Atlas Air revenue, guidance rise again in 2Q

Atlas Air Worldwide Holdings (AAWW) reported a second-quarter net loss of $21.2 million, down from net income of $38.9 million for 2Q 2017, due to an unrealized $50 million loss on outstanding warrants. However, after adjustments, the company saw a 70.8% increase in adjusted net income, to $49.7 million. Operating income rose 4.2% to $60.9 million and total operating revenues increased 28.8% to $666 million, with support from substantial growth in block hours for the ACMI, Cargo Charter, and Passenger Charter segments.

Of interest during the call were CEO Bill Flynn’s comments on the A330 converted freighter in response to questions about future fleet growth. The A330 production and converted freighters have gotten off to a slow start in global fleets, but Flynn said that the many passenger A330s in service present “a growing opportunity and a good opportunity” for conversion to freighter configuration.

Looking at the results by operating segment:

ACMI (including CMI): ACMI block hours increased 18.8% to 53,230. While average utilization in block hours per day fell 4.4% to 8.7, operating revenue for the segment rose by 21.2% to $278 million thanks to a higher average rate per block hour. Direct contribution for the segment declined by just under 1% to $52.7 million.

The increase in block hours during the quarter was due to increased flying for Amazon, the start-up of 747-700F flying for several new customers, and redeployment of a 747-8F from the charter segment to ACMI. Atlas now has fifteen freighter-converted 767-300s operating for Amazon, and still plans to add five more into service for the e-commerce giant by the end of 2018.

Charter: Cargo charter block hours increased 23% to 13,887, while operating revenues for the Charter segment increased 35.6% to $347 million. During the call, Flynn noted that charter activity has changed for the company from what was typically a seasonal business peaking during the fourth quarter, out of Asia, to what has now become “a 52-week business” driven by robust commerce activity (particularly newly released consumer electronics), and serving other markets as well as Asia.

Dry leasing: Revenues for the segment increased 39.9% during the quarter to $40.0 million, thanks to placement of additional 767-300Fs through the second half of 2017 and first-half 2018, as well as a 777F earlier in 2018.

Following the successful quarter, Atlas Air increased its guidance for the rest of 2018, and expects its full-year 2018 revenue to exceed $2.6 billion. Full-year block hours are expected 19% higher to around 300,000, and adjusted net income is expected to grow by 45-50% from 2017.