Atlas Air reports strong Q2; bullish on year-end targets
Atlas Air Worldwide Holdings reported strong second quarter earnings for 2020. The carrier’s second-quarter for the year saw net income of $78.9 million, or $3.01 per diluted share, compared with net income of $86.9 million, or $1.61 per diluted share, in the second quarter of 2019.
On an adjusted basis, EBITDA totaled $247.0 million in the second quarter this year compared with $84.1 million in the second quarter of 2019. Adjusted net income in the second quarter of 2020 totaled $123.2 million, or $4.71 per diluted share, compared with $4.5 million, or $0.17 per diluted share, in the second quarter of 2019.
“Revenue and earnings in the second quarter continued to exceed our expectations,” said chief executive officer John W. Dietrich. “These positive results were primarily driven by the team capitalizing on strong demand and higher yields in our commercial charter and South America businesses. We also continued to provide the US military with essential services and our ACMI customers flew well above their minimum guarantees.”
The carrier executed “very favourable” business opportunities in a challenging operating environment. “To serve this increased demand, we reactivated three of our 747-400 converted freighters and operationalized a 777 freighter from our dry leasing business. This enabled us to serve the strong and profitable shorter-term demand, while also entering into numerous new long-term charter programs at attractive yields. We expanded our long-term charter business to include new agreements with manufacturers such as HP Inc., and large freight forwarders like DHL Global Forwarding, APEX Logistics, DB Schenker, Flexport and Geodis, all that wanted to secure committed capacity from us.”
Dietrich added: “We continued to deliver safe and high-quality service for our customers, despite the many challenges presented by this pandemic, including a variety of travel restrictions, testing protocols, quarantine mandates and other operational challenges. This is a true testament to the commitment and dedication of all our Atlas team members, particularly our crew and ground staff out in the field.
He said: “Atlas is continuing to play an essential role in the global supply chain, and the goods we carry help save lives, fuel economic activity and support jobs. We are playing a key role in our customers’ operating networks, and are helping businesses and communities manage through Covid-19.”
“We have a talented team, a strong balance sheet, and we continue to demonstrate our ability to adjust to market conditions, capitalize on strategic growth opportunities, and navigate through these evolving and uncertain times,” Dietrich said.
“Reflecting our first-half results and our current market expectations, and subject to any material Covid-19 developments, we anticipate full-year 2020 revenue of just over $3 billion and adjusted EBITDA of approximately $750 million."
“Our outlook also expects approximately 50 percent of our full-year 2020 adjusted net income to occur in the second half of the year. That would result in 2020 adjusted net income being more than double 2019.”
2020 outlook for ACMI and charter
Reflecting the first-half results the our current market expectations for the balance of the year, and subject to any material Covid-19 developments, the carrier expects to fly more than 330,000 block hours in 2020, with about 70 percent of the hours in ACMI and the remainder in charter.
The carrier also anticipates revenue of just over $3 billion and adjusted EBITDA of approximately $750 million. “Our outlook also expects approximately 50 percent of our full-year 2020 adjusted net income to occur in the second half of the year. That would result in 2020 adjusted net income being more than double 2019,” he added.
Historically, Atlas Air has generated the vast majority of its earnings in the second half of the year. “This year, however, due to the strength of the first half, we anticipate our full-year 2020 adjusted net income to be more evenly split between the first and second half. Our second-quarter results this year benefited from commercial charter yields that were significantly above typical levels and from a $24.3 million (after tax) refund of excess aircraft rent paid in previous years.”
Aircraft maintenance expense in 2020 is expected to total about $480 million, with depreciation and amortization totaling around $255 million. Core capital expenditures, which exclude aircraft and engine purchases, are projected to total approximately $80 to $90 million, mainly for parts and components for our fleet.
The carrier estimates its full-year 2020 adjusted effective income tax rate will be approximately 23 percent.
“For the third quarter of 2020, we expect commercial charter yields to moderate from the second quarter, but still remain elevated compared with typical yields for this time of year. We anticipate flying more than 85,000 block hours (about 70 percent in ACMI), with revenue of nearly $800 million and adjusted EBITDA of about $170 million. We also expect that our third-quarter adjusted net income will represent approximately 20 percent of our full-year 2020 adjusted net income, or to be more than six times higher than third-quarter 2019 adjusted net income of $9.5 million,” he concluded.