ATSG revenues decline in Q1 despite strong cargo results

Aircraft lessor ATSG has recorded decreased revenues and earnings before interest, tax, depreciation, and amortisation (ebitda) in the first quarter of this year, partly due to decreased passenger services in the wake of the pandemic.

The company achieved revenues of $376.1m in the first quarter of this year — 3.4% lower than in the same period of 2020. Adjusted ebitda declined by 14.9% year on year to $105.6m.

Since March 2020, the company has leased fifteen Boeing 767-300 freighters — including five in the first quarter of this year. This has had a positive impact on its aircraft leasing revenues from external customers.

However, the company’s ACMI Services revenues were down due primarily to “reduced operations for passenger and combi services, including fewer special charter operations, versus the early stages of the pandemic last year”.

Rich Corrado, president and chief executive officer of ATSG, commented: “Leased cargo aircraft deliveries remained on a record pace in the first quarter, including four of the eleven additional Boeing 767s we will lease to and fly for Amazon this year.

“We also received word last week that the FAA has awarded a Supplemental Type Certificate for freighter conversion of Airbus A321-200 passenger aircraft under our joint venture with Precision.

“In March, we were pleased to learn that Amazon intends to express its continued confidence in ATSG by choosing to exercise ATSG warrants it holds to acquire 19.5% of our common shares, including a cash equity investment of $132m that we expect to be completed this week.

“However, the incremental passenger flying we were awarded to move personnel in the early stages of the pandemic last year has not continued into 2021, and our ongoing combi and passenger flying assignments remain down.

“We anticipate an improving trend for our airline businesses, especially in the second half.”

• 321 Precision gains STC for A321 conversion

• Record B767 deployments boost ATSG in 2020

• ATSG freighter deployments boost Q3 revenues and profits

Looking at the performance of ATSG’s divisions, Cargo Aircraft Management (CAM) saw revenues in first quarter 2021 increase by 12.2% to $83.2m and pre-tax segment earnings increased by 35.7% on a year earlier to $21.5m.

“Seventy-five CAM-owned B767s were under lease to third parties at the end of the quarter; thirteen more than a year ago and two more than at the end of 2020,” the company said.

“Nine 767 aircraft were in or awaiting conversion to freighters at the end of March 2021, down three from a year earlier.”

ATSG’s ACMI business saw revenues decline by 13.0% to $247.1m, while pre-tax earnings increased 15.7% to $21.3m.

“Revenues for ACMI Services decreased 13% from the prior-year period, stemming primarily from a reduction in charter passenger operations for commercial customers of Omni Air, reduced Boeing 757 combi operations for the military, and the 2020 retirement of four Boeing 757 freighters we had operated for DHL,” the company said.

It added: “Pretax segment earnings for the first quarter increased to $21.3m, including the benefit of $28m in government grants recognised in the quarter, which ATSG excludes from its ebitda.” 

Taking the effects of the pandemic into consideration, ATSG said it expects adjusted ebitda for full-year 2021 to be at least $525m – or 6% higher than 2020.

Looking forward, Corrado said: “Our leasing business remains exceptionally strong, and is driving our cash-flow returns. Customer demand for our converted 767 freighters is driven by the growth in ecommerce shipping and shows no sign of abating.

“We now expect to lease at least ten more Boeing 767-300 freighter aircraft in 2022, and multiple customers are expressing interest in signing multi -unit freighter orders with us starting as late as 2025.

“On the other hand, our passenger charter and combi operations are recovering at a slower pace than we had expected a few months ago, and margins for our airlines remain below our targets. We remain hopeful for a strong rebound in passenger operations late this year.”

Last year, ATSG achieved 11 deployments via external lease (and 13 leases overall) of newly converted Boeing 767 freighters, plus re-deployments of three other Boeing 767s.

Additionally, it obtained a broader base of lease customers, as ts subsidiary company CAM delivered aircraft to seven lessees in five countries. These include including Astral Aviation in Kenya, MasAir in Mexico, Raya Airways in Malaysia and CargoJet in Canada.