Atlas 3Q performance, peak season expectations strong

Atlas Air Worldwide Holdings (AAWW) reported third-quarter net income of $71.1 million, up from a net loss of $24.2 million for 3Q 2017, and expects strong performance for the fourth quarter on expectations of a record peak season. Operating income was up by 3.3% year-over-year during the quarter, to $54.5 million, while total operating revenues increased by 22.6% to $656.6 million.

Atlas’ CEO, Bill Flynn, said that the trade war between the United States and China is an important topic, but “neither we nor our customers have seen a material impact on air freight demand.” While Flynn said tariffs may lead manufacturers currently based in China to shift production to neighboring countries, only about 1% of goods moving by air are exposed to tariffs. Flynn thus expects air freight to continue growing in line with IATA projections of around 4% per year, “with express and e-commerce growing much more than that.” Atlas’ outlook for peak season traffic is likewise bullish on both trans-Pacific routes and for perishables from South America.

Looking at the results by operating segment:

ACMI (including CMI): ACMI block hours increased 12.6% y-o-y to 56,571 during 3Q and ACMI operating revenues were up 11.8% to $288.6 million, despite a 6.7% decrease in average utilization. Unscheduled maintenance during the quarter partially offset the increases in the segment and 2019 will see more maintenance demands offer potential headwinds for Atlas, but next year’s maintenance demands will not be disclosed until the fourth quarter earnings call.

Also on the ACMI segment, before year-end, Atlas will begin operating its first 747-400F for SF Express, and its second 747-400F for Asiana Cargo. Atlas will also add two additional 767Fs for Amazon before Thanksgiving, to reach the total of twenty Amazon aircraft announced back in 2016.

Charter: Cargo charter block hours increased 46.2% during the quarter to 12,690, while operating revenues for the charter segment rose 32.5% to $322.8 million. During today’s earnings call, EVP and Chief Financial Officer Spencer Schwartz said Atlas’ charter business has benefited greatly from higher revenue per block hour, which is up 14.2% y-o-y for the first nine months of 2018 thanks to high demand on trans-Pacific trade lanes, and subsequently strong rates. Schwartz said yields for air freight from mainland China to the US have been as high as $5.20 per kilogram for the current period and Atlas does not expect to see a slowdown into peak season.

Dry leasing: 3Q revenues for the segment were up 44.4% to $44.5 million, thanks to the placement of additional 767-300Fs through the second half of 2017 and the first three quarters of 2018, as well as two 777Fs in 2018.

Following the successful quarter, Atlas said it expects full-year 2018 revenue to exceed $2.6 billion, in line with guidance during the company’s 2Q earnings call. Volumes for the year are expected to increase by about 17% to 297,000 block hours, with 75% of those in ACMI and the remainder in Charter.

Those interested in hearing more from Atlas Air are invited to join us at Cargo Facts EMEA 2019, 5-6 February at the Westin Grand Frankfurt. For more information, or to register, visit www.cargofactsemea.com.