Air Transport Service Group (ATSG) reported revenue of $517 million, up by $51 million, and an operating cash flow of $148 million as against $122 million reported for the same time last year. Besides Q3 revenues from ATSG’s three airline subsidiaries increased 8% to $357 million compared to the Q3 of 2021.
Rich Corrado, president, and chief executive officer of ATSG, said: "Our teams continued to achieve or exceed our growth and performance goals during the third quarter, as our emphasis on a long-term lease and commercial arrangements with customers continues to dampen the effect of macroeconomic factors on our results
ATSG reported an operating Cash Flow of $148 million, versus $122 million for Q3 of 2021. Besides the company reported the adjusted cash flow to be $91 million, versus $73 million for the year-ago quarter as sustaining capital expenditures, primarily for aircraft maintenance, increased by $7 million.
“We will complete delivery of eight Boeing 767-300 freighter leases this year while adding seven more customer-provided freighters that we fly on their behalf. Freighter leases continue to fuel our earnings momentum, driving pretax earnings for our leasing subsidiary up 30 percent in the third quarter. Operating hours for our airlines continue to grow, and we are expecting another busy peak season," added Rich
The external leases of seven more Boeing 767s since September 2021 contributed to Cargo Aircraft Management (CAM)’s 18% Q3 revenue gain and 30% increase in pre-tax profits from a year ago. Also contributing to CAM's improved results were engine leasing and pay-by-cycle engine support services. Eighty-nine CAM-owned 767 freighter aircraft were leased to external customers as of September 30, 2022. Five of eight newly converted 767-300 freighters CAM expects to lease in 2022 were delivered in the first nine months of the year.
Twenty-one CAM-owned aircraft were in or awaiting conversion to freighters as of September 30, 2022, consisting of fourteen 767-300s and seven A321s. That included six 767-300 and six A321-200 passenger aircraft purchased for conversion to freighters during the first nine months of 2022
Going ahead, ATSG is expecting the delivery of the last three of eight dry leases of 767-300 newly converted freighters CAM this year.
ATSG expects its capital spending for 2022 will be $625 million, including $195 million in sustaining CAPEX and $430 million for growth. Growth Capex will be funded primarily by the strong Adjusted Free Cash Flow ATSG is generating this year.
“We are on schedule to meet our targets, as demand for our express-package network assets and flight operations remains strong. We are ready to operate under expanded peak holiday-season flight schedules for our CMI customers, supporting the fulfillment of higher e-commerce shopping spurred by special early-season promotions. We anticipate growth in ATSG’s cash flow through the current economic cycle and beyond," Rich added.
Rich noted that ATSG expects to lease more than 20 freighters in 2023, including fourteen 767-300s and at least six A321-200s. By year-end 2022, CAM will own or hold rights to acquire all of the 767s and A321s it requires for lease deliveries in 2023. Those orders are backed by customer deposits or are from existing lease customers.
“We expect the Boeing 767-300 and the Airbus A330-300 to be the aircraft of choice for regional express air cargo networks for years to come,” Rich said. “CAM has secured a sizeable portion of the conversion capacity for both aircraft types emerging from current sources through the middle of this decade. Customers have already placed orders for more than 20 of the 29 A330 freighters we expect to lease through 2027. All those customers are based outside of North America, which will further diversify our revenue streams and expand our presence abroad.”
In 2024, CAM expects a similar pace of 767 and A321 lease deliveries, plus the first of twenty-nine Airbus A330-300 freighters it will purchase, convert, and lease.