Atlas answers the big question

Atlas Air Worldwide Holdings’ first quarter net income was either up 90% or down 60% depending on whether you look at the adjusted or as-reported figures. On an as-reported basis, Atlas saw net income for the first quarter of 2014 fall 60.4% y-o-y to $7.9 million. However, after adjusting for a $3.4 million charge (related to the early termination by IAG of leases for three 747-8Fs) in the first quarter of this year, and a $14.2 tax benefit in last year’s quarter, net income was up 91.5% to $11.3 million. Revenue for the quarter was up 6.9% to $403.4 million, and operating income jumped 24.5% to $28.1 million.

Financial and operating results are shown in the chart at right, but nothing in the chart answers the big question that has been on everyone’s mind for the last two months: “What is Atlas going to do with the three 747-8 freighters on which IAG terminated the leases?” No matter what the results in the first quarter, the specter of three very expensive assets parked and generating no revenue was casting a huge shadow over the company. Atlas’ answer, announced with the release of the first quarter results, was: We’ve already placed two of them with DHL, and we will put the third into revenue service.

Leaving aside the question of just what “revenue service” might be, the placement of two of the 747-8Fs with DHL is good news for Atlas. Not unmitigated good news, because the 747-8Fs will not increase the number of freighters Atlas operates for DHL, but rather will replace two 747-400Fs currently flying for the German integrator. And Atlas CEO Bill Flynn and CFO Spencer Schwartz both respectfully declined to answer analyst’s questions about how much of a discount, if any, Atlas had had to offer DHL to secure the placement.

But even with the above caveats and unanswered questions, having two of the three 747-8Fs immediately entering ACMI service with DHL is a big positive for Atlas.

Turning back to financial and operating results, as shown in the chart, the company’s ACMI (including CMI) segments reported a solid, if not exceptional, quarter, balancing out the expected decline in military (AMC) charter work. We will analyze the results in detail in the upcoming May issue of Cargo Facts. If you are not already a subscriber, click here for full details.