The huge jump in reported net income was driven by three one-time financial items:
- A $130 million benefit in 4Q17 due to the recent change in US tax law
- An unrealized gain in 4Q17 of $23.7 million on outstanding warrants
- An unrealized loss in 4Q16 of $27.9 million on outstanding warrants
Adjusting for the impact of these one-time items, AAWW said net income was up 13.0% to $66.7 million.
The strong performance was spread across all three of the company’s business segments, with revenue and direct contribution well up for ACMI, Charter, and Dry Leasing. Total block hours increased 17.7% on the back of a 28.3% increase in ACMI flying (which includes CMI).
Over the course of 2017 Atlas added 767-300 freighters to the fleet it leases to, and operates for, Amazon, and, as we have reported, signed new ACMI agreements with several Asian airlines. In addition, the strong 2017 peak-season demand drove up charter rates.
Discussing the results, CEO Bill Flynn summed up the quarter, and the year, as a time of a “strong airfreight environment, underpinned by global economic growth.
Looking ahead, he said Atlas expects this environment to continue, with the result that total block hours should be up about 19% in 2018, and adjusted net income up at “a mid-twenty-percent level.” Some of that increase in net income will be the result of the changes in the US tax law, but even without that benefit, Atlas predicts a mid-teens-percentage increase.
To meet the increasing air freight demand, Atlas signed operating lease agreements for six additional 747-400 freighters last year. Two of these joined the Atlas fleet in late 2017, with the remaining four to join this year. The two acquired last year were 747-400ERFs formerly operated by Korean Air, and now leased from Altavair. Atlas declined to disclose the source of the other four, but more -400ERFs are likely to come out of the Korean fleet, and several 400Fs are likely to be retired by EVA, and we suspect Atlas has probably locked up some of these.
On the subject of 747 freighter availability, Mr. Flynn commented that there were relatively few production 747 freighters parked (we count six), and that these would likely be quite expensive to return to service. He reiterated that Atlas could be interested in more 747-8Fs, but that production was “booked out for years.”
On the medium widebody front, Atlas is now leasing twelve 767-300BCFs/BDSFs to Amazon, and has already arranged the acquisition and conversion of eight more. These eight will all be redelivered to Atlas’ Titan Aviation leasing arm before the end of 2018, leased to Amazon, and then returned to Atlas for CMI operation in the Amazon Air fleet.
Interested in learning more about Atlas Air’s view of what the future holds for the air freight industry? Then join us in Shanghai 23-25 April for Cargo Facts Asia 2018, where Atlas EVP and Chief Commercial Officer Michael Steen will speak on the opening session. To see this year’s exciting agenda, or to register, visit www.cargofactsasia.com.