A strong quarter ends Atlas’ “historic” year

2016 was quite a year for Atlas Air Worldwide Holdings (AAWW). During the year, the company:

• Acquired Southern Air Holdings, including subsidiary carrier Southern Air, with its five 777Fs and five 737-400Fs, all in CMI operation for DHL, and

• Signed an agreement with Amazon, under which Atlas agreed to lease twenty 767-300 freighters to Amazon, and operate them for Amazon on a CMI basis.

The Southern Air acquisition was accretive almost immediately, but the Amazon deal put Atlas in the position of having to acquire twenty 767s, convert them to freighter configuration, and hire and train pilots to fly them – all before seeing any revenue. The impact of the start-up costs for the Amazon operation and income from the Southern acquisition in 2016, combined with the impact of the US West Coast Port slowdown in 2015, makes full-year comparisons complicated.

Fourth-quarter and full-year financial and operational data are shown in the chart at right, and the “Adjusted Net Imcome” line probably captures the results best. For both the quarter the full year, block hours were up substantially, driven mostly by the Southern acquisition. Revenue in the quarter was also well up, again driven by the Southern acquisition, but revenue for the year was only up slightly, due to the positive impact of the port slowdown in 1Q15.

On the net income side, the fourth quarter benefited not only from the Southern acquisition, but also from much lower maintenance costs. For the full year, after adjusting for all the one-time impacts in 2015 and 2016, net income was down, as start-up costs for the Amazon contract outweighed gains in revenue.

Regarding Amazon, Atlas said that it had secured feedstock and conversion slots for all twenty 767-300 freighters it is obliged to provide. The second of the twenty went into service this month, and all twenty will be in service by the end of 2018. On a financial basis, Atlas reiterated that the deal with Amazon will become accretive in the second half of this year, and will be net positive for the full year.

As can be seen in the chart, above, ACMI (including CMI) and Charter revenues are now more or less balanced, although ACMI provides a greater share of operating income. As the remaining eighteen 767 freighters go into service for Amazon, the ACMI/CMI share of both revenue and operating income will rise.

Turning to the fleet, AAWW currently has ninety-one aircraft. Most of these are Atlas-owned, although thirty-one are owned by other entities and operated by Atlas Air on a CMI basis. The breakdown of “owned vs CMI” will become increasingly complicated over the next two years by the Amazon agreement, because Atlas will own the twenty 767 freighters, but will dry-lease them to Amazon, which will hand them back to be operated on a CMI basis. We show the two freighters currently in operation for Amazon in the top (operating fleet) part of the chart rather than in the bottom (dry lease) section.

If you are interested in learning more about Atlas Air’s view of the air freight industry, join us at Cargo Facts Asia in Shanghai, 25 – 26 April, where Michael Steen, AAWW’s Executive Vice President and Chief Commercial Officer, will speak on a panel devoted to “Challenges and Opportunities in Asia Pacific Air Cargo.” For more information, or to register, go to CargoFactsAsia.com.