Air Transport Services Group, which provides medium wide-body aircraft leasing, contracted air transportation and related services, has reported customer revenues were $366.1 million, up $161.2 million, or 79 percent, for the past quarter ending September 30, 2019.
Both of ATSG's principal business segments, aircraft leasing and air transport, reported higher revenues for the third quarter. Revenues from Omni Air International, which ATSG acquired in November 2018, were the largest contributor to the year-over-year revenue gain.
GAAP Earnings from continuing operations were $105.1 million, up $72.2 million, or 219 percent. GAAP Earnings per Share basic were $1.78, versus $0.56 a year ago.
The unrealized effect of re-measurement of financial instrument values increased ATSG's third quarter 2019 after-tax earnings by $90.8 million, and third-quarter 2018 after-tax earnings by $17.2 million. The majority of the earnings gain related to a non-cash change in the value of warrants issued to Amazon.com, Inc. related to a decrease in ATSG's share price during the third quarter 2019. Increases in interest expense, depreciation and amortization expense, and in retiree benefit costs were also significant factors.
Contributions from Omni Air, and from the increase in externally leased 767 freighters since September 2018, drove the majority of the increase in Adjusted EBITDA.
Capital expenditures in the first nine months of 2019 included $247.9 million for the purchase of nine Boeing 767aircraft, including two in the third quarter, and for freighter modification costs.
Joe Hete, Chief Executive Officer of ATSG, said, "Demand for our aircraft and flight operations continued to accelerate in the third quarter, pointing toward a strong peak period of non-payload-sensitive flying for our air express network customers as we deploy more 767 freighters. Flight operations for the U.S. Department of Defense and passenger charter customers were also strong."
ATSG continues to project that its Adjusted EBITDA will increase to $450 million in 2019 from $312 million in 2018.
Peak-season flight schedules for ATSG's scheduled express-package services will be higher in the fourth quarter than previously forecast, largely due to strong e-commerce demand.
2019 capital expenditures, principally to purchase and modify Boeing 767 aircraft for freighter deployment, are now projected to be approximately $460 million, down from $475 million previously projected. Five 767-300s are expected to be in or awaiting cargo conversion at year-end 2019.
ATSG anticipates ten lease deployments in 2020, including commitments of four to Amazon and one to UPS. The airline states that the demand for Boeing 767 freighters remains very strong and ATSG is negotiating with multiple customers seeking to lease the remaining aircraft. Goals for 2020 also include mid-year approval of its application for a Supplemental Type Certificate for our Airbus A321 passenger-to-freighter conversion program.
Hete noted that ATSG expects to continue investing in 767 aircraft in the near term, based on known and anticipated requirements of customers relying even more on air express networks to speed fulfillment, and those customers' preference for ATSG's customized turnkey solutions and superior service performance.
"While trade and tariff issues have impacted the general cargo market," he said, "demand for our mid-size freighters remains very strong, driven by the expansion of regional air express networks and growth in e- commerce. Looking forward, the aircraft and other investments we are making will drive even higher cash flows into an already strong cash-generating business. We expect lower capital expenditures in the next few years with decreasing debt leverage and full availability of capital allocation options to increase shareholder returns.”