ATSG reports another strong quarter

News Journal

WILMINGTON — Air Transport Services Group, Inc. this week reported consolidated financial results for the quarter and six months ended June 30.

ATSG’s second quarter 2020 results, as compared with the second quarter of 2019, include:

• Customer revenues up 13 percent, or $43.2 million, to $377.8 million.

• ATSG’s principal business segments, aircraft leasing and air transport, increased revenues by eight percent and 13 percent, respectively, before eliminations. Revenues from other businesses increased eight percent on the same basis.

• First-half capital spending was $265.9 million, up 23 percent. Capital expenditures included $188.2 million for the purchase of seven Boeing 767 aircraft in the first half of 2020, and for freighter modification costs.

Rich Corrado, president and chief executive officer of ATSG, said in a news release, “ATSG’s airlines leveraged short-term charter and ACMI opportunities to mitigate substantial pandemic-related reductions in regular operations for the U.S. Department of Defense and commercial passenger customers to achieve strong revenue and earnings growth on an adjusted basis for the second quarter. Air cargo operations expanded with the deployment of one Boeing 767-300 freighter leased to Amazon and operated by Air Transport International, the first under a new order for twelve with the remaining eleven scheduled for lease to Amazon during 2021.

“We now expect to lease twelve 767-300 freighters in 2020 to external customers, up from the previous guidance of eight to ten. Near-term pandemic effects aside, ATSG remains a growing, thriving air transport business with substantial growth potential in the coming years.”

ATSG’s total fleet consisted of 94 aircraft in service at the end of the second quarter, five more than at the same point in 2019. CAM owned 89 of those aircraft; three were leased to ATSG airlines by third parties and two were customer-provided for ATSG to operate. Sixty-three of those in-service, CAM-owned cargo aircraft were dry-leased to external customers on June 30, 2020, seven more than a year ago.

Total second-quarter external revenues from other activities increased by one percent due to growth in aviation fuel sales and ground handling services.

Bright outlook

Due in part to robust demand for its cargo aircraft and related airline services, as well as stronger than expected demand from governmental agencies for passenger charter flights in the second quarter, ATSG now expects Adjusted EBITDA for 2020 to be at least $470 million.

This updated projection reflects ATSG’s assumption about the level and duration of pandemic impacts on its commercial and military passenger flying, and a reduced likelihood of continued passenger charter opportunities to mitigate those effects in the second half.

The pandemic’s effects on the global economy and on military operations have proven to be difficult to predict. In the event those effects impact ATSG’s business later this year in ways not currently foreseen, ATSG may revise its Adjusted EBITDA guidance prior to year-end.

Corrado said that “Overall, ATSG’s long-term outlook is very bright, with especially strong demand for our cargo aircraft from lease and ACMI customers around the globe. Our order book calls for us to modify and dry-lease at least twenty additional 767 freighters through 2021, while redeploying others to new customers.

“Our business model’s emphasis on long-term cash flow streams from dry-leasing midsize cargo aircraft and focused passenger operations provides a solid financial foundation. When the pandemic fades, we expect to deliver even stronger results from our leasing, airline, aircraft maintenance and logistics operations.”

ATSG’s capital expenditures for 2020 are projected to be approximately $465 million. That includes purchases of 11 Boeing 767-300s this year for lease deployments.

Currently, ATSG expects to purchase three to five Boeing 767-300 aircraft in 2021. As a result, ATSG anticipates that capital spending in 2021 will decline by at least $115 million to approximately $350 million. At the same time, ATSG projects continued growth in Adjusted EBITDA over the next two years, stemming from its fleet investments and expanding airline, MRO and logistics operations.

News Journal