While total block hours were up 7.7% year-over-year, Atlas Air Worldwide Holdings reported an operating loss of $0.88 million for the third quarter of 2019, a 102% drop year-on-year. Adjusted net income was $9.5 million, 78% lower than 3Q 2018.
Block-hour growth was mainly driven by CMI flying. During the third quarter of 2019, Atlas Air began flying a fourth 737-800BCF on a CMI basis for Amazon, with another to be added by year-end. Atlas also began operating a fourth 747-400F for Nippon Cargo Airlines (NCA) and expects to fly the remaining one in 2020. But this was offset by lower levels of ACMI flying because of the imposition of tariffs and trade tensions.
What the company did not mention, however, is that Amazon in September reassigned a 767-300BDSF (30109) previously operated by Atlas to Air Transport Services Group (ATSG) affiliate Air Transport International (ATI). Another 767-300BDSF (28495) is also due to be transferred to ATI. Atlas told Cargo Facts that its Titan Aviation Holdings subsidiary would continue to lease nineteen converted 767-300Fs to Amazon.
Amazon’s decision to assign more flying to ATSG could partly be because of the ongoing and unresolved labor dispute between Atlas Air and its pilots, who object to a combined seniority list of Atlas Air and Southern Air pilots. In August, Teamsters Local 1224, the union representing Atlas’ pilots, was ordered by an arbitrator to continue negotiations with the company for a collective bargaining agreement.
William J. Flynn, chairman and chief executive officer of Atlas Air, said that the company’s third-quarter performance was affected by the uncertain global macroenvironment, driven by ongoing tariff and trade tensions. He said that apart from lower yields and volumes than anticipated, labor-related service disruptions had a significant impact.
Revenue for the ACMI segment increased slightly during the quarter due to higher levels of flying, but this was offset by a decrease in the average rate per block hour due to the growth of smaller-gauge 767 and 737 CMI flying. In addition, Atlas blamed lower ACMI segment revenue on the delayed redeployment of two 747-8Fs for Qantas. Atlas and Qantas agreed in April to upgauge two 747-400Fs that had been flying for Qantas to -8Fs, with the transition originally expected to take place from late July 2019, but the two -400Fs that had previously been flying for Qantas (29253 and 29254) were replaced with two other Atlas 747-400Fs (30588 and 32840). Regulatory delays delayed the placement of the two -8Fs (37561 and 37566) to late August 2019.
Looking ahead, Flynn said that Atlas was expecting full-year revenue to be about $2.75 billion, with an adjusted net income of approximately 60-65% of the adjusted net income for 2018.