ATSG reports 3Q profit up, extends DHL agreement

US-based Air Transport Services Group (ATSG) reported third-quarter net income up 27.0% y-o-y to $10 million, as total revenue rose 3.1% to $185 million. Operating income for the quarter was up 10.1% to $18 million, and CEO Joe Hete said “I’m confident that we’re heading for one of the best years in our history, given the scale of the business we have today.”

That scale is shown in the top chart. The ATSG fleet now includes 53 freighters and four combis, of which all but four 767-200Fs are owned.

• Revenue in the company’s core ACMI segment was down 6.0% to $103 million, reflecting the loss in February of a three-unit 767-200F contract in support of DHL’s Middle East operations. While the ACMI segment reported a small operating loss of $126,000, this was a considerable improvement over the 3Q13 loss of $7 million, and ASTG says its ACMI operations will likely return to profitability in the fourth quarter.

• Revenue in the company’s other main operating segment, Cargo Aircraft Management (CAM), was almost flat with last year’s quarter at $40 million, but operating income was down 14.6% to $14 million. During the quarter, CAM placed three 767-300BCFs in dry-lease agreements with Cargojet (two) and Amerijet (one).

Regarding the new DHL deal, ATSG said it had signed an agreement in principle with DHL Express that would see DHL “extend the leases for thirteen 767-200Fs [by an average of about 18 months, ed.], and execute new leases for at least two more freighters that currently support DHL under short-term agreements.” The new leases will commence by the end of the first quarter of 2015 and run through March 2019. This will, of course, provide stable income over the period of the leases, but comes at the cost of a decline in the lease rates. Also on the subject of DHL, the contrct under which ATSG operates four 767-200Fs on a CMI basis for the German integrator will end after the 2014 peak season, and will not be renewed.