(Updated: Feb. 18, 1:05 a.m.. ET)
Atlas Air cruised to record revenue and profits in 2021 with a strong fourth quarter that reflected the all-cargo airline’s ability to command higher rates amid ongoing capacity tightness due to reduced passenger belly space and ocean shipping congestion and increase the fuel surcharge in response to higher fuel costs.
The announcement of new dedicated charter deals with Cainiao, the logistics arm of Alibaba, and Kuehne + Nagel, the largest airfreight forwarder in the world, underscored expectations for the financial momentum to carry through this year.
The world’s largest operator of widebody cargo aircraft on Thursday reported revenue grew 28.6% to $1.16 billion, beating analysts’ estimates by $60 million, with adjusted operating income up 41% to $289 million and more than double the 2019 level. Adjusted pretax income climbed 43.6% to $280 million. Discounting the pandemic effect that made 2020 a black swan, revenues jumped 60% and adjusted profit more than doubled compared to 2019.
For the year, Atlas Air Worldwide Holdings (NASDAQ: AAWW) posted a record $4 billion in revenue and $1.1 billion in adjusted earnings before interest, taxes, depreciation and amortization.
Soaring revenues more than offset an increase in pilot and COVID-related costs.
Higher aircraft utilization resulting from strong shipping demand, higher yields and demand for dedicated service drove the strong fourth-quarter results. Although block hours — from the time the cargo door closes at origin until it opens on arrival — actually fell 4.3% to about 92,000, Atlas was able to charge a higher average per hour, especially as more aircraft were placed under extended long-term contracts.
The carrier attributed reduced block-hour volumes to reduced flying of less profitable smaller aircraft under arrangements in which the customer provides the equipment and Atlas provides crew, maintenance and insurance.
Atlas separately announced that Cainiao has added a 747-8 freighter under a long-term charter agreement to increase capacity between China and the Americas in response to strong e-commerce demand. During the fall, Atlas and Cainiao expanded their partnership to include daily service between China and Latin America with the help of an extra 747-400 freighter.
The new aircraft will enter service in the second quarter linking China with the U.S., Brazil and Chile and bringing Cainiao’s dedicated fleet to six jumbo jets.
The busy day continued with a later disclosure that Kuehne + Nagel inked a long-term agreement for dedicated service utilizing two 747-8 freighters that will enter service in the second half of the year.
Last month, Atlas Air expanded its charter arrangement with freight forwarder Flexport to add a third Boeing 747-400 freighter to its network and extended a long-term transportation services agreement to operate a jumbo jet freighter for Chinese delivery giant SF Group. It also placed an order with Boeing (NYSE: BA) for four production 777 freighters.
Atlas’ growing roster of strategic customers also includes freight forwarding giants Ceva Logistics, DB Schenker, DSV and Geodis; express carriers DHL, FedEx (NYSE: FDX) and UPS (NYSE: UPS); passenger airlines Icelandair and Japan Air System; and computer company HP Inc. The past couple of years have seen a marked trend of shippers essentially creating private airlines that give them direct control over routes, frequency and capacity.
Atlas said it has placed all four incoming 747-8 freighters from Boeing under long-term agreements, with delivery expected between May and October. During a briefing with Wall Street analysts, CEO John Dietrich said the fourth 747-8 is reserved for Inditex, a multinational clothing company headquartered in Spain. The planes are the last ones Boeing will produce before shutting down assembly of the iconic nose-loading jumbo jet.
The 747-8F provides 20% higher payload and 16% lower fuel consumption than the 747-400F.
It also expects one of four recently ordered Boeing 777s to be delivered late in the fourth quarter and the other three in 2023.
Last year, Atlas bought six 747-400 cargo jets that had expiring leases to maintain capacity with demand so strong. Atlas said it plans to purchase another five 747-400s at the end of their leases this year.
“Acquiring these widebody freighters underscores our confidence in the demand for dedicated international airfreight capacity, particularly in express, e-commerce and fast-growing global markets. These investments are consistent with our long-term strategic growth plan and will provide customers with modern and environmentally efficient aircraft, which will drive strong returns for Atlas in the years ahead,” the company said in its announcement.
During the fourth quarter, Atlas completed the integration of Southern Air under a single operating certificate, providing operating efficiencies in terms of maintenance and pilot scheduling.
Atlas said fourth-quarter operating costs increased by nearly $160 million, half of it attributed to higher pilot costs resulting from last year’s new collective bargaining agreement. The airline has also faced higher costs during the pandemic, such as paying premiums to crews operating in areas with strict COVID restrictions and to maintain safe working conditions.
The airline gave upbeat guidance for the first quarter, with revenue targeted above Wall Street estimates at $1 billion.
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