Atlas almost quadruples net income in 1Q

Atlas Air Worldwide Holdings (AAWW) reported first-quarter 2015 net income almost quadrupled y-o-y to $29 million, as revenue rose 10.3% to $445 million. Operating income for the quarter more than doubled to $57 million.

As could be expected, the company said the strong performance benefitted from increased demand for commercial charter capacity as shippers switched from ocean to air, both as a result of the labor-related congestion at the US West Coast ports, and the massive automobile recall in the US. Surprisingly, Atlas said it also received a boost from “better-than-expected military cargo and passenger demand.”

AAWW separates its business into three reportable segments: ACMI (including CMI), Charter (both commercial and military), and Dry Leasing (through its Titan Aviation Leasing subsidiary).

• Block hours in the ACMI segment rose compared to 1Q14, as customers flew above their contractual minimums, and also as Atlas added three 767-200Fs to its CMI operation for DHL Express. The company said it added a fourth 767-200F in April, and now operates nine of the type in support of DHL in the US. But while block hours increased, revenue per block hour decreased – for the same reasons: customers flying above rather than below contractual minimums (as was the case in 1Q14), and the additional CMI flying (which brings in less revenue per block hour than ACMI).

• As mentioned above, the Charter segment benefitted from the congestion at the US West Coast ports, but Atlas said it saw solid demand growth on all the major trade lanes, including, perhaps surprisingly, North-South traffic in the Americas. Regarding this latter, Atlas CEO Bill Flynn said that despite the political and economic problems in Brazil and Argentina, air freight demand into those countries remained strong, particularly in support of the manufacturing sector in Brazil. Atlas maintains what it calls a “scheduled charter network” connecting North and South America through a hub in Miami, and was well placed to take advantage of available opportunities.

• There were very few surprises in the Dry Leasing segment, with business remaining “steady.” However, the segment did get a boost as the company “realized revenue from maintenance payments related to the scheduled return of a 737-800 passenger aircraft in February 2015.” That aircraft was sold when it came off lease, and Atlas’ dry-lease fleet is now made up of six 777Fs, one 757-200F, one 737-300F, and a single remaining passenger aircraft, a 737-800. Regarding the 757-200F, while AAWW did not mention the matter in its discussion of the first-quarter results, Cargo Facts believes it was returned off lease by China Cargo Airlines in late April. Given Atlas’ close relationship with DHL Express, and DHL’s seemingly insatiable hunger for 757 freighters, we would not be surprised to see it painted yellow sometime in the near future.

Looking ahead, Atlas said it was confident that air freight demand would continue to increase at between 4% and 5% per year through 2016, and also pointed out that its customers tended to perform at above-market levels. Taking these two factors together, the company said: “We anticipate significant growth in adjusted fully diluted earnings per share in 2015.”

Regarding fleet plans, CEO Flynn said only that Atlas planned to add more 747-8Fs, but did not specify how many, nor when they might be added.