Sunday, 28 February 2021

ATSG Reports 2020 Results


Air Transport Services Group, Inc, the leading provider of medium wide-body aircraft leasing, contracted air transportation and related services, this week reported consolidated financial results for the quarter and year ended December 31, 2020.

ATSG's fourth quarter 2020 results, as compared with the fourth quarter of 2019 include:

    Customer revenues down $4.0 million to $399.4 million, and up $118.4 million to $1.57 billion for the year.

Fourth quarter ACMI Services revenues were down $17.9 million due primarily to the effects of the pandemic on passenger operations for commercial customers and on combi aircraft flying for the U.S. Military. Aircraft leasing revenues for the quarter increased $9.3 million as a result of record deployments of leased Boeing 767s during 2020.

    GAAP Earnings from Continuing Operations were $2.3 million, or $0.04 per share basic, versus a loss of $41.1 million, or $0.70 per share. 2020 GAAP earnings were $25.1 million, or $0.42 per share basic, versus $60.0 million, or $1.02 per share in 2019.

The unrealized effect of the quarterly re-measurement of warrant liability values decreased ATSG's after-tax earnings by $37.7 million ($0.51 per share) and $81.8 million ($1.04 per share), respectively, for the fourth quarter and year ended December 31, 2020. Warrant losses for 2020 were a result of an increase in the probabilities of additional warrants related to customer leases and increases in the traded value of ATSG shares during the quarter and year. Payroll expense were partially offset by federal CARES Act grant proceeds intended to mitigate pandemic effects at certain ATSG businesses.


    Adjusted Earnings from Continuing Operations (non-GAAP) decreased $9.9 million to $29.1 million. Adjusted Earnings Per Share (non-GAAP) were $0.38 diluted, down $0.18. Adjusted Earnings Per Share for 2020 were $1.72, up $0.21 from 2019.

Adjusted Earnings from Continuing Operations and Adjusted EPS exclude elements from GAAP results that differ distinctly in predictability among periods or are not closely related to operations. Exclusions from GAAP earnings include warrant and other financial instrument revaluations, government CARES Act grants, amortization of aircraft lease incentives, retiree benefit costs, losses of non-consolidated ATSG affiliates, and acquisition-related expenses. In 2019, Adjusted EPS for the fourth quarter and year included $0.07 per share for non-recurring deferred tax benefit adjustments in state tax rates.

    Adjusted EBITDA from Continuing Operations (non-GAAP) decreased $2.5 million to $121.8 million. Annual Adjusted EBITDA increased $44.9 million to $497.0 million.

Reductions in contributions from ATSG’s airlines, principally due to pandemic-related reductions in passenger flying for commercial customers, as well as lower volumes of external aircraft maintenance business, offset higher contributions from ATSG’s aircraft leasing operations during the fourth quarter.

Adjusted Earnings per Share, Adjusted Earnings from Continuing Operations and Adjusted EBITDA from Continuing Operations are non-GAAP financial measures and are defined in the non-GAAP reconciliation tables at the end of this release.

    Capital spending for 2020 was $510.4 million, up $56.9 million from 2019.

Spending included $353.4 million for the acquisition of eleven Boeing 767-300 aircraft and freighter modification costs, versus $328 million in 2019. Spending for other equipment, including aircraft engines and components, increased $31.6 million.

Rich Corrado, president and chief executive officer of ATSG, said, "2020 was a very good year for ATSG and its family of companies despite the significant challenges of the pandemic. We delivered a record number of 767 cargo aircraft to a record number of lease customers, and flew more hours of passenger and cargo aircraft operations overall than ever before, and we delivered our best service performance of the year for our key customers during the peak season. However, the pandemic had a greater impact on our businesses in the fourth quarter than previously. We did not replace contracted passenger charter business with ad-hoc passenger flying to the degree we had in prior quarters, and continued to have limited access to certain combi destinations. We are grateful for the federal grant funds that have allowed us to retain employees despite impacts on our airline revenues. Those employees delivered superior customer service throughout the year, including record-setting performance levels during an exceptionally busy holiday season."

In 2020, ATSG’s milestones included:

    Annual revenue increases from all of ATSG’s principal businesses.
    Record levels of Customer Revenues, Adjusted Earnings Per Share and Adjusted EBITDA.
    A record eleven deployments via external lease (and 13 leases overall) of newly converted Boeing 767 freighters, plus re-deployments of three other 767s. Two newly converted 767 freighters were leased internally to ATI.
    A broader base of lease customers, as CAM delivered aircraft to seven different lessees in five countries, including international customers Astral Aviation of Kenya, Aerotransportes Mas de Carga, S.A. de C.V. (MasAir) of Mexico, Raya Airways of Malaysia, and CargoJet of Canada.
    Investments in new technology to better track, record and monitor the performance of aircraft in flight, make proactive maintenance recommendations, and improve access to aircraft records.
    Strengthened balance sheet via a $500 million private offering of eight-year unsecured senior notes in January 2020, with proceeds used to pay down our revolving credit facility. That increased our available credit and reduced variable rates on our term loan and revolver balance. ATSG's debt leverage declined throughout the year.




