Atlas Air Worldwide (AAWW) 23 Feb 182017 Q4 Earnings call transcript

Company Profile

Participants

Spencer Schwartz	Executive Vice President and Chief Financial Officer
William Flynn	President and Chief Executive Officer
Bob Labick	CJS Securities
Kevin Sterling	Seaport Global Securities
Helane Becker	Cowen and Company
David Ross	Stifel, Nicolaus
Scott Group	Wolfe Research
Jack Atkins	Stephens Inc.
David Campbell	Thompson, Davis & Company
Stephen O'Hara	Sidoti & Company
Christopher Stathoulopoulos	Susquehanna Financial Group

Call transcript

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Operator

Good morning. My name is Heidi and I will be your conference operator today. At this time, I would like to welcome everyone to the fourth quarter 2017 earnings call for Atlas Air Worldwide. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer session. Instructions]. [Operator you. Thank may you conference. Atlas begin Air, your

Spencer Schwartz

the by you, Air viewed AtlasAir.com Worldwide And results me. call. be Today's in everyone. Officer. complemented under Chief fourth presentation hello, Atlas Schwartz, conference that hosted section. will call a Spencer call I'm Today's Flynn, CFO. and at Information Investor XXXX our Executive Thank quarter Heidi. Bill by Welcome slide is our to be can Presentations

remind meaning slide you company's Reform on As uncertainties. Private statements two, future and These about some like to relate Securities XXXX. our we the and events that indicated expectations performance forward-looking would discussion statements of Litigation includes they today and of risks to within Act the the involve

may from any materially results Our those actions actual statements. forward-looking or in projected differ

For filed in related information please by provide with that today's are reconciled our XXXX and our or press reports. GAAP XX-K measures is in insight appendix refer and meant SEC our non-GAAP Any to today's business, supplemented about slides. as to to are amended release factors Form attached the subsequently meaningful to risk to references

attention to over any your to call the like principal Flynn. questions as slide additional turn through question, participants as question-and-answer would and our we to draw permits. as possible. like happy question time this we answer participants so many will follow-up Bill one I'd to limit gone During one queue, that today, At point, three to we themselves accommodate be ask the period to can to we've After and

William Flynn

Atlas XXXX continue that morning. in Spencer. for XXXX. And Thank was expect an good to exciting we you, and year

full-year in and earnings we higher growth XXXX. year. our earnings revenue even generated the As robust and and fourth-quarter record record release, full noted earnings expect we generate both and press to [indiscernible] revenue We generated in for in

environment, We're express, strong operating We and economic growth. markets. Asian on fast-growing airfreight in underpinned are capitalizing by on a e-commerce our global focus

the to strong place have blocks to and see we opportunities with building grow customers ones. we and our With new in existing market position, add

our expect when by We compared net adjusted to mid-XX% a level with grow XXXX. income

slide to in our adjusted block reflected XX% in XX% and hours EBITDA. increase a revenue, in increase XX% increase four, fourth-quarter earnings Moving adjusted

achieved in contribution our In addition, we direct all segments. of increases double-digit in

year. We also placed current additional aircraft by in the XX. it's the raising number expectations with we That's and XXX-XXX of end in new this operating when XXXX highlights began our to a Amazon the growth with for operating framework for the and line in five line we Slide our quarter, XX of for this five had aircraft service commenced total expectations during XXXX.

As by ago, level in we I growth mid-XX% income noted with expected moment net a and continuing adjusted XXXX. business our to XXXX anticipate grow with compared a strength

in significant revenue block expect XXX,XXX billion adjusted of volume, hours, about and XXXX, revenue adjusted increases $X.X rising We EBITDA million. to $XXX EBITDA around and in to our with approximately growing volumes

adjusted of net this Consistent in teens. we than the patterns, a anticipate year income this occur historical of XX% second half that percentage to the grow with By by a Our following of our comparison, would've US reform, and we even income the Cuts rate also benefit Act. passage any the the tax Tax of Jobs includes outlook from without benefit lower adjusted tax our more income in year. net will expected

approximately adjusted million to $XX at income adjusted first of million XXXX. first in we net the approximately double quarter, EBITDA Looking the quarter of and the expect be $X.X

ACMI four entered the the throughout aircraft an will growth XXX-XXX XXXX, for due entered anticipated to mainly to Two XXXX. should we quarters increase XX% hours To maintenance in $XXX increase about maintenance and block increase service aircraft. expense six total leases Aircraft charter expect approximately into XX% charter. reflecting total to approximately these balance is with demand, in line in with the we year, XXXX, and of compared enter ACMI anticipated million. have and full about total million, freighter daily in in third the For the block service operating in of fourth expected $XXX amortization Depreciation and hours. meet

for capital and After our addition, some to which be happy to comments ask components provide and million Spencer core point, additional then In At $XXX our take Spencer, would additional expenditures, results. to your like have about purchases, are some to million, detail for $XXX Spencer? I aircraft fourth-quarter to we'll total I'll fleet. exclude expected engine this about and mainly parts questions.

