ATSG reports first quarter revenue rise
May 08, 2018: Aircraft lessor Air Transport Services Group saw first quarter revenues up 11 percent amounting to $203.0 million (after the adoption new revenue recognition standard).
Joe Hete, president and chief executive officer of ATSG said, "Continued earnings improvement from our airline businesses and the reduction in the federal tax rate drove a more than doubling of our first quarter adjusted earnings from continuing operations compared to last year. The outstanding efforts of our employees, and strong customer demand for our growing portfolio of freighter aircraft, point to further success during 2018.”
ATSG, that recently delivered first of two leased Boeing 767-300 converted freighters to Air Incheon, continues to expect that its adjusted EBITDA from continuing operations for 2018 will be approximately $310 million, up 16 percent from 2017, after taking into account the ratification of the amended pilot collective bargaining agreement at ATI in late March.
"We are off to a very strong start and optimistic about our growth in revenues and cash flows for the rest of 2018," Hete said.
"We continue to project delivery of ten 767-300 freighters to customers this year, one more than last year. Customer demand for additional 767s remains strong. We have customer commitments for seven of the 10 newly converted 767s this year, all of which will be straight dry leases. An agreement for an eighth dry lease is being finalised, and we have strong interest from customers for the remaining two."
Cargo Aircraft Management (CAM), a subsidiary of Air Transport Services Group (ATSG), sees revenue increase by $4.4 million, or 9 percent, to $52.4 million.
ATSG informed of CAM’s pre-tax earnings: “CAM’s pre-tax earnings increased 16 percent to $15.5 million, primarily due to the increase in leased freighters in service. CAM was leasing fifty-two cargo aircraft to external customers as of March 31, 2018, one more than at the end of 2017 and nine more than a year earlier. Of the externally leased freighters, one was a 737 and the rest were 767s. Higher earnings from additional leased aircraft in service were offset by the increase in warrant-related lease incentives, higher interest expense that included non-cash amortization related to ATSG's September 2017 convertible offering, and increased depreciation from its larger fleet.”
CAM delivered one 767 to Northern Aviation Services in January under a seven-year dry lease. One 737 freighter was delivered in April and one other 767 is due to be delivered later this month on an eight-year lease. That leaves eight additional 767s to be delivered to customers in 2018.
“Since we completed our 20-aircraft commitment to Amazon in August 2017, CAM will have delivered 13 additional 767 freighters to customers by year-end 2018,” added the company.
ACMI Services revenues, excluding revenues from reimbursed expenses, increased 10 percent to $119.4 million in the first quarter. Pre-tax earnings improved by $7.5 million, to a $3.9 million profit for the quarter. The factors that contributed to the growth of ACMI segment this year compared to first quarter of 2017 were additional flying for CMI customers, lower depreciation expense, and reductions in premium pilot pay and training.
ATSG’s airlines were operating six more CAM-owned aircraft at March 31 versus a year earlier, five of which were for CMI customers.
On March 21, ATI pilots represented by the Air Line Pilots Association ratified an amendment to the collective bargaining agreement with Air Transport International, which sets compensation levels for four years from that date. The ratification of the amendment will result in higher costs for pilot compensation at ATI beginning in the second quarter of 2018.
Effective January 1, 2018, ATSG segregated MRO Services, as a new reporting segment that includes the results of its aircraft maintenance services and modification services businesses. Total revenues from MRO Services were $52.7 million, up 31 percent. External customer revenues increased by 22 percent.
ATSG continues to project 2018 capital expenditures of about $300 million, the majority of which is for purchases of 767 aircraft and related freighter modification costs for customer deployments in 2018-19.