Air Transport Services Group (ATSG), which provides medium wide-body aircraft for lease, has reported a 10% increase in customer revenue during the third quarter of 2020 compared to the prior-year period to $404.1million.
ATSG's principal business segments, aircraft leasing and air transport, increased revenues by seven percent and 10 percent, respectively, before eliminations. Revenues from other businesses decreased six percent on the same basis.
GAAP Earnings from Continuing Operations were a loss of $5.7 million, or $0.10 per share basic, versus a profit of $105.1 million, or $1.78 per share.
Quarterly re-measurements of financial instrument values reduced after-tax earnings by $50.5 million and increased them by $90.8 million in the third quarters of 2020 and 2019, respectively. These non-cash impacts in the third quarter each year stemmed primarily from quarterly changes in the traded value of ATSG shares and their impact on ATSG’s liabilities for warrants issued to Amazon.com.
Increased contributions from ATSG’s airlines, and from eleven more externally leased 767 freighters compared to a year ago, drove the majority of the increase in adjusted EBITDA.
Adjusted Earnings per Share, Adjusted Earnings from Continuing Operations and Adjusted EBITDA from Continuing Operations are non-GAAP financial measures and are defined in the non-GAAP reconciliation tables at the end of this release.
Capital spending through the first nine months totalled $394.3 million, up 17%. Capital expenditures included $273.4 million for the purchase of eight Boeing 767 aircraft in the first nine months of 2020, and for freighter modification costs.
Rich Corrado, president and chief executive officer of ATSG, said, "In the third quarter, ATSG’s businesses continued to deliver better than expected results, aided by a quarterly record seven deployments of 767 freighter aircraft to its aircraft leasing customers, and by seizing opportunities for charter and cargo ACMI operations to supplement the capacity of our customers. These opportunities helped to offset pandemic-driven year-over-year declines in commercial passenger and Boeing 757 combi operations at two of our airlines. We will achieve our goal of delivering a record twelve 767-300 freighters in 2020 to external customers, including four in the fourth quarter, while also re-leasing three 767-200s to customers in Kenya, Malaysia and Mexico."
ATSG now expects Adjusted EBITDA for 2020 to be approximately $490 million. While ATSG’s says that its aircraft leasing demand is “exceptionally strong”, the pandemic’s effects remain difficult to predict.
Corrado said that ATSG’s long-term outlook remains very bright. “We expect another record year for cargo aircraft leasing in 2021, given an order book that already calls for us to modify and dry-lease at least fifteen more 767 freighters, while redeploying others to new customers. We are also hopeful that demand from Omni’s commercial passenger charter customers resumes in early 2021.”
"ATSG’s capital expenditures for 2021 are projected to be lower than in 2020, as we indicated last quarter. However, given the continued strong demand for our leased mid-size freighters, we now project purchasing at least seven feedstock 767s next year with continued opportunity for lease deployments at attractive long-term returns on capital extending into 2022. We now project that 2021 capital expenditures will be in the range of $425 million, down from the approximately $485 million we anticipate for 2020.