Release Date: August 09, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Expanded and extended flying agreement with Amazon, adding 10 additional aircraft this year.
- Leased four additional 767 freighters to external customers since the end of June.
- Leased commitments for the first two converted Airbus 330 aircraft expected to deliver in Q4.
- On track to exceed the goal of positive free cash flow for the year with $107 million generated through June.
- Raised adjusted EBITDA outlook and lowered capital expenditure outlook for 2024.
Negative Points
- Revenues down $41 million or 8% versus a year ago to $488 million.
- GAAP pre-tax earnings fell significantly from $49.7 million to $10.7 million year-over-year.
- Adjusted pre-tax earnings fell $41 million to $17 million, and EPS was down by $0.38 to $0.19.
- ACMI services segment reported a pre-tax loss of $7 million compared with a gain of $24 million in the prior year.
- Total block hours flown by the three airlines were down 10% versus the prior year quarter.
Q & A Highlights
Highlights of Air Transport Services Group Inc (ATSG, Financial) Q2 2024 Earnings Call
Q: Can you discuss the demand for midsize freighters and the supply-demand balance for that freighter class?
A: Mike Berger, CEO: We still see solid demand for mid wide-body aircraft. We've delivered 14 aircraft in the last 12 months and expect to deliver double-digit aircraft by the end of this year, continuing this momentum into 2025.
Q: Can you explain the negative pre-tax earnings in the ACMI business and the expectations moving forward?
A: Quint Turner, CFO: The biggest impact was reduced block hours flown. We expect ACMI services to be profitable for the year, with significant improvement in the fourth quarter due to seasonal peak flying opportunities and scheduled pricing increases.
Q: What is the outlook for ACMI services' pre-tax earnings and its contribution to EBITDA in 2025?
A: Quint Turner, CFO: While specific 2025 guidance is premature, we expect ACMI services to improve next year, assuming current contracts and business volumes remain stable. ACMI could contribute between 25% and 30% of adjusted total EBITDA for next year.
Q: How are lease rates and lease rate factors expected to trend into 2025?
A: Mike Berger, CEO: Lease rates for 767s have remained stable over the last few years. Lease rate factors can vary based on feedstock costs and aircraft availability, but overall, rates have been very constant.
Q: Can you provide an update on labor negotiations and any expected timelines for agreements?
A: Jeffrey Dominick, President: We don't expect to finalize pilot agreements until sometime in 2025. Negotiations are progressing under the National Mediation Board, and no additional costs from labor agreements are anticipated for the fourth quarter.
Q: Are there any disruptions or increased turnover among pilots due to ongoing labor negotiations?
A: Jeffrey Dominick, President: Attrition has dropped significantly, reducing turnover costs. There are no disruptions, and crews are performing their duties as expected.
Q: How is the cargo market performing, particularly in relation to passenger planes and underbelly storage?
A: Mike Berger, CEO: We don't see any pressure from belly cargo. Our main customers operate within major integrator networks, which provides stability and minimizes variability from seasonality and available capacity.
Q: What were the $25 million in property and equipment proceeds from, and should we expect more in the second half of the year?
A: Quint Turner, CFO: The proceeds came from selling five airframes, including a couple of 300s and three 767-200s. We may continue to be opportunistic in monetizing assets, but it's not a frequent occurrence.
Q: Can you provide a timeline for aircraft conversions for the rest of the year?
A: Mike Berger, CEO: We expect to deliver more aircraft, including continuous conversions of 767s with IAI in Tel Aviv. The 767 remains a core part of our fleet, and we will continue conversions to meet demand into 2025.
Q: What is the status of Omni's passenger block hours and military flying activity?
A: Quint Turner, CFO: Passenger block hours were up 4% year-over-year and are expected to remain stable in the second half of the year. October is typically the busiest month due to military exercises, and we anticipate a contractual increase with the government's fiscal year beginning in October.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
