ATSG on the up as it continues to benefit from Omni acquisition

Freighter lessor Air Transport Services Group (ATSG) reported higher third-quarter results thanks to the integration of charter carrier Omni Air International, which it acquired late last year.

Revenue in the quarter rose to $366m, up 79% from the year-ago period while net profit more than tripled to $105m from $33m in the third quarter of 2018, the company said in an investor update on November 6.

Both of ATSG’s principal business segments, aircraft leasing and air transport, as well as revenue from the acquisition of Tulsa-based Omni for $845m in cash last November, were the largest contributor to the year-over-year revenue gain, the company says.

“Demand for our aircraft and flight operations continued to accelerate in the third quarter, pointing toward a strong peak period of non-payload-sensitive flying for our air express network customers as we deploy more 767 Freighters,” ATSG chief executive Joe Hete says in a statement.

“Flight operations for the US Department of Defense and passenger charter customers were also strong.”

The Department of Defense became ATSG’s largest customer following its acquisition of Omni, which operates a fleet including Boeing 777s and 767s for the US government and military.

At the end of September, ATSG’s in-service fleet included 92 aircraft: 78 cargo and 14 passenger aircraft. Of those, 58 cargo aircraft were leased to external customers, four more than a year ago. The company expects to have 100 aircraft in service by the end of the year.

ATSG leased three 767-300Fs to Amazon during the third quarter, including two newly converted aircraft and one previously leased to ATSG subsidiary Air Transport International. Six additional 767Fs are scheduled for deployment during the fourth quarter, two to Amazon and four to United Parcel Service, the company says.

Looking forward to the end of the year, the company said it sees the holiday shopping season being stronger than previously expected.

“Peak-season flight schedules for ATSG’s scheduled express-package services will be higher in the fourth quarter than previously forecast, largely due to strong e-commerce demand,” the company said. “As a result, costs to prepare for and support that demand will be greater than previously anticipated.”

ATSG maintained its full-year 2019 forecast of $450m in earnings before interest, tax, depreciation and amortisation, compared with $312m for 2018.

Demand has remained strong, despite trade and tariff issues which have affected the wider cargo market, Hete said, adding that ATSG expects to continue investing in 767s in the near term, “based on known and anticipated requirements of customers relying even more on air express networks to speed fulfillment”.