ATSG looks ahead

In a presentation delivered at the Stifel, Nicolaus & Co Transportation & Logistics Conference, Air Transport Services Group (ATSG) Chief Executive Officer Joe Hete and Chief Commercial Officer Rich Corrado painted a picture of where the company is now, and also provided some information about near-term plans and a glimpse of some future possibilities.

ATSG has made a replay of the presentation available on its website, but we will review a few of the highlights here, beginning with the major changes in 2016:

• The big news, of course, was the completion of a deal with Amazon that will see Cargo Aircraft Management (CAM, ATSG’s leasing arm) dry-lease twenty 767 freighters to Amazon. ATSG subsidiary carriers ABX Air and ATI will then then operate those freighters for Amazon on a CMI basis. As part of the deal, Amazon received warrants for purchase of up 19.9% of ATSG common shares at $9.73 per share through March 2021.

• ATSG added five freighter-converted 767-300BDSFs to its operating fleet in 2016. See the chart below for our updated summary of the complete ATSG fleet

• At the end of the year, ATSG acquired MRO and conversion specialist PEMCO World Air Services. ATSG had its own maintenance subsidiary (Airborne Maintenance & Engineering Services, or AMES), but the PEMCO acquisition greatly increased its MRO capabilities. The extent to which the PEMCO’s conversion business will be important to ATSG’s future remains to be seen, but the company’s move into China (see below) opens some interesting possibilities.

Regarding the move into China, ATSG had hoped to see BrightStar Express Airlines, its all-cargo joint-venture with Okay Airways and Vipshop, up and flying by the end of 2016. A slowdown imposed by the CAAC on certification of new airlines has pushed BrightStar’s service launch to sometime late this year, but ATSG says it can still take advantage of opportunities in China through its partnership with Okay. In addition to using Okay’s single freighter (a 737-300F) to build business that will be transferred to BrightStar, ATSG plans to acquire two more 737-300s, have them converted to freighter configuration by PEMCO, and put them into service with Okay. Once BrightStar receives its AOC, the business and the freighters will be transferred.

And finally, looking further into the future, ATSG’s executives said that Amazon’s decision to build and operate its own hub at Cincinnati/Northern Kentucky Airport (CVG) was likely positive for ATSG. Yes, it would lose the business of operating a hub for Amazon in Wilmington (ILN), but since one of the reasons Amazon made the move was to have space available for up to 100 aircraft, ATSG hoped to “continue to deploy assets with them as they grow that fleet potentially to 100, or more than 100.”

Also in the future, ATSG said it hoped to be able to move larger freighters (i.e. some of its 767s) into China.

Turning from the future to the present, here is a snapshot of the ATSG fleet as it is today. Through its leasing arm CAM, ATSG owns seventy aircraft:

• Five 757-200Fs – all operated for DHL by ATI

• Four 757-200 combis – all operated for the US military by ATI

• Thirty-six 767-200Fs
  • eleven operated for DHL by ABX,
  • fourteen operated for Amazon (seven each by ATI and ABX)
  • three dry-leased to Amerijet by CAM
  • three dry-leased to West Atlantic by CAM
  • two dry-leased to DHL International Aviation Middle East by CAM
  • one dry-leased to Cargojet by CAM
  • one dry-leased to Raya Airways by CAM
  • one not currently leased

• Twenty 767-300BDSFs
  • five operated for Amazon (four by ATI and one by ABX)
  • six operated for DHL by ABX
  • one operated for Aloha Air Cargo by ABX
  • one operated for Aeronaves TSM by ABX
  • three dry-leased to Amerijet by CAM
  • one dry-leased to Cargojet by CAM

• Four 767-300s currently in or awaiting conversion

• One 767-200

Looking ahead again, ATSG said it plans to add another three 767 aircraft by July of this year.

If you are interested in hearing more about ATSG’s plans, join us at Cargo Facts Asia in Shanghai, 25 – 26 April, where Chief Commercial Officer Rich Corrado will participate in a session devoted to the impact of e-commerce on the air freight and express industry. To register, or for more information, go to CargoFactsAsia.com.