Spencer Schwartz

Bill. you, Thank

a basis, record results six. million, of slide quarter net continuing was fourth the $XX.X operations which Our taxes XX% highlighted XXXX. income are increase fourth-quarter adjusted on On of over from totaled an

Bill robust As EBITDA. increases in block adjusted and reflected revenue, results hours noted, our

benefit in We also our $XX.X a basis, That as related our warrants. revaluation the as direct reported totaled a net outstanding million. liabilities, deferred generated segments. substantially On gain of million included both higher contribution on all to well an tax of unrealized our of $XXX.X million $XXX income

included tax the in rate fourth XX.X%. income earnings quarter an adjusted effective of Our

our or for XXXX, to placed service, income that we decade. and to any framework and expect rate approximately for the aircraft purchased the not effective was next we our due at on tax Based For On to respect a year. quarter basis, liabilities the do be the our full US year rate full expect pay year, had lower adjusted into of this reported And of the the of rate. benefit an that we've tax federal and we during tax current tax US effective tax deferred XX%. an we XX.X% tax the XX.X%. to rate With principally significant XX.X% revaluation income had income

express an record the volumes. driven Block for for flying revenues ACMI new quarter for by significant segment placements. an several Amazon. driven up in the Higher and the revenues XXX-XXX Pacific, increase additional revenues flying customers, the operations fourth fourth Looking hour reflecting the at seven, rates flying operators primarily increase commercial primarily growth were number yields. reflected slide increase in strong leasing, a higher in impact quarter in XXX-XXX XXX-XXX of of during aircraft reflected period Cathay hour ramp seasonal of for XXX-X the block were in dry segment by segment In charter

by nearly a offset in of The XXX-XXX the charter flying. contribution slide Moving in quarter, redeployment increase from year. segment. of the the segment ACMI to maintenance line in ACMI costs period primarily the the in offset to quarter with increase $XXX due a the strength in by previous contribution during fourth maintenance partially was improvement commercial totaled fourth reflected higher the million eight, and hours, yields, XX.X% and aircraft block earnings XXX-X increase primarily to the higher costs associated partially significant

affected due converted by scheduled operational addition, of contribution contribution both debt leasing, interest to disruptions. leased of during and repayment and aircraft. related charter the ACMI In in XXX higher dry in quarter primarily the to aircraft the reduction labor-related dry segment expense was In reflected XXX-XXX segment a placement

ended nine equivalents, cash Turning with $XXX slide we and cash including balance short-term our restricted cash, XXXX and sheet, totaling million. investments,

financing million payments proceeds reflected partially and financing partially million aircraft on Our by XXX-XXX cash cash position activities our Net offset by for of net at from debt of provided offset activities. used obligations. December included convertible during cash by provided notes, activities, $XXX by $XXX million operating XXXX $XXX financings cash from investing our issuance XX of and of

and and completed raised of acquisition flight the cash modifications, million. activities additional the quarter, cash primarily and including XXXX fourth XXX-XXXs, engines $XXX GEnx During the used core upgrade for related financings investing kits of XXX-XXX to spare we equipment conversion and expenditures. Net six engine aircraft, for which during capital payments of

debt secured assets, is a in have a related by rate our vast aircraft of Our which average a of fixed all value is low at and of Almost rate has majority the interest excess weighted the X.X%. debt. that

our a slide remain to to fleet. maintaining committed sheet we balance Moving strong growing XX, while

has As since shows, fairly consistent leverage grown our aircraft the XX our slide during ratio time. same we have net fleet while that by XXXX, remained

leverage was ratio of end X.X at quarter fourth the Our the times. net

years improve aircraft we the previously forward, to expect in generate as have we substantially begin and more to place service looking EBITDAR. As it over next to said, gradually higher few we

turn it I'd back Bill. to to Now, like

William Flynn

Thank you, Spencer.

expect for with and in the in a global economic to built we an growth. e-commerce strong on fast-growing operating we XXXX. We're by airfreight and environment capitalizing And XX, year solid express, to Moving and exciting have to We're XXXX continue markets. add grow slide global ones. to was Atlas foundation opportunities new existing that underpinned provides customers

net our revenue, please. volumes, anticipate As adjusted we and may With EBITDA first a question have result, that, income. the Heidi, growth significant in we

Operator

Certainly.

go comes Securities. Your ahead. the first CJS of from question Bob Labick line Please from

Bob Labick

Good on nice and morning. Congratulations year. a quarter

Spencer Schwartz

Bob. you, Thank

William Flynn

Bob. you, Thank

Bob Labick

you XXX-XXXs the a and more background and one guess, got where will potentially to I'll give six Lots them? be where wanted one talked you leased the the but I leases sounds follow-up. of the on little start I about. of terms you in specifically, questions. with not like sure. placing them, us stick It about, more charter, you then, Could to

more give color please? that, if around us could you So,

Spencer Schwartz

Bob. bit Sure, I'll a that. little give of

aircraft, them service They'll service both be XXXX. be in on And placed with then, said, as and will one in put and in four in of The September two were So, XXXX, throughout one ACMI lease. October. charter. in in you customers they're

fungible. six There are of them. they're somewhat So,

So, with some be will ACMI customers.

be Some in charter. will

provided included guidance moving of and around in today. are that be Some will all between framework we And those. them the

Bob Labick

great. then, following just And it, Got one. that on up

you of per capacity expectations up favorable. or capacity suggesting coming Can in bit off terms been revenue about industry, that rates charter hasn't much in other block for rates strong forward? In going a year-over-year, coming ex-fuel and the little was are talk just there on your

