Air Transport Services (ATSG) 8-K Results of Operations and Financial Condition

0

Investor Meetings

August 2010

Exhibit 99.1

1

Safe Harbor, Non-GAAP Reconciliations

Except for historical information contained herein, the matters discussed in this presentation contain forward-looking statements that involve risks and

uncertainties.

There

are

a

number

of

important

factors

that

could

cause

Air

Transport

Services

Group's

("ATSG's")

actual

results

to

differ

materially

from

those indicated by such forward-looking statements. These factors include, but are not limited to, changes in market demand for our assets and services,

the timely completion of 767 freighter modifications as anticipated under ABX Air’s new operating agreement with DHL, ABX Air’s ability to maintain on-

time

service

and

control

costs

under

its

new

operating

agreement

with

DHL,

and

other

factors

that

are

contained

from

time

to

time

in

ATSG's

filings

with

the U.S. Securities and Exchange Commission, including its Annual Report on Form 10-K and Quarterly Reports on Form 10-Q. Readers should carefully

review this presentation and should not place undue reliance on ATSG's forward-looking statements. These forward-looking statements were based on

information,

plans

and

estimates

as

of

the

date

of

this

release.

ATSG

undertakes

no

obligation

to

update

any

forward-looking

statements

to

reflect

changes in underlying assumptions or factors, new information, future events or other changes.

ATSG, Inc. Non-GAAP Reconciliation

EBITDA, Adjusted EBITDA and Net Debt are

non-GAAP financial measures and should not

be considered alternatives to net income

(loss) or any other performance measure

derived in accordance with GAAP.

EBITDA

is

defined

as

income

(loss)

from

operations plus net interest expense,

provision for income taxes, depreciation and

amortization.

Net Debt

is defined as Long-term debt

obligations plus Current portion of debt

obligations minus Cash and cash equivalents.

The Company’s management uses these

adjusted financial measures in conjunction

with GAAP finance measures to monitor and

evaluate its performance, including as a

measure of liquidity.  EBITDA, Adjusted

EBITDA and Net Debt should not be

considered in isolation or as a substitute for

analysis of the Company’s results as reported

under GAAP, or as alternative measures of

liquidity.

 2008

2009

6Mo.10

2Q09

2Q10

(56,619)

45,358

26,682

9,872

15,898

Impairment of goodwill & intangibles

91,241

0

0

0

0

      34,622

      45,358

      26,682

        9,872

      15,898

Interest Income

      (2,335)

         (449)

         (158)

         (129)

           (85)

Interest Expense

      37,002

      26,881

        9,783

        7,166

        4,594

Depreciation and amortization

      93,752

      83,964

      42,552

      20,927

      21,752

163,041

155,754

78,859

37,836

42,159

GAAP Pre-tax Earnings (Loss)

Reconciliation Statement ($ in 000s)

Adjusted EBITDA from Cont. Oper.

from Continuing Operations

Adjusted Pre-Tax Earnings                     

from Continuing Operations

Earnings from Continuing Operations Before Interest, Taxes, Depreciation & Amortization (Adjusted EBITDA)

Net Debt

12/31/07

12/31/08

12/31/09

6/30/10

  Long term obligations

           567,987

           450,628

          325,690

            287,269

  Current portion of debt obligations

             22,815

             61,858

             51,737

              36,788

  Cash and cash equivalents

           (59,271)

         (116,114)

           (83,229)

            (63,660)

Net Debt

531,531

396,372

294,198

260,397

Reconciliation Statement ($ in 000s)

2

The Restructured ATSG:

Cash Generation With Less Risk, More Growth

Differentiated Business Model

Lessor

and operator of world’s largest fleet of converted medium widebody Boeing 767 freighters

Accretive, lower-risk conversion plan will expand highly efficient 767 freighter fleet by 50% by 2012

Long-term leases and operating agreements with global leader DHL, long-term relationships with Bax

Schenker, U.S. Military, USPS, TNT and Qantas

Provide full spectrum of air transport services throughout the world: Dry leasing, ACMI (wet leasing),

maintenance, technical, fuel management, logistic support services

Favorable Industry Dynamics

Booming air cargo recovery fueled by restocking, alternate mode issues, better logistics management

