Atlas reports third quarter loss but expects positive peak
03 / 11 / 2016
Atlas Air Worldwide Holdings reported a loss in the third quarter of the year as a result of “non-deductible expenses” triggered by warrants granted to Amazon, but the company remains optimistic for the peak season.
The aircraft lessor recorded a loss from continuing operations of $7.5m for the third quarter, compared with a $12.8m loss for the same period last year, which it said was down to the expenses triggered by the warrants granted to Amazon.
On an adjusted basis, income from continuing operations, net of taxes, totalled $27.4m compared with $30.7m in 2015, although last year’s figure included some tax benefits.
Despite the repeat of last year’s loss, the company was happy with the progress it has made in implementing a fleet of 20 Boeing 767-300 aircraft for Amazon, which gained a shareholding in Atlas as part of the deal.
The aircraft lessor has also been increasing its focus on the fast growing e-commerce and express markets, rather than the traditional air cargo sector where growth has been slowing, while it is also in the progress of integrating recently purchased Southern Air into the business.
President and chief executive officer William Flynn said: “During the third quarter, we continued to focus on increasing our alignment with the faster growing express and e-commerce markets.
“We placed our first aircraft into service for Amazon in August, and we moved forward with preparations to ramp up to 20 by the end of 2018.
“We also made significant progress toward integrating Southern Air and the two new operating platforms that it adds. Thus far, the contributions and synergies from Southern Air and its express-focused Boeing 777 and Boeing 737 crew, maintenance and insurance (CMI) services have exceeded our expectations.
“Reflecting our expanding business base and the ongoing development of our strategic platform, our third-quarter results were at the upper end of the range that we expected.
In aircraft, crew, maintenance and insurance (ACMI), we started flying for Amazon and benefited from accretion generated by Southern Air.
“In charter, our results reflected an increase in military cargo and passenger demand. And our Dry Leasing business maintained its steady, annuity-like performance.
“Despite publicity about the Hanjin Shipping bankruptcy during the quarter, we did not observe any noticeable impact on airfreight demand or rates.”
Flynn added that the company was looking forward to a strong fourth quarter.
“We expect peak-season demand to be solid and accompanied by a seasonal improvement in commercial airfreight yields.
“Together with our additional seasonal flying for express operators and a lower level of maintenance expense, we expect both a sequential and a year-over-year improvement in our block-hour volumes, revenue, profitability and margins in the fourth quarter, which we anticipate will account for slightly more than 50% of our 2016 adjusted diluted earnings per share.”
Looking at the company’s individual business segments, its ACMI business increased its contribution during the period thanks to the acquisition of Southern, although the redeployment of a B747-8 freighter to the charter segment had increased maintenance spend had a negative impact.
The charter segment’s contribution also improved, reflecting the additional B747-8F capacity and an increase in military cargo and passenger demand. Its dry leasing business remained similar to last year’s levels.