William Flynn

Bob, market. first the perhaps, talk I'll with starting

kind few – that beginning There not seeing really across to of folks in not strong July, I XXXX continued and way good inflected peak XXXX certainly, August over your growth, just off is the a quite strength strong X, a board markets There's coming kind to all source into question. to expeditors a markets. as kind a put economic all are lines in take beyond. And capacity on solid excess lot demand. some into we're of the back around newbuild. service. market seeing recent And I XXX-XXXs investment very we've of very about very it across get in global we outlook only This really before, of talked looking discussed There month So, growth XXXX that parked the the will regional the XXXs parked, a a of are of serve. recently, market that's month. the we've seen call, the lot production and bring Xs market the And broadly even of and and in to which production the we're to e-commerce and their think back underpinning for think certainly,

overall, demand, we between good that ability to for suggests So, a balanced and think, the environment price. what capacity

Bob Labick

That's Thank fantastic. you.

Spencer Schwartz

Thank you.

Operator

question next your of Please line And Global Sterling ahead. comes Kevin with from Seaport the go Securities.

Kevin Sterling

Spencer. Thank are you. How doing? Good you Bill and morning,

Spencer Schwartz

Great.

Kevin Sterling

capitalizing a leases bit on bit be going a guys because demand out historically, some multiple strong and can intrigued I'm will really these you is that more do we're seeing? operating secondly, to spikes those or there. we're in pivoting buy quarter, maybe Congrats might forward? to on you And are leases. customers? leases, that strong the one I demand good or now a of deeper Do operating operating by leases think, seeing forward into satisfy it going dig little be customer planes a think Will little that you Bill, you for you freight then, model because,

William Flynn

lot Kevin. there, in that question a So,

start. me Let

Kevin Sterling

We've only got two.

to ask going I'm a lot. So,

William Flynn

Last in growth had the we the growth that ACMI talked our all in in to very building third the call, about we in Okay, fleet year, Amazon. with customer good. we're quarter's addition

about also so, DGF growth each as with I'm not other took dedicated through Cathay going customers the we and And to the talked freighter a two the Pacific, well. aircraft go Asiana overall. with customer.

military market, and So, the we're ACMI passenger market is we capacity cargo first charter military, have and in our our had, and additional needed both customers overall. which performance charter and commercial consistently to certainly serve having, great

to take to given XXX-XXXs, was the drive capacity obtain that and about. of lease for So, In the growth we that we and we're the rates talking certainly business just in sense. the additional meet kind the advantage able needed results were much it for market available buying sense we're to versus that risk leasing our in lease when how makes balance financing aircraft, where aircraft and and it in in terms us those made of of on case the what

that of aircraft, long-term on balance with if the And we'd placement would. aircraft, and good forward, going generate leasing to the appropriate. we We'd right acquire when the to of the where there's So, to have visibility from on have will and we opportunity earnings asset really that, course, an that.

Kevin Sterling

Got multiple six for customers? is one makes leases you. or sense. customer these No, Are it

Spencer Schwartz

customers, Multiple Kevin.

will for And some operate They'll – They'll with ACMI mentioned not customers. some operate as sort commercial military. I between before, of certainly for charter. one. customers. the move one of them always them with It's They'll operate of around

Kevin Sterling

then, seems norms be was historical well. seeing picture And you Would seems it. uptick to with And I my follow to us of what How you what agree seeing now? legs I kind to compare can the as previous cycles? now February you seeing the strong big me, assessment? airfreight frame here. like, off-base? then, it but thanks. recession, out January it remember we're short-lived, coming Okay, to has would Bill, am of what in the relatively market airfreight, we're up last help can the Or and of we saw that we're in to some

William Flynn

And Yeah. When downturn. first quarter right growth see Well, of it questions XXXX was It couple time, the saw only a and in. a should we that. point, years. out couple for years, of of And there And lot XXXX, the make wasn't think fairly flat. we coming the a we still was of good you didn't period for after Kevin. a about then, recovery lot Capacity middle XXXX how were of airfreight. of for a a coming probably of

much And freight we same almost XXXX. to talked similar growth saw think then, that, that about time. I ocean of in pretty period catalyzing container a phenomenon

growth conversations about. are sources towards and talked as XXXX very well and airfreight a well from of at as the we've have a actors with and into major and we cycle because that continuing So, the we our XXXX good strong and look customers looking e-commerce are they in express as that

to for has and I as efficiencies in in, think their e-commerce, that outcomes time-definite all created customers and that further and industry that that they're us air. no looking what the companies expectation consumers matter chain, supply gain favors

a could grow is e-commerce. to think extended growth, as or continue ingredient there new calculation a this growing component so, and well growing future of a the And be I a into and in around – cycle result

Kevin Sterling

Well, we've that's couple a Bill. you. seasonal you seen in to and Thank the past start helpful, January say years. February historical are of would patterns better And off than

William Flynn

good are I think January start. February off a to

Kevin Sterling

morning. the I Okay. really color. Thanks all appreciate this you for time

William Flynn

Kevin. Thanks,

Spencer Schwartz

Kevin, thanks.