767 is most-favored replacement for 150-200 less efficient mid-sized freighters flying now

767 is ideal regional ‘spoke’

freighter complement to inter-continental 747 and 777 hub locations

Strong Financial Characteristics and Performance

Minimal leverage, and no off-balance sheet liabilities or large capital commitments

Strong cash flow generation, not projected to be Federal Income Tax cash-payer until 2013 or later

Disciplined capital allocation with established ROIC hurdles

3

Unique Blend of Complementary Businesses

Equipment leasing, and equipment and facility maintenance services

Customers include: DHL, Allegiant Air, Branson Airport, Tampa International Jet Center

Contracted sort management services for USPS

Logistic support services

Heavy & line maintenance, component overhaul, engineering and manufacturing

Customers include major airlines, private operators

Provides 727, 757 ACMI services

Customers include BAX Schenker and DHL

Provides 767, DC-8, DC-8 Combi ACMI services

Customers include BAX Schenker, U.S. Military and Qantas

Provides 767 ACMI services

Customers include DHL and TNT

Dry leases 767, 757, 727 and DC-8 freighters to ATSG airlines and external customers

Access to engine maintenance and component services

External customers include DHL, Amerijet, CargoJet, First Air

Description

Business

4

ACMI:

ACMI:

Dedicated Aircraft,

Dedicated Aircraft,

Crew, Maintenance

Crew, Maintenance

& Insurance

& Insurance

(excludes fuel)

(excludes fuel)

Charter:

Charter:

Unscheduled & military

Unscheduled & military

Dry Lease Plus

Dry Lease Plus

Crew

Crew

Airframe Maintenance

Airframe Maintenance

Engine Maintenance

Engine Maintenance

Pilot Training

Pilot Training

Cert. Support

Cert. Support

Standard

Standard

Dry Lease

Dry Lease

ATSG Business Model:

Cargo Aircraft

Dry or ACMI, With Complementary Services

Leased Externally

Leased to ATSG Airline

5

Recent DHL Agreements:

Growth with

Secure Cash Flows, Minimal Risk

Aircraft Lease Terms

DHL to lease thirteen 767Fs from CAM under 7 year terms; DHL responsible for airframe and engine

maintenance costs

Airborne Maintenance and Engineering Services (“AMES”) will provide airframe heavy maintenance

DHL provides fuel at its own expense

Crew, Maintenance, Insurance (CMI) Agreement Terms

ABX

operates

13

aircraft

for

DHL

for

5

years,

with

2-year

extension

right

to

DHL,

2

5

years

mutual

Defined-fee

scaled

for

the

number

of

aircraft;

logical

choice

to

support

domestic

network

expansion

ABX operates with monthly performance incentive bonuses

Subject to $70mm amortizing break-up fee if DHL prematurely terminates

$29.5mm

balance

of

the

DHL

Note

(at

June

30,

2010)

amortizes

to

zero

over

the

CMI’s

term;

no

cash,

interest fully reimbursable

Thirteen seven-year 767SF leases,

Aircraft operating agreement for five to ten years

nd

6

Global Air Cargo Market:

Rebounding in Multiple Regions

June 2010 vs.          

June 2009

Volume Growth

(FTK)

Capacity Growth

(AFTK)

Africa

54.0%

23.3%

Asia/Pacific

29.8%

20.5%

Europe

15.3%

2.1%

Latin America

44.9%

25.3%

Middle East

39.6%

17.9%

North America

24.2%

5.9%

Industry

26.5%

12.2%

YTD 2010 vs. YTD 2009

Africa

46.3%

14.8%

Asia/Pacific

35.1%

14.8%

Europe

12.6%

-4.6%

Latin America

48.2%

24.9%

Middle East

34.1%

15.8%

North America

29.4%

0.6%

Industry

28.3%

6.8%

International Air Cargo Growth –

June 2010

Lufthansa Cargo

‘Booming’

Lufthansa CFO Stephan

Gemkow: "The cargo

business is currently

absolutely booming.”

June Sets Air Cargo

Record in HK

Hong Kong Air Cargo

Terminals, which

handles close to 80%

of the cargo at Hong

Kong International

Airport, said its record

June volume in Hong

Kong was up 30.5%

over June 2009, and

also up over a strong

2008.

