ATSG Reports Growth and Increases 2024 EBITDA Outlook

Air Transport Services Group, a prominent provider of aircraft leasing and air cargo transportation, announced strong performance in the second quarter of 2024, along with a favorable outlook for the remainder of the year during their earnings conference call. CEO Mike Berger highlighted an expanded agreement with Amazon, which will add 10 more aircraft to their operations by peak season, while the company has successfully leased additional freighters to external customers.

ATSG increased its adjusted EBITDA forecast for 2024 to approximately $526 million, a rise of $10 million from previous estimates, and revised its capital expenditure outlook down to $390 million for the year. The company remains focused on safety, customer satisfaction, and cost control, and is on track to surpass its free cash flow goals.

Key Highlights:

• Expanded partnership with Amazon to operate a total of 51 767s by peak season.
• Leased four additional 767 freighters to external customers since the end of June.
• Raised adjusted EBITDA outlook for 2024 to approximately $526 million.
• Reduced total capital expenditure estimates for 2024 to $390 million, including $165 million for sustaining expenditures and $225 million for growth.
• Generated $107 million in free cash flow through June, with expectations for further improvement.
• Anticipates solid demand for mid-sized freighters and plans to deliver more aircraft by year-end.
• Expects profitability in its ACMI business for the entire year, with significant improvements anticipated in Q4.
• Extended a long-term agreement with ABX Air until 2030, with no disruptions in crew operations reported.
• Sold five aircraft, including unmodified 300s and three 767-200s.
• Demand remains strong for 767 conversions, a critical aspect of the company’s operations.

Company Outlook:
ATSG expects continued strong demand for mid-sized freighters, driven by e-commerce growth, and plans to deliver more aircraft by the end of the year. The company’s Lease Plus strategy and global growth initiatives are vital for its plans beyond 2025.

Challenges:
The rising costs of converting aircraft have impacted fleet production expenses. Additionally, depreciation of the aircraft fleet might be influenced as planes grow older.

Positive Developments:
ATSG has broadened its leasing activities, leasing four more freighters, and has raised its full-year guidance based on current performance and growth prospects.

No Notable Misses:
The earnings call did not indicate any specific misses in performance metrics.

During the Q&A session, questions regarding bond repurchases due in 2029 were addressed, highlighting that negotiations would be necessary for any potential buybacks. Management reiterated their commitment to executing the 2024 strategy and fulfilling their commitments.

Air Transport Services Group has demonstrated resilience and growth in a competitive market. With an expanded partnership with Amazon and a solid leasing strategy, the company is well-positioned to cater to the increasing demand for air cargo. Despite facing challenges like rising conversion costs and possible depreciation, ATSG’s elevated EBITDA forecast and commitment to free cash flow generation reflect a solid operational and financial strategy. The company’s focus on safety, customer satisfaction, and cost management is expected to foster continued success in the years ahead.