Operator

the line of And Becker go Helane your from Cowen. next Please question with comes ahead.

Helane Becker

point Thank operator. referred just issues Thanks questions. to time. – don't a I lot, Hi, your Spencer everybody. prepared not One was you so much two remember their said about in I sure or it remarks it. for clarification. who or I'm labor of whether have you how Bill

could you So, to refer me? again just for that

Spencer Schwartz

Spencer. It's Helane. Sure,

our Just saw. the ACMI said that, by fourth we also during quarter, results and charter the our disruptions were that impacted operational

Helane Becker

Okay.

us now, injunction Or the on with should update stopped? So, that? just you Or right? that has can stop, that

William Flynn

Helane. Sure,

the our of the results couple under contract. injunction made ability in with the and union our a we We preliminary manage continue indicate conditions our well-reasoned for that the to terms issuing sound Right a pilot But decision and a court think framework our things. our negotiations that now, XXXX in fourth-quarter think business I customers. serve I should and overall. the provided certainly think our and

Helane Becker

not get whole a to you should a are don't that, couldn't there. then, available, your terms you you making to you available. kind that lot how availability; And do are just sure that there I the I or about into? that. then, grow And going glitches orders. moved Bill, and lot they if aircraft those. to X-Xs just you're the I think you about making the looking XXX-XXX, I No, guess? existing of develop how the for aircraft implying may will ones Boeing new I wasn't And be at that talk issues on sorry Yeah. mentioned client if weren't of know, is I of there. Can have did. that you think base, aircraft we from wanted just in of as experienced I'm that

William Flynn

think availability. out of booked XXX-X right years. about The line I aircraft Well, you're number is some through

majority of UPS. be I directly those going the into think are to going

their will and deployed networks it into capacity into be So, broadly market. internal not the

back only eight is some estimate about that parked. I'm it XXXs there to they're are And condition into Our what in, sure – those parked but bring take investment XXXs not service. will

looking next market. service talked – of the growing about the we we'll and that same to thing and looking should we in We've as at We Conversion in say, the sourced conversions the number years of tight mid them in XX market are, was point over there some to of additional ability demand Amazon need well. There question, passenger provide we're as So, Xs market. as certainly deliver to prudent time, as fuel a can I the is aircraft a And – AXXXs all out, capacity at aircraft now for We've think slots think I is XXX, wide-body underway the and freighter what this are do – six and balance identified them leased year. to further the that couple we're think, we there's operating of at and the are conversions years and which our that. your are XXX about. in.

for couple we – aircraft but out. just then, study but us, conversion to anxious there's market, that a deployed a go think see And I in to opportunity of of as we'll now potential what years continuing that learn, next out we're performs. only one the currently freighter that's kind how

Helane Becker

aircraft Or first the question. can then, getting helpful. many how Did you just one are Amazon take you in first quarter? really And last quarter? for say the any quick That's Okay. in

Spencer Schwartz

had we the still at we XX of have XX at the Helane, moment. and end year this

Helane Becker

Okay.

Spencer Schwartz

the of year. to get we But will the XX end by

a one month. approximately So,

Helane Becker

beginning month then now – a One

Spencer Schwartz

Yes.

Helane Becker

– I guess is the answer.

Spencer Schwartz

Approximately.

Helane Becker

Since you Right. said take didn't you any.

Spencer Schwartz

Approximately.

Helane Becker

haven't taken any you Since year-to-date.

all Okay, Got right. guys. you. Thanks,

Spencer Schwartz

Thank you.

Operator

And Ross line Nicolaus. with comes your ahead. David question of from Stifel, the go Please next

David Ross

gentlemen. morning, Good Yes.

Spencer Schwartz

Hi, Dave.

William Flynn

David. Hi,

David Ross

and everything on just November? they can the question, in to quickly the normal the labor First about court disruptions back quarter, how in ended Did after late decision fourth talk you go little And charter cost as immediately or any tail? is have of there ACMI you quarter? a have estimates bit it in then, you the in do to what a may

William Flynn

David, things. a of Well, couple

know, and we we've issued the as release to a Under pulmonary that the issued and that union do And talked so. So, the the with injunction to ordered. to injunction, what their was court obligation you that's certainly to effect. comply has

out, under our continuing I pointed with negotiations pilots. we're As also negotiations –

So, around want in getting of Spencer, contract, public additional not into a is that detail to you thoughts a some related things for to best have lot a and probably as you are us forum. share? PI contracting do such But,

Spencer Schwartz

the quantification, further regard inappropriate with with with quarter impact, Just peak we noted were performance. said, obviously, customers in to pleased here, as with an in delivered we happy have that did but injunction that judge's the that itself can with Bill results pilots' We're, for it to the certainly it the because preliminary see us discuss previously quite the fourth union. order, negotiations the be we're would the you and and

David Ross

roughly Is normally. moved to characterization? a to back you the hasn't XXXX, are into disruptions? went things running any there and that labor As work back They been tail fair

Spencer Schwartz

in because negotiations. much more say somewhat of order. the Dave, the Again, judge's reluctant, with midst quite We're pleased we're we're to

are results quarter. with performance. delivered our Customers the the happy see we can in first You that

– those really should speak themselves. think for things I that's

William Flynn

framework – growth for perspective Spencer XX% almost we're we've and the we're some provided in and on operations earnings. also, about XXXX, And giving talking

David Ross

just CapEx. then, question And Okay. on last

airplanes Any the CapEx, thoughts deposit because number, is CapEx which as preliminary year-over-year delivery fleet. your rest to presumably core the gave payments the on increasing You guidance in the there's of purchase number?