LAN: S. America

Volumes Growing

LAN Airlines' chief

executive officer

Enrique Cueto

said

cargo traffic will grow

30% this year.

“Traffic growth for

the (South America)

region is very strong,

especially in Brazil.”

Aerologic Boosts Europe-Asia Service

The Aerologic joint venture between Lufthansa Cargo

and DHL Express, will increase capacity between

Europe and Asia due to high demand.

DHL Express

and Lufthansa Cargo plan to increase frequency of their

flights to Shanghai and Seoul over the rest of 2010.

DHL Projects 10-15%

Growth in U.S.

Ian Clough, chief

executive of the U.S.

division of DHL

Express: DHL Express

aims to achieve a 10% to

15% growth rate for

international shipments

in and out of the U.S. by

early 2011. "The U.S. is

absolutely critical to our

global network,“

he said.

"The [U.S.] business is

strongly on the road to

recovery. “

Source: IATA

7

ATSG Global Presence:

Positioned With Growth-Market Customers

1.0%

2.1%

2.2%

2.4%

3.2%

3.8%

4.0%

4.6%

6.3%

7.4%

8.6%

8.7%

0%

1%

2%

3%

4%

5%

6%

7%

8%

9%

10%

Japan-N. America

Europe-N. America

Japan-Europe

Europe-Other Asia

India-N. America

Africa-Europe

Other Asia-N. America

S. America-Europe

Europe-India

China-Europe

Other Asia-China

China-North America

Growth Trends By Region, 2009-2018

ATSG markets

8

Global Freighter Fleets:

Big Opportunity in Medium-Size Market

Source: ACMG

1,680

99,200 / 11,445

3

1,900

A300-B4

2,650

104,900 / 14,654

2

1,850

A300-600F

3,360

88,420/ 10,922

2

1,390

A310-300F

3,200

124,900 / 16,034

2

1,775

767-300SF

Aircraft

Fuel

(gallon/

block hr)*

Crew

Payload (lbs.)/

Capacity (cu. ft.)

Range

(NM)

767-200SF

1,380

2

100,000 / 11,138

2,800

DC-8 63

1,760

3

96,800 / 10,060

2,150

DC-8 73

1,600

3

111,800 / 10,060

2,470

Medium Freighter Comparisons

Narrow-body

213 Units

65   A310-200/300s

47

A300B4s

150 A300-600s

55   B767-200s

(36)

59   B767-300s (3)

Wide-body

436 Units

12   B707-320s

146

B757-200s

(2)

28

DC-8-50/60

(1*)

29

DC-8-70s

(15*)

* includes 4 combis

ATSG fleet (2012)

Prime candidates for

Replacement with 767s

Medium Freighters-

2010

Source: Boeing, Airbus

9

767 Covers Asia, Americas, Europe

767s provide 45-60 ton payload

potential between the world’s principal

inter-continental cargo airports and

major cities in each region. Smooth

interline pallet transfers between

medium 767s and large 747/ 777s.

Miami-based 767s reach principal

perishable food and floral markets

in Columbia, Brazil, Mexico,

Venezuela, Puerto Rico, etc.

All of China, Japan, SE Asia,

Australia & India within range of

767 from Hong Kong, world’s

largest air freight airport. With

ETOPS, can cover principal trans-

Atlantic routes.

767-200ER,

767-300 Ranges

w/ max. payload

Frankfurt

Miami

Hong

Kong

10

ATSG Investment Strategy:

Value-Creating Freighter Conversions

11-14

12-19*

April 2011

Jan. 2012

DHL-CAM Dry Leased

Other Customers-CAM Dry Leased

11-14

11

Jan. 2011

4

* Includes freighter conversion by 2012 of ten owned Boeing 767-200s, three Boeing 767-300s pending

purchase.  Modification schedule of 767-200s subject to DHL options. Deployment as leased vs. ACMI

operated aircraft subject to market conditions, customer preference.

7

11

April 2010

DHL-

Interim Leased

ACMI Services –

ACMI/Charter

13

13

4

5-8

5-8

7-14*

26

30

32

39*

Dry Lease Investment

Return Illustration*

$23.4 MM

Projected EBIT

11.7%

Unlevered ROIC

$200 MM

Capex Required

(13)

767-Series

Freighters

(in millions)

* Margin from ACMI or other

complementary services would

be incremental.

