ATSG yesterday announced it will operate an additional 10 Boeing 767 freighters on behalf of Amazon Air but also reported lower revenues and profits after a difficult first quarter of the year.
The Amazon deal will see ATSG operate the additional 10 767 freighters over a five-year period, with the option to add a further 10 aircraft.
The aircraft will be in operation by the end of the year and the deal also includes an extension of the operating agreement to May 2029, with the option to extend for an additional five years.
Amazon will also have the opportunity to take extra shares in the aircraft lessor and operator as part of the arrangement.
The new deal will be a boost to ATSG after it reported lower revenues, operating profits and net profits in the first quarter of the year.
First-quarter revenues declined 3.1% year on year to $485.5m, operating income fell 30.4% year on year to $33m and net earnings were down 57.2% to $8.6m.
The firm’s Cargo Aircraft Management (CAM) business saw revenues decline 15% in the first quarter as 12 767-200s and four 767-300s were returned to the company since the end of the first quarter last year, although the declines associated with these returns were offset by 15 additional leases including 12 767-300s and three A321-200s.
“Revenue reductions associated with the 767-200 fleet include the effect of fewer cycles operated by lessees under our 767-200 engine power programme,” ATSG said. “Excluding the revenues from that programme, segment revenues would have been flat versus the prior-year quarter.”
CAM profits were affected by the freighter returns, the engine power programme as well as segment interest expense and depreciation increasing by $5m versus the prior-year quarter.
Twenty-four CAM-owned aircraft were in or awaiting conversion to freighters at the end of the first quarter, including 13 767s, six A321s, and five A330s.
The company’s ACMI business reported a pre-tax loss of $3m versus a loss of $2m in the first quarter 2023 as interest expenses increased by $0.5m and revenue block hours decreased.
“The decrease included three fewer aircraft in service than a year ago. Cargo block hours decreased 3% for the first quarter, driven by a mix of routes that included more domestic and less international flying than a year ago,” the company said.
Taking into account the flying opportunities from 10 more Amazon 767 freighters, ATSG expects adjusted EBITDA of approximately $516m in 2024, an increase of $10m from the outlook provided in February 2024.
Joe Hete, chairman and chief executive of ATSG, said: “The expansion of our flying agreement with Amazon should only help reach that goal. Our amended agreement also provides opportunity for a combination of up to ten lease extensions and/or additional assigned aircraft, beyond the initial ten we will bring into service this year.
“Furthermore, CAM is well-positioned to lease additional freighters to other customers with minimal incremental capital investment as market demand improves.”
