ATSG swings to a loss in Q3

Aircraft lessor ATSG reported a loss in the third quarter of the year as block hours decreased and costs increased.

The company, which is in the process of being bought by investment firm Stonepeak for $3.1bn, saw revenues decline by 9.9% to 471.3m, operating income was down 52.9% to $21.7m and it swung to a net loss of $3.3m compared with a profit of $17.2m last year.

The loss primarily came from its ACMI division, which reported a pre-tax loss of $14m compared with a profit of $12m last year. That said, profits at its CAM leasing division were also down on a year ago, dropping 22% to $18m.

The ACMI segment’s pretax loss for the third quarter of 2024 included $4.9m more for customer incentive costs stemming from warrant agreements reached with Amazon in May of 2024.

In addition, cargo block hours were down 7% and revenue block hours were down 13% compared with last year. 

ACMI also experienced increased expenses for maintenance, travel and ground services, the company said.

On a more positive note, ACMI began operating seven Amazon-provided Boeing 767-300 aircraft during the quarter, with three more added subsequently. 

Meanwhile, the CAM division suffered from the scheduled returns of nine 767-200 freighters and six 767-300 freighters over the past year.

This was partially offset by the benefit of revenues from 11 additional freighter leases, including 10 additional 767-300s and one Airbus A321-200 since the end of September 2023. 

“Segment depreciation expense increased by $11m and interest expense by $2m versus the prior-year quarter. The 2024 results were impacted by the reduction in 767-200 freighter leases and related engine power programme revenues, declining $5m in total versus a year ago,” ATSG said.

CAM leased four 767s and sold four others to external customers in the third quarter. One 767-200 freighter was returned by an external customer upon lease expiration. At the end of the third quarter, 89 CAM-owned aircraft were leased to external customers, two fewer than a year ago.

Meanwhile, 19 CAM-owned aircraft were in or awaiting conversion to freighters at the end of the third quarter, one fewer than at the end of the prior-year quarter.

This included eight 767s, six A321s, and five A330s. One of the A330s is expected to complete conversion and be leased to an external customer in the fourth quarter of 2024.

Mike Berger, chief executive of ATSG, said: “Our leasing business continued to benefit from strong demand for our freighter aircraft, as we added four Boeing 767-300 freighter leases during the third quarter.

“Our third quarter results were affected by fewer block hours flown than a year ago and higher expenses, including start-up costs to fly ten more aircraft provided by Amazon. I am delighted to report that the 10th aircraft entered operations this week.

“For the quarter, we once again generated strong free cash flow, bringing the total to $193m for the year. Going forward, certain contractual price increases effective in the fourth quarter position us for strong improvement in our ACMI Services segment and we expect to execute three new leases for CAM-owned freighters by year-end 2024.”

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