Spencer Schwartz

buildup million we for Amazon. aircraft approximately of to support Well, $XX remaining have about spend for the

overhauls the we'll approximately to $XX have XX, those. we'll million there. full related to another So, about and to have engines to And get perform then,

have normal aircraft of And are obviously, customer. then, that incremental procurement if a be said, presumably really In And purchases the as of placing we'll items. for view Otherwise, sort with those that, that to our addition about. big as part purchase, have long-term we we, have a engine that leases some with an engine the process. we Bill talked would

David Ross

you thank Okay, very much.

Spencer Schwartz

you. Thank

William Flynn

David. Thanks,

Operator

of Your Group Please Scott next question with comes Wolfe go ahead. Research. from the line

Scott Group

And Can the is that that contracts you number guys. you can XXXX? you duration I of the And for in those the announced Morning, Are in that the are are leases? or thanks. of charter us terms you've maybe those said planes what already Spencer, Hey, ACMI. for fleet then, share aircraft assumed and say some of with then, contracts think are coming? ACMI just of

William Flynn

Okay.

So, of think. I'll there, make a comments couple I

customers are sorry, will we the and the in will military be as other and be with some some customers and and far with already As some the commercial some charter. placement with of announced be – aircraft, ACMI will that with have charter in

are operate a in marketplace. term, more with we're bit giving specifics be medium-term. issues. it's those somewhat confidential we they terms mixture. any know very to in the utilized. regard will I would where real how your going but of miss and question, achieved. and we comfortable a things to there that and We really We're the like, that With that We're because you specificity very will aircraft will not But I So, these provide confident Did fully you short feel the of operate. real to don't have they confident competitive not Scott? we're comfortable they're

Scott Group

could many Yeah. the share, kind the charter you're planes just in how assuming you guidance, Maybe what how year? ACMI and for – many within of in the if

Spencer Schwartz

Scott, we talk normally that. don't about

into. work XX% said in said to charter, ACMI. wanted somebody about XXX,XXX in number We've XX% We've hours. a that's think I

to we're as really have ACMI nature is beyond an large just we the underlying another the Overall, demand, our for on contracts what exciting utilization average probably excited growth about and is new positioned that talked I math gives we've a the be beyond. really in customers XXXX going XXXX. about Asia-based believe base, where of particularly our Some the year us amount indicative of And number. customer said, with

William Flynn

aircrafts Scott, nicely. within the add both They're that our including portion of CMI to placed ACMI, of are in ACMI segment, growing number within quite we the continue to ACMI.

Scott Group

And done And you a labor deal Can can get – year? labor just last deal or assume are get increases done? helpful. say if this you then, when question. would accruing Okay, wage then, and the you does you all just guidance clarify, that happen you the that for

Spencer Schwartz

all, Well, on timing can't we a process get first predict the to of really the to a of new and deal. agreement. depends That just ability parties' both

we're of the So, to certainly predict positioned not timing that.

Scott Group

let's deal July there. guidance and to a update labor sense. makes expecting do not we do increases to takes because puts you a accrue deal the get we labor and happens, now do of to understand you say, want we once that; then, the do done, But meaning, you're And X, start have that's you wage I when if That need done? any – of for deal that sort or just

William Flynn

happen, that If point. we to yes, then were that guidance at Scott, would update

Scott Group

Okay.

William Flynn

guidance we've we year. believe for guidance the full the provided is The that

Scott Group

Got you.

guys. you, it. Thank Appreciate Okay.

Spencer Schwartz

you. Thank

Operator

from your next question go Stephens. comes Atkins Jack And with line the ahead. of Please

Jack Atkins

time. morning, good everyone. the Thanks Hey, for

William Flynn

Good Jack. morning,

Spencer Schwartz

Jack. Hi,

Jack Atkins

revenue start XX XX a maybe question in first with ACMI guess, quarter or ACMI block to on the where I quarters was flat was let the hour So, last actually segment. the me just This per up. in

maybe issues last maybe weighing of and strength been it five quarters mix broader the that is I the So, getting or four it have that curious the things what of Is you. on – that's in think some just the drove behind market? I'm

maybe we revenue seeing XXXX, block expect hour how Just thinking you we steep fairly of couple flatten mix? that. into be I due out should after to declines, out sort And of think largely curious per look about ACMI would in of as think, I years to

William Flynn

mix So, talked with were Jack. about. There, no has aircraft last we point, your I'll CMI component. issues, as start clearly,

Jack Atkins

Right.

William Flynn

we're to rate hour I think is per reality that's to have glad we going I that issue. watt a just have think as the And be XX-plus and an in of don't different. CMI. so, the aircraft

Jack Atkins

Of course.

