Air Transport Services Group, which provides medium wide-body aircraft leasing and contracted air transportation and related services, reported consolidated financial results for the quarter and the year ending December 31, 2019.
Customer revenues went up by 44 percent to $403.4 million in the fourth quarter compared to the same quarter in 2018 and the year total went up by 63 percent to $1.45 billion compared to last year. ATSG's principal business segments: aircraft leasing and air transport, reported improved revenues for the fourth quarter and year.
GAAP Earnings from operating income reported a loss of $41.1 million compared to a loss of $5.2 million during the same quarter last year. For 2019, GAAP earnings stood comparatively low at $60.0 million from last year, which stood at $67.9 million. Non-GAAP adjusted EBITDA from operating income increased by 29 percent to $124.3 million. Annual adjusted EBITDA rose by 45 percent, or $140.0 million, to $452.1 million.
The Group reported that the contributions from Omni Air and the increase in externally leased 767 freighters drove the majority of the increase in the adjusted EBITDA. Capital spending for 2019 was up by 55 percent, or up $160.6 million, and stood at $453.5 million. Capital expenditures included $328.0 million for the purchase of eleven Boeing 767 aircraft, including two in the fourth quarter, and for freighter modification costs.
Joe Hete, chief executive officer of ATSG said, "2019 was very productive and profitable for ATSG and its family of companies, excluding warrant effects. We successfully integrated Omni Air, our November 2018 acquisition, and expanded its passenger fleet, leading to better than expected returns from that investment. Demand for our cargo aircraft and flight operations was strong, due in large part to more aircraft and more flight operations for Amazon. We are optimistic that 2020 will be just as good, and project a strong increase in Adjusted EBITDA as we expect to deploy 8-10 more 767 converted freighters for customers."
ATSG reported the Cargo Aircraft Management (CAM) segment saw its fourth quarter revenues go up 18 percent versus the prior year, involving net of warrant-related lease incentives. Revenues benefited primarily from a full year of results from the eleven Omni Air passenger aircraft that CAM acquired and leased back to Omni Air in November 2018, and from seven more converted 767 freighters added during 2019. CAM's external customer revenues increased eight percent to $44.5 million during the fourth quarter.
CAM put 6 extra aircrafts in service at December 31, 2019, totaling at ninety-four, compared to eighty-eight on December 31, 2018. It owned ten others in cargo conversion or staging for lease, versus six the year before. That in-service fleet of CAM-owned aircraft included eighty-two cargo and twelve passenger aircraft. Sixty-two cargo aircraft were leased to external customers, three more than were leased as of the same date last year, and four more than on September 30, 2019.
CAM leased four additional 767 freighters during the fourth quarter, two to Amazon and two to United Parcel Service (UPS). The first of those UPS placements occurred in October. A third 767 was leased to UPS in January; two more are due this year. Ten 767s were undergoing conversion or awaiting deployment as freighters at year end, including two 767s acquired during the fourth quarter. CAM purchased eleven 767s during 2019.
CAM’s pretax earnings for the quarter were $18.4 million, $2.7 million more than the prior-year's same quarter. Fourth-quarter earnings reflected $1.3 million more in quarterly allocated interest expense and $5.9 million more for depreciation expense, due to both organic and acquired fleet growth, versus the year-ago quarter. CAM's annual interest and D&A expense increased $16.5 million and $31.6 million, respectively. The timing of new aircraft lease deliveries and transitioning of aircraft between lessees also had a larger effect on CAM’s 2019 results for the quarter and year.
ATSG's airlines operated seventy-one aircraft at the end of 2019, up four from the third quarter and nine more than a year earlier. Two of those seventy-one aircraft are leased-in and two others were provided by a customer. Total block hours increased 47 percent for the fourth quarter and 40 percent for 2019, principally due to the contribution from Omni Air's ACMI and charter operations, and growth in flight operations for Amazon.
Pretax earnings for the quarter were $14.4 million versus $7.9 million a year ago, up 83 percent. Higher revenues from our airline operations, including Omni Air, were the principal factor. Interest expense allocated to ACMI Services for the fourth quarter increased $0.6 million, primarily related to debt associated with the Omni Air acquisition.
Hete assured that "We are looking forward to another year of good growth in 2020. Our plan now includes commitments to lease nine more 767 freighters, four of which we would operate for Amazon, and three we will lease to United Parcel Service. We also project continued improvement overall from our airlines including revenue growth from more leased aircraft and additional flying for Amazon driven by their one-day delivery commitments, plus growth in operations for our military and other government customers."
Rich Corrado, president of ATSG, noted that, "Demand for Boeing 767 freighters remains very strong. Amazon's 2018 commitment to lease four more 767 freighters this year will absorb more of the feedstock aircraft we have agreed to purchase. Ongoing discussions with existing and new customers indicate significant interest in freighter deployments for 2021, which would place all of our 767-300s available at the end of 2020 into service by the end of next year. At the same time, some of those new 2020 leases of 767-300s may replace existing leases of other 767-200s. DHL does not intend to renew ACMI agreements expiring in March for the 757-200 freighters we have operated for them. We are working hard to redeploy or otherwise realize value for all of those transitioning aircraft."