Atlas Air shares climb following rumored Apollo deal

Shares in Atlas Air are rising dramatically following rumors of Apollo Global Management’s potential purchase of Atlas Air Worldwide Holdings this week, increasing 28.93% from $75.06 a share on Monday to $96.78 a share as of press time, with a market capitalization of $2.72 billion. The potential sale is estimated to be around $3.2 billion, or roughly $102.50 a share, according to Bloomberg . An announcement could come as soon as this week as the company’s second-quarter earnings call is scheduled for Friday, Aug. 5, at 11 a.m. ET. [caption id="attachment_57131574" align="alignright" width="300"] An Atlas Air Cargo plane prepares to take off from the Miami International Airport in Miami. Photographer: Chandan Khanna/AFP/Getty Images[/caption] The players New York-based private equity firm Apollo has invested in aviation companies, including 500 million euros in cargo handler Swissport and $1.5 billion in carrier Grupo Aeromexico in 2020. Meanwhile in 2018, Apollo’s private equity branch purchased Sun Country Airlines . In total, Apollo has around $513 billion in assets under management, according to the company’s most recent earnings report. Atlas Air Worldwide, also based in New York, is a freighter-focused leasing company whose subsidiaries include Atlas Air, Polar Air Cargo and Titan Aircraft Investments , serving freight, commercial and military customers. Its current fleet boasts more 747 freighters than any other carrier, and also includes 777, 767 and 737 aircraft. Atlas Air’s clients range from freight forwarders like Chapman Freeborn, DB Schenker , DSV , Flexport and Kuehne+Nagel to express carriers like DHL , FedEx , Kintetsu World Express , China Postal Airlines and UPS . The company also partners with other carriers like Cathay Pacific , Asiana Airlines , Nippon Cargo Airlines , Emirates SkyCargo , Air Charter Service and Air Partner . Forwarding partners Kuehne+Nagel, DB Schenker, Flexport and DHL declined requests to comment on the rumored deal. Air Partner and Cathay Pacific were unavailable for comment ahead of publication. Apollo, Atlas and Amazon While details of the transaction have not been made public, Atlas Air board members can expect a big payout if the sale comes to fruition, said Cathy Roberson, president of Logistics Trends & Insight and an Air Cargo World columnist. “As for the impact on Sun Country or other Apollo carriers, Apollo could combine them all together into one and perhaps offer them as a sale to someone,” Roberson said. Amazon , which as of 2021 owned roughly 4.9% in Atlas holdings, could be a potential buyer. However, it is “doubtful that Amazon would want to take on unionized pilots,” she added. Atlas Air Worldwide underwent lengthy discussions in 2021 with the pilot’s union, and eventually reached a collective bargaining agreement with Sun Country and Atlas Air pilots in September of this year. [caption id="attachment_69621" align="alignleft" width="300"] Photo courtesy of Atlas Air Worldwide Holdings.[/caption] Under its partnership with Amazon, Apollo’s Sun Co untry Airlines operates 12 737-800 BCFs aircraft . And Atlas’ Southern Air signed an agreement in 2019 with Amazon to operate five 737-800Fs for 10 years , with up to 20 aircraft being placed into service by Amazon throughout the contract duration. It is unclear how the proposed deal between Apollo and Atlas Air Worldwide would affect Amazon’s CMI operations with Sun Country or Southern Air. Amazon did not respond to requests for comment ahead of publication. Atlas’ growth Atlas Air has been seeing growth as the market faces capacity and supply chain challenges. Atlas’ Q1 revenues reached $1 billion in Q1, up 16% YoY, according to a May 5 earnings report. Net income earnings, however, were down 9.3% YoY to $81.5 million. Volumes totaled 82,628 block hours in the first quarter of 2022, up 6% compared with the same period in 2021. “We’re seeing a sustaining shift in customer demand for long-term dedicated airlift, which is driving more the need for Atlas’ assets and services,” John Dietrich, president and chief executive officer, said during a May 5 earnings call. “We’re expanding and diversifying our customer base and increasing the amount of flying that we perform under long-term contracts … In fact, during the first quarter, our customers continue to enter or enhance long-term agreements with Atlas for dedicated freighter capacity.” In Q2, Atlas Air expects revenue to exceed $1.1 billion, reaching more than 85,000 flown block hours, according to Q1 earnings report. [caption id="attachment_72862" align="alignright" width="300"] Atlas Air and All Nippon Airways begin a route between NRT and ORD on Oct. 2. Photo courtesy of Atlas Air.[/caption] Building the fleet Atlas Air has also been building its fleet to strengthen its express and e-commerce services, and other fast-growing markets, in addition to adding much-needed airfreight capacity to the market. In fact, the carrier announced its intention to purchase five of its currently leased 747-400Fs throughout the year , one of which it acquired in March. Atlas is also adding four new 777F aircraft and 747-8s to its fleet. All 747-8s have been secured in long-term contracts, including on behalf of Swiss forwarder Kuehne+Nagel as well as Cainiao Network, Alibaba’s logistics arm . “It’s important to reiterate that the overwhelming majority of our fleet is now committed under these long-term contracts which puts us in a strong position for the years ahead,” Dietrich said. Meanwhile a merger with Southern Air in November 2021 further expanded Atlas’ fleet, adding nine 777F aircraft and eight 737-800BCFs to its portfolio. Business is booming The boom in airfreight demand since the start of the pandemic has resulting in a hot acquisition market. 2021 in particular saw one of the hottest acquisition markets in history as airfreight stakeholders eyed acquisitions as a way to strengthen products and services as well as expand its geographical footprint to achieve market growth. This trend has continued in 2022. One of the largest transactions include DSV’s purchase of Kuwait-based Agility’s Global Integrated Logistics Unit (GIL) in 2021 which continues to bolster the forwarder’s quarterly earnings . More recent acquisitions include CEVA Logistics’ purchase of forwarder Spedag Interfreight in July to strengthen its presence in East Africa. Earlier that same month Denmark-based forwarder Scan Global Logistics acquired Gelders Forwarding and Advection Logistics to expand its operations in Europe, while Hellmann Worldwide Logistics which purchased Slovakia-based express provider OptimNet Solutions in June. Atlas Air ranked No. 4 in Air Cargo World’s Freight 50 ranking of the world’s top cargo carriers, based on 2020 tonnage.

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