William Flynn

the we additional the where on third this new of are So, that. seeing you're we ACMI our in terms average Spencer, impact that color per quarter, might quarter customers have with rate yeah, during in And about that you call. segment. some talked in block hour placements

Spencer Schwartz

I think right. it you got

So, Jack, as about, And and rate aircraft placed generally have the per block in because, the CMI you placements it A ACMI. we course, the hour. that talked block have we've component. generally know, then, increases rate of as as said, decreases we've hour That, doesn't per Bill

much. So, traditional had more that's what up ramping you because saw. while sort We we placements we a CMI for than are of ACMI had so

mix So, it's really just a all. issue. That's

Jack Atkins

Okay.

given to sense. a it's versus Makes us fleet on Amazon the Okay. year and year timing know new tied of a expense flow what And rest would depreciation and that of is like how the coming XXXX, this then, seems the It XXX-XXXs then, step the just amortization basis. aircraft pretty dash-XXXs stuff? the increase you of much you for up help into that into year-over-year side, up a can operating significant make should Spencer, And this how rents question the on through the think coming the fleet.

Spencer Schwartz

Sure, Jack.

rentals, the So, million under $XX just for to quarter, during about fourth with quarter. was aircraft regard the it

For to the this as year, see expect bit you increase should progresses. per year that little a quarter

Jack Atkins

Okay.

William Flynn

said, aircraft we'll adding, we year. adding be throughout that new the the we're As

With regard right. over depreciation, that time. you'll to So, you're see

so you year, The last and than have year, of XX a throughout aircraft We year, year put depreciation more then eight in before. year. for Amazon the those aircraft this then XX aircraft had we have more we've full last that service for placed have certainly we'll

year have of that. you a partial so, And

year and regard with quarter should amortization up gradually to each little this throughout increase depreciation, there then, as the And we depreciation year, year progresses. a quarter, $XX see million. fourth this of should about that step So, be you to well. for expect The as had

Jack Atkins

well One you here. great. in question airlines. year? this sneak could With airport fees some passenger with as seeing all Are that in seeing last airport if the up it inflation Okay, to I line creep regard we've higher been fees,

William Flynn

it's That's only the hard commercial charter. landing when to say, paying fees We're Jack. in

Jack Atkins

Yeah.

William Flynn

Fees, of are CMI, in ACMI the for and account customers. the

terms out in the of and charter it's are our now landing flying right think fee of of – across function I board. So, mix increase into concerted operations what fees, any country a of kind than our more more

Jack Atkins

Okay.

again Okay, the time. great. you Thank for

Spencer Schwartz

Thank you, Jack.

William Flynn

Thanks, Jack.

Operator

line next Company. go your of from with Please the David Thompson, & comes ahead. question Campbell Davis And

David Campbell

hear market-wise, Chinese cetera the Because start, to to Hi, Bill. are good these and both January Year, numbers Yeah. distorts and cargo Spencer. how you as et Hi, usual, New year-to-year. really said, appreciate questions. know? growth, I off Glad you the it. substantially answer February, you month-to-month do a But

how a know we you start? if for to the will be good so, of for first And months? And what it's of month don't do in several know, the sort March, indications normal off month comparisons you which do have

William Flynn

Right.

New So, a Lunar point, you good David, raise about Year.

we then a if when over longer couple so, Feb and combined Jan over and looking compare, And And – for Feb of at two we're look Jan, over look at years. to prior year. the compared combine to we we'll look a perspective,

and to on schedule operate is and then, their So, dear they're both. at we and what near We what at our look they're telling giving look customers what's us of to behalf. us market. And kind the our heart

levels first Feb, we – they're And I then telling we've market a But of combine of approximately Lunar and our the year the all to were on major from adjusted that, the year our the Jan has think our through market, good good did words for had net of EBITDA. generally, off start. beginning demand across when income based lines. you and would the operations double the customers The where provided got New you two, So, trade factored say our last the in we're of million us, for $XX that all Year. of what framework quarter, we're about and I that review around good

flying we've our and I is operations for we're handle And, what having good. going market be certainly, on to good a us. And So, think a conversation of the the got that's our is customers. with level

Spencer Schwartz

sort of scarcity And, of David, continues assets. a There be to it's assets, Spencer. freighter of scarcity

and capacity our based is reaching us out It's their to And customers on for to so, that. to some it try networks. looking up shore of

David Campbell

Okay.

for other of of on do basis, you in Next what you, from the this that – – lot year Amazon aircraft, beyond year visibility think. place is, XXXX, have kind orders the full and you'll of are but this there's growth? question year scheduled no have longer-term – of, know for I have of all obviously, I But aircraft year, Amazon. potential deliveries aircraft putting you a a XXXX growth aircraft Second

growth particularly of And given in so, going capacity? and XXXX, come where to the the XXXX from shortage aircraft is

William Flynn

things. So, a of couple

full the XX the having this We'll have for more Amazon of as of We'll that four from year service we're effect adding right. we the we're in year. far. all the aircraft year that talking lease-ins so aircraft You're effect deliberate full about have

continue that assume if in for is a pricing in I think, certainly charter, path charter. opportunities going have to there's market us a nice we to and grow forward, growth

because think, it's our said good We in have capacity, into – We about available last will through but think military in and in of to there on us. know. did, I while calendar constraints call calendar our are XXXX and cargo to haven't that year. talked carry first quarter military FY, of you XXXX, not there military isn't mean the levels capacity And as we certainly FY that operations going we're passenger I will yet, fourth doesn't FY quarter,

of And in wouldn't the once be the believe the dash-Xs. several the our really and how what so, of additional based taking company years could telling That's find I overly but last we our the managed initial over needed delivery customers completed capacity we on we've are estimate speculative us, we capacity, in. it, if that market we

Spencer Schwartz

we expect to to XXXX grow in continue simply, business said expect the and XXXX. David, we –

David Campbell

I appreciate Okay, thank much. you it. very

Spencer Schwartz

Thanks, David.