11

Emerging Go-to-Market Strategy

Drive higher return on capital by optimally

positioning opportunities and bundling

additional services

CAM a neutral, non-airline, lead sales

organization that can drive a bundled marketing

strategy

Develop packaged programs cross-selling

entities

Amerijet International program (ACMI

migration to CAM-leased 767s, with full ATSG

support) symbolizes this approach

Market Approach

Market Opportunities

Airline Operators

Key drivers

Replacement

Capacity growth

New markets

Non-Operators

Examples

Forwarders/Brokers

Integrators

Shippers

12

Flexible

Global

Solutions

Premier Source of  Medium Freighter Solutions

767-200 with

GE CF6-80A

engines

Low fuel cost

Low

maintenance

cost

Flexible

configuration

Power By Hour

engine services

The Global Leader of Medium Wide Body Operating and Leasing Solutions

Efficient Medium

Wide-Body

Aircraft

Dry leasing

ACMI/ wet

leasing

CMI

Combi

Full service

charter

Flight

operations

Heavy

maintenance

Line

maintenance

Maintenance

programs

Engineering

Technical

support

Manual services

Parts,

components

sales & service

Aircraft

conversion

services

Global

aircraft

deployment

Logistics

support

DHL

BAX

Schenker

TNT

UPS

Qantas

Amerijet

Air

Mobility

Command

CargoJet

Bundled

Maintenance

Solutions

Program

Management

Meeting Diverse

Customer Needs

13

Balance Sheet Improves as Earnings Grow

EBITDA* (from continuing operations)

Pre-tax Earnings (from continuing operations)

Net Debt*

Stockholders’

Equity

$531.5

$396.4

$294.2

$260.4

$200.0

$80.4

$246.0

$276.3

$155.8

$78.9

2008

2009

1H 2010

$37.8

$42.2

2009

2010

Year

Second Quarter

Year

Second Quarter

$34.6**

$9.9

$15.9

2009

2010

12/31/07

12/31/08

12/31/09

6/30/10

12/31/07

12/31/08

12/31/09

6/30/10

$163.0**

-$56.6

$45.4

$26.7

2008

2009

1H 2010

    EBITDA is defined as income (loss) from operations plus net interest expense, provision for income taxes, depreciation and amortization. Net Debt is defined as Long-Term Obligations plus

        Current Portion of Debt Obligations minus Cash and Cash Equivalents. EBITDA, and Net Debt are non-GAAP financial measures and should not be considered alternatives to net income (loss) 

         2008 EBITDA and 2008 Pre-tax Earnings adjusted to exclude impairment charges of $91.2 million.

or any other performance measure derived in accordance with GAAP. See Reconciliation Tables.

*

**

14

Employer

Employer

contributions

contributions

DHL Promissory

DHL Promissory

Note Extinguishment

Note Extinguishment

De-levering Continues:

Cash Flow Available for Current Capex Commits

Transfer of Aircraft

Transfer of Aircraft

Capital Leases to DHL

Capital Leases to DHL

Principal

Principal

payments

payments

$324.1

$512.5

12/31/2008

6/30/2010

Total Debt Reduced 42%

Credit Facility Covenant Compliance

Required *

2008

2009

2Q10 **

First Lien Debt / EBITDA

< 2.75

2.58

2.17

2.03

Total Debt / EBITDA

< 3.25

3.10

2.44

2.22

Fixed Charge Coverage

> 1.50

2.55

1.99

2.05

Capital Expenditures

> 1.05

1.58

1.65

1.24

$106.3

$297.3

Actuarial costs

Actuarial costs

& adjustments

& adjustments

$113.7

$84.7

$86.7

Workforce

Workforce

contraction

contraction

& plan freeze

& plan freeze

$79.3

$ in millions

Gains on

Gains on

assets

assets

12/31/2008

6/30/2010

Post-Retirement Liabilities Reduced 64%

$ in millions

$22

$31

$32

$142

$90

$70

$82

$18

Maintenance

Growth

2007

2008

2009

2010 est.

