Atlas fleet boost bumps 4Q18 earnings

Atlas Air Worldwide Holdings (AAWW) reported a fourth-quarter net income of $211.0 million, up 0.7%  from net income of $209.5 million for 4Q 2017 on solid results from the company’s ACMI, Charter and Dry Leasing segments. Operating income rose 19.5% to $127.6 million and total operating revenues increased 21.8% to $765.0 million from substantial growth in block hours for the ACMI and Cargo Charter segments. Growth in those segments was made possible by Atlas’ growing operating fleet, which saw average aircraft equivalents increase by 20.6% y-o-y to 109.5 units in 4Q18.

Looking at the Atlas fleet, although the company has put twenty freighter-converted 767-300Fs into operation on behalf of Amazon since 2016, the aircraft added to support this operation represent less than half of Atlas’ fleet growth since the beginning of 2016. In three years, Atlas added forty-five aircraft and now operates 112 aircraft, including units that are owned, leased, or operated on a CMI basis. In 2018, Atlas added sixteen aircraft, mostly a mix of 767-300Fs and 747-400Fs. As far as continued fleet expansion into 2019 is concerned, CFO Spencer Schwartz told analysts during an earnings call that Atlas has modeled some growth, but would not elaborate at this point.

Also of interest during the call with analysts were comments from Schwartz and Company CEO Bill Flynn on the potential impact of an escalation of the trade war between the United States and China, and of a no-deal Brexit. Schwartz maintained that so far the tariffs haven’t significantly altered the schedules or flight frequencies of Atlas’ customers serving the Asia Pacific Market.  Should the two countries fail to reach a resolution causing production to migrate to nearby countries in the long-term, Schwartz added that Atlas is well-equipped to follow the trade flows.

Regarding Brexit, Flynn noted that Atlas hasn’t had much exposure to the UK market since British Airways pulled out of freighter operations years ago. Flynn added that changing flows or increased activity into and out of Europe could be a potential upside for Atlas but cautioned that coming out of Lunar New Year, volumes coming out of Europe seem “a bit softer” compared to trans-Pacific volumes.

Looking at the results by operating segment:

ACMI (including CMI): ACMI block hours increased 19.4% to 66,003. Average utilization in block hours per day was flat at 9.2, and operating revenue for the segment rose by 19.7% to $359.9 million in part due to the larger fleet. Direct contribution for the segment increased by just under 1% to $90.4 million.

A number of factors drove block hours higher in 4Q18, foremost was the growth in the number of aircraft operating on behalf of Amazon. This was the first quarter during which Atlas was operating all twenty 767-300Fs for the e-tailer. The quarter also saw expanded A/CMI operations for new and existing customers such as SF Express, NCA, Asiana, and DHL. An average of 78.2 aircraft flew in ACMI service during 4Q18, up 19.9% from the previous year.

See also: Widebody freighter fleet analysis: fastest-growing carrier fleets 

Charter: Cargo charter block hours increased 9.5% to 12,831, as passenger charter block hours fell 1.1% to 3,966. Overall operating revenues for the Charter segment increased 23.2% to $358.8 million on higher revenues per block hour, which were up 9.5% for cargo charters and 35.4% for passenger charters. The charter fleet also grew rapidly during the quarter following the allocation of additional freighter and passenger 747-400s. Average aircraft equivalents in charter service during the quarter rose 34.3% to 22.3 units.

Dry leasing: Revenues for the segment increased 41.3% during the quarter to $47.6 million thanks to the placement of eight additional freighter-converted 767-300Fs throughout the year, as well as the placement of two 777Fs.

Following the successful quarter, Atlas Air’s guidance for 2019 calls for higher volumes and expects its full-year 2019 revenue of approximately $3.0 billion. Full-year block hours are expected to grow by 14.8% to around 340,000 in 2019, with a 3:1 split between ACMI and Charter.

Those interested in learning more about how to successfully navigate the uncertainty stemming from Brexit and the ongoing trade war between the United States and China are invited to join us at Cargo Facts Asia 2019, to be held 15-17 at the Langham Shanghai. For more information, or to register, visit registration ends March 1st! 

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