ATSG - Damp Q3 But Looks to Good Q4

Three main activities
The Wilmington, Ohio-based company operates three main segments. ACMI Services (Aircraft, Maintenance, Insurance) for other carriers, CAM - Cargo Aircraft Management - their aircraft dry lease segment and Maintenance (MRO) Services, along with other activities. The fleet is operated by ATSG’s subsidiaries ABX Air Inc. and Air Transport International (ATI). They are the world’s largest operator of converted B767 freighters.

ACMI - the largest revenue bringer
Not so much of a thankful business these days despite revenues reached.
The ACMI sector within ATSG accounts for quite a large amount of the company earnings - but at the same time the lowest margins. The third quarter revenue in this sector was not much better than that in the same period of 2017. The revenue reached US$116.2 million with a flat pre-tax earning of only US$61,000. Block hours flown were only 2% up on last year and the company faces additional costs of US$2.2 million each quarter for amended pilot compensation levels.

CAM - need for more aircraft
Here also the third quarter revenues were flat compared to last year.
A total of US$58.8 million (2017 - US$58.5 million) in revenues was recorded. The company states that revenues were affected by fewer aircraft engine leases, lower maintenance earnings from lease customers and transitioning aircraft.The lease fleet totaled 73 aircraft by the end of September, seven aircraft more than the same period in 2017. The fleet is made up of B767, B757 and B737 aircraft with six B767 aircraft presently undergoing passenger-to-cargo (P2F) conversion.
The acquisition of Omni Air International which also operates B767 passenger aircraft is seen as an opportunity for ATSG to use some of the Omni fleet as so called feed stock aircraft for cargo conversions. They plan to put a further eight to ten B767-300Fs into service during the coming year.

MRO -  more revenue, less profit
Here revenues rose better than in Q3 of 2017, but earnings did not.
A total of US$46.9 million, up from US$39.9 million in Q3 of 2017 were earned, although pre-tax earnings at US$2.3 million were more or less on par with those of 2017. This is attributed to lower margin maintenance services rendered as well as longer maintenance completion times than expected.

Other activities
ATSG has activities in postal sorting services, maintaining airport equipment and logistics services.
Q3 2018 saw revenues rise 32% from US$17.1 million in 2017 to US$22.6 million and pre-tax earnings of US$3.1 million (2017 - US$1.4 million).
The revenue increase was helped by an increase in mail volumes handled as well as additional gateway services provided to Amazon, such as cargo handling and ground support services at Amazon’s Tampa, Florida location.
In total ATSG’s net revenue for Q3 reached US$204.9 million, a drop of almost 20% on Q3 2017. The company outlook for the fourth quarter remains positive according to Joe Hete, ATSG President and CEO. He states that: “With five newly converted 767-300 freighters set to enter service, including three that will be deployed under long-term external leases and two that will support peak season ACMI demand. We are focussed on providing our customers with excellent service during what we anticipate being a very busy fourth quarter.”

John Mc Donagh