Mixed picture for ATSG

Air Transport Services Group, Inc (ATSG), the US-based provider of medium widebody aircraft leasing, contracted air transportation and related services, has reported consolidated financial results for the third quarter of this year (the period ending September 30).

ATSG made revenue of $523m, up 1 percent on the same three months of 2022, with adjusted earnings (EBITDA) of $137m, down from $163m in the same period of last year.

Joe Hete, chief executive of ATSG, said: “The third quarter started out on track with our expectations.

“We leased seven newly converted freighters in July and early August, including five [Boeing] 767-300s and our first two [Airbus] A321-200s.

“However, both macro and operational pressures throughout the latter part of the quarter materially affected our results. In our CAM [Cargo Aircraft Management] leasing operations, we realised lower revenues from 767-200 aircraft sales and associated engine power than forecasted during the quarter.”

In ATSG’s CAM business segment, aircraft leasing and related revenues in the third quarter were down by 1 percent year on year, due to eleven fewer leased B767-200 aircraft and lower power-by-cycle engine revenue associated with 767-200s, though these factors were partially offset by higher average lease rates.

CAM deployed five B767-300 and two A321-200 leased freighters to external customers during the quarter. Eleven leased freighters have been deployed since September 2022: nine B767-300s and two A321-200s.

Over the entirety of 2023, CAM now expects to deploy 16 newly converted leased freighter aircraft: 12 B767-300s and four A321-200s. Six of the 16 are due to be deployed in the fourth quarter.

Twenty aircraft are currently in or awaiting conversion to freighters for CAM operation. That total is made up of seven A321 aircraft and 13 767-300s. One B767-200 is currently staging for lease.

The company is scheduled to purchase three A330 feedstock aircraft in the fourth quarter of this year for planned freighter conversion and deployment in 2024.

ACMI services
ATSG’s ACMI services operations made pre-tax earnings of $12m in the third quarter, down 51 percent year on year. The reduction stemmed from unfavorable revenue mix impacts in both cargo and passenger operations, inflation and service challenges in ATSG’s passenger operations, the company said.

Revenue block hours for ATSG’s cargo airlines were down 4 percent in the third quarter, while operating one fewer 767 freighter compared with the year earlier period also had an impact.

Meanwhile, cargo block hours were affected by fewer longer haul international routes as compared to the same period of the prior year.

Looking ahead, ATSG confirmed that in mid-October certain airlines that lease aircraft from CAM to serve international routes had said that they are experiencing weaker customer demand, impacting their recent financial performance and outlook. ATSG expects this to disrupt future leasing revenues from those customers.

Moreover, the company said that it expects the conflict in the Middle East to affect customer requirements in the near term. In addition, it forecasts fewer 767-200 aircraft sales and lower engine revenues than planned for this year.

ATSG’s domestic air express operations, in support of the e-commerce networks of DHL and Amazon, remain on track with earlier expectations, however.