AAWW ‘well positioned’ to face near-term headwinds

Second-quarter results at Atlas Air Worldwide Holdings (AAWW) took a hit from tariffs and trade tensions between the US and China, but the global provider of outsourced aircraft and aviation operating services remains confident of its long-term growth.

Revenue for the three months ended June 30, 2019 stood at USD663.9mn, down from the USD666.1mn reported for the same quarter of last year. Reported net income totalled USD86.9mn and adjusted ebitda (earnings before interest, tax, depreciation and amortisation) USD86.4mn.

“Revenue and earnings in the second quarter were below our expectations, as air cargo volumes and yields were affected in the near term by the widely reported impact of tariffs and trade tensions,” said AAWW chief executive William J Flynn.

“In addition, our results during the period were impacted by labour-related service disruptions.”

Revenue from AAWW’s ACMI segment rose, owing to an increase in Boeing 767 and B737 flying, the start-up of B747-400 flying for new customers, and incremental B777 flying. However, higher costs outweighed the extra activity, one cause being an interim wage agreement with pilots at subsidiary airline Southern Air.

Cargo charter flying – and rates – dropped off somewhat during the second quarter as demand from both military and commercial clients fell and cargo yields dipped.

“With manufacturers and shippers taking a wait-and-see approach regarding tariffs and trade issues during the course of the quarter, we experienced a softening in anticipated commercial cargo block hours and yields in our Charter segment,” Flynn explained.

“On the military side of Charter, our cargo hours were in line with our expectations for the quarter and were up from the first quarter of this year as we anticipated they would be, but passenger demand for the military was less than expected.”

As for AAWW’s dry leasing activity, revenues were up owing to the placement of additional B767-300 converted freighter aircraft throughout 2018, as well as the placement of one B777-200 freighter in July 2018. The rise was partially offset by the scheduled return of a B777-200 freighter in March 2019 that is awaiting placement with a customer.

On an adjusted basis, for the first half of 2019 ebitda totalled USD204mn compared with USD219.3mn in January-June 2018.

Based on the first-half results and current conditions, AAWW now anticipates full-year revenue of approximately USD2.9bn, adjusted net income of approximately 80% of the 2018 figure, and adjusted ebitda of around USD520mn.

Having begun flying three B737s on a CMI basis for Amazon, AAWW expects to fly two more for the e-commerce giant by the end of this year and said there are further opportunities for another 15. It also flies two CMI B777s for DHL, and could win additional flying as DHL awards its remaining deliveries. Plus, Nippon Cargo Airlines has one CMI B747 and is expected to add two more by the end of 2019.

Flynn concluded: “Despite the present trade tensions and the resulting impacts on global airfreight, we have the right building blocks for the future, including our world-class employees; the modern, efficient, diversified aircraft and services that customers want; our focus on express, e-commerce and fast-growing markets; the scale and scope of our enterprise; and our leadership position in global aviation outsourcing.”

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