$160

$112

$101

$114

$ in millions

*  Requirements at year-end 2008 were 3.00 / 3.50 / 1.50 / 1.25

** Based upon twelve months trailing EBITDA

Minimal Future Capex Commitments

Capital Spending Trends

$94.8

$47.9

$45.7

15

Fog Has Lifted –

ATSG Value Cleared for Takeoff

Limited risk, strong cash and asset-value returns from converted 767 freighters

Expanding

767

freighter

fleet

will

yield

attractive,

annuity-like

cash

ROIs

via

long-term

leases

ACMI/CMI flexibility offers options, low-risk transition to widebody 767s from older narrowbodys

767 platform flexible as trans-continental leader, compatible feeder to inter-continental 747s/777s

Significant market-value gains on P-2-F aircraft conversion investments

Long-term agreements with key customers

Lease/CMI approach unlocks value of aircraft from ACMI, creates more options for customers

17 767/757s now under fixed 5-7 year leases with DHL, CargoJet, Amerijet, etc.

5-year CMI with DHL, with performance factor plus $31m amortized note forgiveness, DPW backing   

Integrated, value-added services

Increase return on invested capital

Comprehensive mix allows for turnkey customer solutions

Competitive terms and service packages for third party maintenance business

Attractive balance sheet and liquidity, growth capital capacity

No off-balance sheet obligations; current low-rate term & revolver facility run through 2012

Manageable 2010-2011 capital commitments: maintenance plus convert 767-200s, and acquire and convert three  

767-300s using existing cash and credit resources, yielding significant asset-value gains

Secure long-term cash flow enhances access to growth capital if needed

Expanding opportunities around the globe

Expanding presence in large, fast-growing air cargo regions: Asia, South America, Europe & Africa

Unique provider of combi airlift to military in South Pacific region

Uniquely

positioned

as

largest

independent

source

of

premier

medium

widebody

freighter

–

the

767

16

Appendix

17

Balance Sheet Trend

June 30,

Dec. 31,

June 30,

Dec. 31

2010

2009

2009

2008

ASSETS

CURRENT ASSETS:

Cash and cash equivalents

63,660

83,229

112,064

116,114

Marketable securities - available-for-sale

-

-

-

26

Accounts receivable, net of allowances

35,684

87,708

77,329

87,857

Inventory

5,740

5,226

7,611

11,259

Prepaid supplies and other

8,845

7,093

8,122

11,151

Deferred income taxes

31,597

31,597

20,171

20,172

Aircraft and engines held for sale

-

30,634

32,901

2,353

TOTAL CURRENT ASSETS

145,526

245,487

258,198

248,932

Property and equipment, net

650,408

636,089

627,768

671,552

Other assets

29,948

21,307

23,265

25,281

Deferred income taxes

-

-

14,973

54,807

Intangibles

9,686

10,113

10,557

11,000

Goodwill

89,777

89,777

89,777

89,777

TOTAL ASSETS

$925,345

$1,002,773

$1,024,538

$1,101,349

LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES:

Accounts payable

31,912

38,174

30,625

36,618

Accrued salaries, wages and benefits

24,956

44,077

40,259

63,500

Accrued severance and retention

7,171

18,959

45,301

67,846

Accrued expenses

15,146

16,429

15,161

13,772

Current portion of debt obligations

36,788

51,737

62,774

61,858

Unearned revenue

16,775

15,340

9,232

14,813

TOTAL CURRENT LIABILITIES

132,748

184,716

203,352

258,407

Long-term obligations

287,269

325,690

380,225

450,628

Post-retirement liabilities

102,765

152,297

269,886

294,881

Other liabilities

59,311

44,044

17,163

17,041

Deferred income taxes

66,988

50,044

-

-

STOCKHOLDERS' EQUITY:

Preferred stock, 20,000,000 shares authorized, including 75,000 Series A

Junior Participating Preferred Stock

-  

-

-

-

Common stock, par value $0.01 per share;

638

634

635

632

Additional paid-in capital

503,441

502,822

490,349

460,155

Accumulated deficit

(194,248)

(211,085)

(226,330)

(245,534)

Accumulated other comprehensive loss

(33,567)

(46,389)

(110,742)

(134,861)

TOTAL STOCKHOLDERS' EQUITY

276,264

245,982

153,912

80,392

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY

$925,345

$1,002,773

$1,024,538

$1,101,349