Atlas reports a solid quarter, and a new Panalpina contract

AAWW 4Q14Atlas Air Worldwide Holdings summed up its final quarter of 2014 in a nutshell, saying that increasing customer demand drove revenue higher, but this was offset by an increase in heavy maintenance expense.

On a reported basis, AAWW’s fourth-quarter results were excellent: Net income was up 39.0% y-o-y to $42 million, as total revenue rose 3.9% to $489 million. Operating income (EBIT) for the quarter was up 3.7% to $60 million. However, after adjusting for a one-time tax-related benefit of $10.7 million and a one-time tax-related charge of $5.5 million, Atlas said net income was down 7.3% to $39 million.

In the company’s core ACMI segment (including CMI), block hours rose 3.9% as market demand drove up aircraft utilization, but unexpectedly high maintenance expenses, primarily on 747-400s and engines, hit profitability, reducing the segment’s direct contribution by 22.8% to $54 million. Regarding the “unexpectedly” part, Atlas said that what was unexpected was not the maintenance itself, but rather the timing – that a considerable amount of maintenance planned for the first quarter of 2015 had to be done in 4Q14. So the profitability lost in the fourth quarter should reappear in the first quarter of 2015.

In the Charter segment, which now includes both commercial and military flying, block hours shrank 4.4%, as flying in support of the US military continued to decline. However, profitability improved as revenue per block hour rose 4.7%. The increased maintenance expenses hit the Charter segment, too, but this was outweighed but the overall combination of increased rates and higher utilization per aircraft, and the Charter segment’s direct contribution was up 6.2% to $29 million.

The Dry Leasing segment (Titan Aviation Leasing) enjoyed a strong quarter, reflecting the acquisition in 1Q14 of three 777Fs with long-term leases attached. This drove an 83.5% y-o-y increase in segment revenue to $24 million, and a 32.7% increase in direct contribution to $8 million.

Concurrent with the publication of its fourth-quarter results, Atlas also announced the signing of a new five-year agreement with Switzerland-based forwarder Panalpina. Under the new agreement, Panalpina will reduce its ACMI commitment with Atlas from two 747-8Fs to one, but commit to “more than 200” scheduled full charters per year, using Atlas 747-400Fs.

Panalpina said that it would continue to use the remaining ACMI-leased 747-8F on the trans-Atlantic lane, including stops in Europe, the UK, the US, and Mexico. However, as of March, it will operate flights from Hong Kong to its Huntsville hub in the US with dedicated scheduled charters using Atlas Air 747-400Fs. “We will not only maintain our scheduled capacity for our customers on the transpacific route but are planning to extend this service together with Atlas Air,” said Matthias Frey, global head of Panalpina’s own-controlled air freight network.

The 747-8F that will come out of service to Panalpina will immediately enter service with DHL, replacing a 747-400F.

And, on the subject of Atlas and Panalpina, here’s a short video of one of the Atlas 747-8Fs in service to Panalpina pushing back then taking off from LAX.




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