ATSG Reports Record Third Quarter 2021 Results

Air Transport Services Group, Inc., the leading provider of medium wide-body aircraft leasing, contracted air transportation, and related services, today reported consolidated financial results for the quarter ended September 30, 2021.

ATSG's third-quarter 2021 results, as compared with the third quarter of 2020 include:

Record customer revenues $466.0 million, up $61.8 million, or 15 percent

GAAP EPS (basic) from Continuing Operations $0.85, vs. loss of $0.10, on pretax earnings of $81.2 million

Adjusted EPS* $0.60, up $0.19 or 46 percent

Record Adjusted EBITDA* $153.0 million, up $27.5 million or 22 percent

2021 Adjusted EBITDA Outlook increased to at least $535 million

Rich Corrado, president and chief executive officer of ATSG, said, "The revenue growth we achieved in the third quarter added to the accelerating pace we saw in the second, as our aircraft leasing and airline businesses delivered sharply improved results versus a year ago. We continue to book and complete orders for freighter leases, and purchase more feedstock aircraft to meet strong lease demand over the next several years. While the pandemic continues to affect our commercial passenger and combi operations, we are proud that our passenger airline Omni Air was able to play a significant role in transporting Afghanistan evacuees during the quarter.”

3Q Financial Highlights

Aircraft leasing and related revenues from external customers increased $19.7 million, or 38 percent, from thirteen more leases of Boeing 767 freighters than at the end of the third quarter of 2020.

Cash flows from operating activities were $429.2 million for the first nine months of 2021. ATSG continues to generate strong cash flows from its combined businesses while expanding its aircraft fleet and reducing its debt obligations.

Nine-months 2021 capital spending was $428.1 million, up 9 percent.

Adjusted free cash flow* totaled $279.7 million for the first nine months of 2021 after deducting sustaining capital expenditures (primarily airframe and engine maintenance expenditures). Of that amount, ATSG spent $278.6 million to grow its fleet through the purchase of passenger aircraft and their conversion into freighters.

Adjusted EPS of $0.60 excludes, among other items:

$0.06 gain from re-measurements of financial instrument values in 2021, including warrants to purchase ATSG shares, vs. $0.73 in the prior-year quarter.

Government grants of $0.30, compared with $0.28 a year ago. The grants are intended to mitigate pandemic effects on ATSG's passenger airline operations.

* Adjusted Earnings per Share, Adjusted EBITDA and Adjusted Free Cash Flow are non-GAAP financial measures

3Q Operating Highlights

Aircraft Leasing

CAM’s third-quarter pretax earnings increased 44 percent to $28.5 million versus the prior year quarter.

In-service fleet comprised 112 Boeing aircraft, eleven more than a year ago. Eight are leased-in or provided by customers.

Eighty-two CAM-owned Boeing 767 freighter aircraft were leased to external customers, thirteen more than a year ago.

Sixteen CAM-owned aircraft were in or awaiting conversion to freighters, seven more than a year ago. The total includes fifteen Boeing 767s and one Airbus A321 passenger aircraft acquired during the quarter.

ACMI Services and Other

ACMI Services third-quarter pretax earnings increased 44 percent to $58.2 million. Excluding the benefit of government grants, ACMI Services pretax earnings increased 50 percent.

Revenue block hours for ATSG's airlines increased 9 percent from the previous quarter and 17 percent from the third quarter of 2020.

Block hours for total passenger and combi operations were up 8 percent over the third quarter of 2020, primarily due to Afghanistan evacuation missions for the U.S. government.

Block hours for air cargo operations, principally for express-network customers, increased 20 percent over the third quarter of 2020.

Other activities third-quarter pretax earnings were a loss of $1.0 million vs. a $0.7 million loss for the third quarter of the previous year.

Outlook

ATSG now expects its full-year Adjusted EBITDA for 2021 to be at least $535 million, a $10 million increase from prior guidance.

The forecast assumes:

New leases for fifteen 767-300 and re-leases of four 767-200 freighter aircraft. One freighter previously scheduled for 2021 will now be delivered next year, due to supply chain disruptions on some parts required for freighter conversion.

Continuing growth in express-network flying in 2021, with fourteen additional 767 freighters operated by ATSG's airlines. By the end of the year, ATSG's airlines expect to operate forty-six 767 freighters for Amazon, thirteen more than at the end of 2020.

Continued pandemic effects on demand for ATSG’s passenger and combi aircraft services through 2021.

Rich Corrado noted that demand for express-package air transport is expected to be at record levels throughout the peak holiday season, in part due to logistics network constraints. “We are trying to assist customers with additional ACMI and charter services where possible, and expect all of our available aircraft to be deployed," he said. "We expect our passenger and combi operations to have results similar to those achieved in the fourth quarter of 2020, absent any unforeseen additional assignments.”

Strong global demand for midsize freighters, like ATSG’s 767s, continues. ATSG expects that its 2021 capital spending will be approximately $530 million, $20 million lower than previous guidance. Approximately $195 million will be for sustaining capital expenditures and $335 million for growth investments, including purchases and conversion costs for Boeing 767 and Airbus A321 aircraft.

“Looking beyond 2021,” Corrado added, "ATSG's business model perfectly positions us to enable the growth in e-commerce expedited shipping, continue to expand our 767 freighter lease deployments, and add new freighter lease options for customers, including the Airbus A321 and A330 platforms. ATSG's complementary service options, including engine and airframe maintenance support, flight services and logistics, make its value proposition unique and compelling to its customers. Our confidence is based on a growing lease order book, access to seventy conversion slots beyond this year, and our track record of achieving our goals. That includes a new agreement with Boeing for at least four more 767 conversion slots, with the first aircraft to be inducted in the third quarter next year. We look forward to allocating the strong cash flows our business produces to increase shareholder value."

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