Revenues up at ATSG as 767 freighter conversion supply chain shows signs of constraints

While leasing aircraft was a catalyst for Air Transport Services Group’s (ATSG) record revenues in the third quarter, supply chain challenges will prevent the Ohio-based company from reaching its placement forecast for converted 767Fs this year. This is a development from the second quarter when ATSG forecasted that it would have sixteen or more converted 767-300 freighter aircraft on lease in 2021, but constraints in the conversion market hampered those plans. [caption id="attachment_416931" align="alignright" width="592"] EFW's Wolfgang Schmid handing over an A330-300P2F model to ATSG leadership at Cargo Facts Symposium 2021.[/caption] “It has recently become clear that supply chain constraints impacting our freighter conversion lines will keep us one aircraft short of that mark in 2021 with that aircraft sliding into 2022,” President and Chief Executive Officer Rich Corrado said today during the company’s earnings call. “Even with this delay, deploying fifteen converted 767-300 freighter aircraft and releasing four 767-200s will be a yearly record and represents a remarkable achievement for the teams that made it happen.” ATSG is also diversifying its conversion slots and earlier this week announced an order for four 767-300BCF conversions from Boeing. Further afield for when 767-300ER feedstock starts to dry up, the company has also secured conversion slots for twenty A330-300P2F conversions with EFW. Redeliveries of the completed freighter and the first lease deployment are expected in 2024, according to Corrado. “All together, we have secured access to seventy conversion slots for Boeing 767-300 as well as Airbus A321 and A330 aircraft over the next five years,” Corrado said. ATSG reported a revenue increase of 15% year over year to $465.9 million compared with $404.1 million. Adjusted EBITDA rose 21.9% to $152.9 million compared with last year’s $125.5 million. “These gains reflect our additional 767 leases and flight operations for Amazon and also leases of our 767-300s and 767-200s to Raya Airways, SkyTaxi, MasAir and Astral Aviation,” said Chief Financial Officer Quint Turner. According to Corrado, the order book for ATSG’s 767-300 freighters is full until late 2023 and there is “significant customer interest” in both the A321 and A330 platforms. PEMCO Conversions, a division of ATSG specializing in narrowbody conversions, completed delivery of its second 737-300 Flex-Combi and received another order during the quarter. PEMCO’s MRO also inducted the first A321 for conversion to freighter. Looking forward, Chief Commercial Officer Mike Berger said that e-commerce would continue to drive the market for its big enterprise customers, the integrators as well as the regional players. The order book for 2022 is at least ten 767s and in the high teens for 2023 deliveries, Berger said. Previously, the company thought it would convert and place at least ten 767Fs in 2023. The A330 conversion slots start in July 2023 and run through December 2025 with the first A330 deliveries in January 2024. Shares of ATSG [Nasdaq: AAWW] were trading at $26.59 as of market close today, up 0.02% from market open.

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