Given the net loss, why was Atlas so pleased with the result that CEO Bill Flynn said “We are off to an exciting start in 2017. We are building on our 2016 achievements and growing our earnings this year”?
As is often the case, the reason is that the reported figures include one-time financial charges, mostly relating to outstanding warrants, and that, on an operational basis, the quarter was an excellent one. Adjusting for the charges, AAWW’s firstquarter net income was up 6.9% to $8.3 million.
On the operational side, as shown in the chart, block hours were up in all segments, operating revenues were up in the ACMI and Charter segments, and an almost-50% increase in ACMI segment contribution more than overcame drops in contribution from the Charter and Dry Leasing segments.
And, in addition to the strong performance in the first quarter, Atlas started the second quarter on a high note by reaching an agreement with Cathay Pacific for the AMCI operation of two 747-8Fs, and the redelivery of two 767-300BDSFs and their placement in the Amazon Prime network.
Looking both back and ahead, Flynn said that the accelerating growth of air freight demand that began in mid-2016 was spread evenly across geographical regions, and across the various verticals in which Atlas operates – and also between the general freight and express/e-commerce sides of the air freight business. He added that Atlas expects demand to stay strong, and stay evenly spread, through the rest of this year.
Looking at the results on a segment by segment basis
ACMI (including CMI): The big gains in block hours, revenue and direct contribution were primarily driven by AAWW’s acquisition of Southern Air in the second quarter of 2016, and by lower crew-training costs. The fall in revenue per block hour was, oddly enough, also partly due to the acquisition of Southern, as the Southern 777Fs and 737-400Fs generate less revenue per hour than the larger 747s in the Atlas fleet. Likewise, additional 767 freighter operation for Amazon drives up total revenue and block hours, but reduces average revenue per block hour.
Charter: Increasing demand from both the commercial and military sectors drove up revenue and block hours, but increased heavy maintenance costs and a reduction in charter rates paid by the military hit both segment contribution and revenue per block hour.
Dry Leasing: A decrease in revenue resulting from maintenance payments related to the return of a passenger aircraft off lease in 2016 was only partially offset by revenue from the placement of two 767-300 freighters with Amazon (August 2016 and February 2017) and one with DHL (February 2016).