital spending for 2024 to be $390 million, down from the $410 million estimated in May 2024, and down $400 million from 2023 actual spending.

Berger adds: “We are on track to achieve our improved 2024 outlook. We expect contracted pricing increases and seasonal charter opportunities in the fourth quarter, which should drive improved sequential results in our ACMI Services segment. This expected improvement, combined with momentum in our core leasing business, positions us well to drive earnings growth in 2025."