Atlas Air Worldwide Holdings, Inc., the world’s largest operator of 747 freighters, reported a net profit of $23.4 million in the first quarter of 2020 as charter demand surged.
Demand for the 747 platform, which was sluggish toward the end of 2019, took a 180-degree turn in 1Q20 as a result of COVID-19 disruptions that affected first export volumes from China, and later airfreight capacity as passenger flight reductions mounted across the world. To counter the capacity crunch, Atlas increased cargo-charter flying and returned to service three of four freighter-converted 747-400Fs that were parked in December 2019 and January 2020.
Although total block hours flown dropped 5% YoY to 73,247 in 1Q19, on ACMI flying that was down 9%, 747Fs previously operating in the ACMI segment were redeployed into the more lucrative charter segment. Cargo charter block hours jumped 9% YoY to 13,539 in 1Q20. Additional flying was made possible by a charter fleet that grew, primarily as a result of the reactivated 747 conversions and from operating a Titan-owned 777F that had previously been idle. Average aircraft equivalents in cargo charter service increased to 19.3, up from 16.0 a year earlier. Revenue per block hour stood at $17,502 for cargo charters, compared to $5,126 for ACMI.
Accounting for warrants issued to Amazon, adjusted EBITDA rose 0.7% YoY, to $121 million for the quarter.
When Atlas reported earnings for 1Q19, the company took a significant impairment from writing down the value of its 747-400F fleet, “due to global airfreight and macroeconomic conditions resulting in lower 747-400 commercial cargo yields and utilization.” That is no longer the case. In an updated outlook, Atlas expects block hours to reach 80,000 for the second quarter of 2020, primarily from higher demand for 747-400F charters. Atlas expects net income to be 40%-50% higher in quarter two compared to 1Q20 on increased flying and elevated yields resulting from the airfreight capacity crunch.