Operator

next line Your question with of Company. comes ahead. from the Sidoti go Please Stephen O'Hara &

Stephen O'Hara

good Hi, morning.

William Flynn

Steve morning, Good

Spencer Schwartz

Steve. morning, Good

Stephen O'Hara

needs on, was maybe the was XXXX get that to would does op of maybe be else margin benefit it's That up these you. as as something. you in you equal, in. rebound, being of about well. as looks be kind Hi. expected down op revenue, a XXXX depreciation as Thank or these come – bit maybe I will offset aircraft? That the higher full those flowing that maintenance, Is And all rebound capitalized. sped I expect the little – like in so, XXXX. It just aircraft depreciation. curious margins it would've in that

Spencer Schwartz

strong. We're understand some margins question, that on Steve. therefore, But maintenance, well. that do completely seeing then your depreciation have is in pretty so, sure and capitalized Not placing is aircraft we're incremental We service, the maintenance are higher. as I that and and looking amortized so

Stephen O'Hara

the why EBITDA revenue implication on It estimate a goes surprised. I'm contract? I improvement in the of improvement the Amazon seems down the side the bit in margin op down and XXXX XXXX, I like using I'm guidance wondering – little did gave. based that we guess guess and depreciation the given the – continued then assuming integration you the go just union from

Spencer Schwartz

may down it don't or like it the way just be margins the or word But we used we your that. may you're So, be something seeing. see because coming approximately model

Stephen O'Hara

just guess, No, that about was Okay, right. additional talk shorter-term dash-Xs? these you. I desire Thank at a And And consideration all willingness to that's can or helpful. you leases? your then, when purchase maybe looking

William Flynn

that our not we as per freighter going in has cost I fuel XXX-XXX that of I them rates the aircraft be, customers and customers. a the predicting to kilo – on And particularly are works would probably – available really where to forward comment. developed terms underscores the $XX in dash-Xs XX XXX, in in, for Well, certainly into $XX near-term. environment UPS with of a the fuel of delivers range think we're I'm behalf that which but say dash-X for great said, not – customers. great There operations underscores that The well moving are in the being

the dash-Xs? I've kind be that XXXs the us. in and the to Yes. we sense In could on So, with before. contracts, tenure and made interested additional near-term said lease these and And of conditions terms

Stephen O'Hara

Okay, very all Thank you much. right.

William Flynn

you. Thank

Spencer Schwartz

Thank you.

Operator

ahead. from Your Stathoulopoulos the line of Chris Please next with go comes Susquehanna. question

Christopher Stathoulopoulos

if question. Good my and year? XXXX, pilot could then I taking was this you finished thanks and for your outlook for wondering give and morning for total we headcount, where

Spencer Schwartz

Sure.

is total are rest was For XXXX, I ground count staff. employees think and pilots under of two-thirds about and the X,XXX just our employee those

For to aircraft. as we more hire we're continue XXXX, adding

those should happens. of number you But increase. see don't lot typically But, more clearly, to on a actually adding we numbers provide a expect it so, specifics employees we're aircraft. And until

will employees be well. as to add We continuing

Christopher Stathoulopoulos

Okay.

fair looking just heads XX your per we Just for a low and assume at for if say, on gave, it fleet the guidance let's count, the aircraft, and where up is like of assume, to build kind you the like, mid-single XX that it headcount pilot – is year? to it digit to ended year, growth

Spencer Schwartz

with that. regard think to we're say I to we've going on what think headcount, I said

see continue I We aircraft, ground you'll pilots new both to staff and new new throughout And the year. flying, to think support stations. add that

Christopher Stathoulopoulos

then, Okay, follow-up on earlier to an okay. just And question.

Scott. think I it was from

CMI CBAs, revisit an in had of to were perhaps But to guys above of in terms the And said there's of they midway? any update would the the and is inflation if that, that you opportunity there contracts these guidance. ACMI settle significantly type come guessing I'm You with of open some that if sort contracts. factor these,

William Flynn

and where things negotiation a couple think the details getting without are. we I of the into of

the need will said, that. else as when because information. it's just we'll, market a to provide it everything obviously, contract, understand The Spencer do around generally ratification we and So,

that there'll at if guidance we we we to believe update We'll visibility when So, pretty be good that happens. have to it will or on time. update guidance need

Christopher Stathoulopoulos

able with a them or would through you or…? revisit But some DHL the I'm and of an sit someone be term like down midway to Amazon saying,

William Flynn

sorry. our take Without strategy be customers our on we to increases. into those customer part specifics, getting any work has I'm that, we increases, with when clearly, of

Christopher Stathoulopoulos

Okay.