Cargo Aircraft Management (CAM)

CAM

 

Fourth Quarter

 

Year

($ in thousands)

 

2020

 

2019

 

2020

 

2019

Aircraft leasing and related revenues

 

88,240

 

 

78,967

 

 

327,170

 

 

301,984

 

Lease incentive amortization

 

(4,880

)

 

(4,301

)

 

(18,509

)

 

(16,708

)

Total CAM revenues

 

83,360

 

 

74,666

 

 

308,661

 

 

285,276

 

Depreciation expense

 

45,511

 

 

41,683

 

 

172,003

 

 

158,470

 

Allocated interest expense

 

9,595

 

 

9,462

 

 

39,304

 

 

38,300

 

Segment earnings, pretax

 

22,183

 

 

18,358

 

 

77,424

 

 

68,643

   



 Significant Developments:

    CAM's fourth quarter revenues, net of warrant-related lease incentives, increased 12 percent versus the prior year. Revenues increased primarily from eleven more converted 767-300 freighters in service at year-end. CAM’s revenues from external customers increased 28 percent for the fourth quarter versus the same prior-year period.
    ATSG’s total fleet consisted of 106 aircraft in service at the end of the fourth quarter, eight more than at the same point in 2019. Twenty were passenger aircraft, including four Boeing 757 combi aircraft, and 86 were cargo aircraft, including one Boeing 757 and 85 Boeing 767s.
    CAM owned 100 of ATSG’s total aircraft fleet. Four passenger 767s were leased to Omni Air by third parties and two 767 freighters were customer-provided for ATSG to operate. CAM-owned cargo aircraft dry-leased to external customers increased by eleven.
    Eight 767-300 aircraft were in or awaiting conversion to freighters at the end of 2020, the same number as at the end of 2019. CAM expects to lease eleven 767s to Amazon and at least four to other external customers in 2021.
    In 2020, CAM purchased two 767 freighters and nine 767 passenger aircraft for freighter modification, all for lease deployment in 2020 and 2021.
    CAM’s pretax segment earnings for the quarter were $22.2 million, up 21 percent from 2019’s fourth quarter. Depreciation expense increased $3.8 million and allocated interest increased $0.1 million. Results for the fourth quarter also reflect lower contributions from CAM’s four Boeing 757 freighters compared to a year ago. Three of those operated for DHL at the end of 2019 were removed from service during the first half of 2020; one operated through the end of 2020.




ACMI Services

ACMI Services

 

Fourth Quarter

 

Year

 

($ in thousands)

 

2020

 

2019

 

2020

 

2019

 

Revenues

 

275,321

 

 

293,206

 

 

1,147,279

 

 

1,078,288

 

 

Allocated interest expense

 

4,793

 

 

5,430

 

 

20,542

 

 

24,950

 

 

Segment earnings, pretax

 

10,198

 

 

14,397

 

 

66,897

 

 

32,055

 

   


 Significant Developments:

    Fourth-quarter revenues for ACMI Services decreased six percent from the prior-year period, stemming primarily from a reduction in charter passenger operations for commercial customers of Omni Air and reduced 757 combi operations for the military. Revenues for ATSG’s cargo airlines increased.
    Total block hours increased one percent for the quarter, as reductions in block hours for commercial passenger operations were offset by increases in express-network freighter operations. Block hours increased 14 percent for the year. Block hours for commercial passenger charter flying were down 37 percent in 2020.
    ATSG's airlines operated seventy-three aircraft at year-end 2020, including twenty-seven leased internally from CAM.
    Pretax segment earnings for the quarter decreased $4.2 million, primarily due to the reduction in typically strong fourth-quarter commercial passenger operations, and reduced combi operations for the U.S. military.
    In December, pilots of ABX Air represented by the International Brotherhood of Teamsters ratified an amendment to their collective bargaining agreement with ABX Air. The agreement includes both compensation increases and work-rule changes that will make ABX Air more attractive to potential pilot recruits and to potential ABX Air customers. The amendment extends the labor agreement for six years. It is expected to increase ATSG’s annual wage and salary expenses overall by $7-8 million in 2021 versus 2020.
    CARES Act funds received by Omni Air and Air Transport International, intended to maintain employment at U.S. airlines during the pandemic, totaled $75.7 million last year. Of that amount, $47.2 million was realized during 2020 to offset airline payroll expenses, including $15.7 million in the fourth quarter.








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