Air cargo carrier Atlas Air Worldwide Holdings, Inc. (NASDAQ:AAWW) today posted solid fourth quarter and full-year results, and issued a bullish outlook for 2019.
The Purchase, N.Y.-based company, which generates most of its revenue by flying freighter aircraft for airlines, the military, and other customers, posted record revenue of $765 million, a 22-percent increase from the year-earlier period. On an adjusted basis, income from continuing operations, net of taxes, rose 31 percent to $87 million from adjusted income of $66 million. Adjusted EBITDA rose 21 percent to $196.5 million.
Aircraft “block” hours, the industry-standard measure for aircraft utilization, rose 19 percent during the period for the company’s core “ACMI” service, Atlas said. This was due to start-up flying for Boeing 747-400s for several new customers and increased peak-season flying for Amazon.com, Inc., which has leased 20 of B767-300 cargo planes from Atlas. Revenue per block hour in the quarter was about the same as in the 2017 quarter, Atlas said.
Under a contractual ACMI relationship, Atlas supplies the aircraft, crew, maintenance, and insurance. The customer typically provides the fuel and other services. ACMI services differ from charter operations--which Atlas is also involved in--that are shorter-term in nature, often don’t involve contracts, and call for the operator to provide all the flying services.
For the year, revenue rose 24 percent to a record $2.7 billion, while block hours increased 17 percent over 2017 totals to more than 296,264 hours, Atlas said. Income from continuing operations, net of taxes, rose 21 percent over 2017 totals. Both years included significant gains resulting from one-time circumstances, Atlas said. Adjusted EBITDA rose 26 percent to $540.6 million, Atlas said
Atlas added 16 aircraft to its fleet last year, bringing its fleet size at year-end to 112. Last year marked the first time in history Atlas had more than 100 planes in its fleet.
The company expects 2019 block hours to rise to 340,000 hours as it generates a full-year’s worth of flying out of the planes it added last year. About three-quarters of those hours will come from ACMI service, it said Full-year revenue should exceed $3 billion, and adjusted EBITDA should come in around $600 million. Air tonnage should continue to grow this year as global economic activity expands at a moderate clip.
William J. Flynn, Atlas’ president and CEO, said the company should not have any trouble obtaining “feedstock,” industry lingo for passenger aircraft eligible to be converted into freighter aircraft. He declined to comment on whether Amazon.com, Inc. (NASDAQ:AMZN), which added 10 aircraft to a similar 20-plane deal with Atlas’ rival Air Transport Services Group (NASDAQ:ATSG), will pursue a similar expansion with Atlas. “We see good growth potential” across the company and its customers, Flynn said.
Business between Asia and Europe was slower coming out of the Lunar New Year than was trans-Pacific volumes between Asia and the U.S., he added
Jesse Cohen, a long-time airline executive and now FreightWavers’ air cargo market expert, said Atlas has “done a nice job expanding out of its prior niche” of flying 747 freighters with the Amazon deal, and with 2018 being a great year for air freight, it benefited from that.” Atlas is unparalleled in the niche it serves, said Cohen. “I don't see anyone else out there with their depth,” he said.
Flynn said he wasn’t concerned about the impact of higher U.S. tariffs on Chinese imports on Atlas’ business. Because its business is aircraft, “we can move the business anywhere,” he said. As a result, if China no longer becomes a viable production source, Atlas planes can be repositioned elsewhere in the region, he said.
The Trump administration has said it would hike tariffs on $200 billion of Chinese goods to 25 percent from 10 percent if a trade deal isn’t agreed to by March 2 or if the current arrangement isn’t extended pending any progress on negotiations.