let's profiles is and of to Could the things mid-teens lease, I incremental the the say, gradual ACMI, mix curveball I'm but with – what and charter certainly three perhaps margins different think ACMI, the different margin you a you fall – shift about margins, should in going in dry just margin two, operating but bottom profiles, towards here? Okay. again, And fuel out? – the with then business lot of how realize longer-term, on and to how of trying to with we realize also all able someplace figure or about there's on get I have there, we terms the in line to years the think pieces out, EBITDA or and should

Spencer Schwartz

Chris. Sure,

XXXX full expect perhaps earlier, margin in mentioned adjusted the continue XX%. about Our we year is that And to EBITDA of for we increase or as XXXX.

margins we're with healthy comfortable quite very And so, those those. and are

Christopher Stathoulopoulos

it Thanks. that's Okay, me. for

Spencer Schwartz

Thank you.

Operator

line Jack go And your of Stephens. ahead. the with Atkins from final comes question Please

Jack Atkins

questions here, for Thanks squeeze letting of couple a follow-up Great. me in guys.

the back doesn't operating But when his my Or income? the operating too. margins, a revenue, these Is a that's think which the it guess, incremental basis operating points by operating basis with of around versus Just leases, function necessarily I know a in depreciation is to question implied. it growth just issue your it's – through and you first, to I flows of ago, associated margins flying? maybe XX flying to one. revenue coming is good of change on got but the points with So, question at the income Amazon basis, that. a Steve's I in guess drive implied year-over-year model moment fuel, guidance sort any going look an to sort of that's I've growth XX trying given

Spencer Schwartz

Sure, Jack.

clearly, an Fuel, You're impact. absolutely right. has

increases, our it impact but margins. much, an fuel very really As bottom flows, line on impact does have doesn't cash impact doesn't

in you customers So, we there things it. times various there that And There impact are that when is to – are business. other certainly bill-backs for things. our little see impact have charter

we from line. every back we'll then impacts having impact bill sometimes little that instead receive on them increase margins, bottom the And no the has and for back customer, to that thing, bill way, but revenue and that the sometimes, don't of really have we

not that that like things extent, are there materially. but So, margins to impact some

of that into calculations as some be bleeding may So, the well.

Jack Atkins

Okay.

Okay. me. the for last one Thank you that, And then, Spencer. for

an off-balance doesn't maintenance in you're that Just flow, doing sound given this year, you heard really fleet on it way with sheet comments When this around have year. like additions, potential CapEx if CapEx, you correctly, large seems requirement a cash your I it this CapEx like it year. combine guys your

think So, so, what of guys flow? million about million sort And think to your flow to that year, this be true for you could cash generating free it $XXX $XXX priority if be free would sort when of is we the right cash? in that cash be

Spencer Schwartz

flow that the cash engines or that think how to cash cash look little calculate at free less others. may our those we for incremental us, purchase things. Sure. use – But, we And flows it capital from core we differently of I cash free look how flow operating I types expenditures, or our flow, or cash then, for and I always some look flow. at aircraft at a that's utilize we capacity

think, a So, at I little it, we differently. look

thing cash For flows, flow was year $XXX that a driven about And by operating the the great. XX% like free of the full over cash it's good XXXX, million, about which something is prior increase is year. mainly

regard With think cash to XXXX, see increase we to I expect capital in allocation we increase. talked strategy. to about the capital incredibly free For we've flow, capital operating continue think, been cash flows our allocation, expenditures, balanced but should We core increase. regard with to

the to acquired business make acquired repurchases. have Those We customers through our focus the and in strong and we have assets the to aircraft up. balance since have continue as Amazon we invest that tenth XX% we've and sheet. support Air, XXXX share XXXX We XXXX, a you ensuring of to And want on know, want. through on. nearly bought that the acquired sheet. on Southern dash-X that that XX from we sure XX% we time. converted continue company And XXXX, to improved shares appreciated ramp through we a and balance We back

the has So, we've I more And forward. we same would expect worked an been of as that quite approach move really believe It's been well. we balanced.

Jack Atkins

for you that Thank great. Spencer. color, Okay,

Spencer Schwartz

Thank you.

William Flynn

Heidi?

Operator

of have Group line a with Research. from the Scott You question Wolfe

Your open. is line

Scott Group

the Hey, guys. Thanks for quick follow-up.

fleet. the one – thing just Just last on

look thing. equivalent X.X the and dash-Xs ACMI in a and think, in was just the I third. dash-Xs aircraft there less fourth quarter, there? at like quarter, I the So, fourth-quarter equivalent. looking seasonal fourth in And are charter, if change that X.X I'm Was in just more in any

Spencer Schwartz

dash-Xs, aircraft the and we so that just was just ACMI, as it that. Cathay to you Pacific. had think with We that impact of I moved placed it's two know, from charter

so, just timing I that movement. And it's think of the

Scott Group

guys. Okay, you, helpful. Thank

Spencer Schwartz

Thank you.

Operator

There the questions I will to turn now presenters. back over the at time. further this are no call

William Flynn

we thank Heidi. you, to would with and your your of our And Thank speaking Spencer thank to like I soon. Well, sharing today, you for all time look interest in company with all us you. questions. your forward Okay. certainly and you again

Operator

today's call. conference concludes This

disconnect. now may You

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