AAWW - Earnings call transcript Q3 2018 | Atlas Air Worldwide Holdings Inc.

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Operator

Good morning, and welcome to the Third Quarter 2018 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. [Operator Instructions]. It is now my pleasure to hand the conference over to Atlas Air.

Ed McGarvey

good and Nicole you, morning everyone. Thank McGarvey, Ed Treasurer for Worldwide. Air Atlas I’m to results XXXX third call. Welcome quarter conference our Today’s call Financial Officer; and will Chief Spencer our be Schwartz, hosted by our Chief Officer. Bill Flynn, Executive a Today’s call at under in Presentations presentation can Investor section. be www.atlasair.com Information slide the is viewed that by complemented

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

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

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

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

Bill Flynn

good and Ed you, Thank morning everyone.

growth we on our achievements first quarters announced full two are the quarter strong we very have the today in raised We and of performance us. and to for join earnings our pleased outlook year. you XXXX, Building third

expectations and and driven peak our market by and Atlas. strength, our customer outlook business demand a ongoing for season Our record are development for results

our our employees. and the leverage all and continue in and work outsourcing, aviation to hard scale our enterprise leadership dedication global thanks scope of of We to the of

are networks time-definite, very place and the secular markets. good and consumers, essential demands Markets to growing where and results Our of a freighter on fast-growing quality e-commerce express, in is businesses today to future. deliver focus efficient, meeting we’re the in and

the strategic We want, grow we on to base focused services our and that have customer and on and business expand are diversify aircraft right enhance the are initiatives executing market, and mix. our the we provide our customers fleet,

four. Moving to slide

and Our third in hours revenue. quarter adjusted XX% increase also in income. in block XX% increase included They reflected XX% EBITDA and in earnings a increase XX% a net increase

we additional XX. Amazon aircraft began the number During three to XXX-XXX operating for quarter, the current raising

renewed aircraft quarter Titan dry we its subsidiary Singapore’s In on as participation leasing you addition, in leasing second our incentive, to outlined call. our

an we enhance concluded of Southern a Air result, pilots. recorded agreement income we in and in approximately the enjoy the a and Also of the $X.X third third an quarter, reduced tax terms employment rate benefit quarter forward. going As million to conditions will interim our

best covering We in XXXX. our the framework path all contract customers Southern to we in our joint of all Air. business, and bargaining contribution Atlas a a the on our our and completing of timely growth for interest five, remain Air continue of is and serving merger pilots The key to growing toward committed a and for Slide manner the enhanced our process pilots highlights parties. of

volumes, leading second benefit express quarter for from fourth operator. quarter adjusted-EBITDA block our Our SF and for will solid including and our also Asiana income. see for Express, revenue, fourth net operators, year do and season Cargo, and anticipate for freighter freighter adjusted record express additional quarter. expectations peak full reflects first XXX-XXX We we The outlook fourth great hours, e-commerce XXX-XXX flying another our we the and yields China’s

line that we with will two expect May and XXXX. XX in Amazon before add we us Thanksgiving, the more freighters announced to schedule for addition, XXX in to In bring

For more around the over to XX% XXX,XXX to hours block $X.X to to approximately and grow year, revenues we full than expect rise billion. XX% volumes

grow We with adjusted also over expect to and adjusted-EBITDA XX% or to increase more near XXXX. than $XXX over XX% compared income net to million

approximately increases implemented air demand. anticipates Tariffs I’d tonnage good for been is topics days; goods are to line important I have move with the also in million before the capital by about impact between million, to do, is X% depreciation freight to rate, on Research and its we aircraft growing tons comments to air about outlook express which a $XXX maintenance provides related XXXX, a perspectives. This have to $XXX price for a but these that only growing Our our demand tons nor like expense about and much or of fleet. parts mainly engine $XXX Spencer, record of exposed than in of neither tariffs expects goods these but million levels. that. material potential and to however XXX,XXX X% tariffs. point Airfreight of prospective expenditures, core few into term and impact IATA about and amortization e-commerce make of purchases, is customers to are Airfreight additional more million longer are XX seen tariffs or $XXX turn some exclude growing trade and and components proposed. million our from

lead customers shift Vietnam may as neighboring to prices. manufacturers production increasing such tariffs without example, countries, to For continue to to supply

few materially move Whatever to change any the capabilities, over are Spencer. impact research additional take increases, I’ll countries, and a manufacturing wouldn’t have likely price tariffs impact by the our Given event we the and ask about expected results. network air. needs scope the of in detail Spencer’s comments to remarks, be in your quarter our networks, modest what on XXX consumer And will and believe and happy questions. that that our route additional manufacturers provide indicates scale air behaviors. have, is positioned by then may and Spencer tariffs global we form to to for move be we to well and will continue shifts in After in operating I’ll look third pass to now that some

Spencer Schwartz

Thank you, everyone. And Bill. hello

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

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

income which reported in total operations the of was unrealized from Our $XX.X segments warrants. direct that On $XX.X an third taxes higher and gain our be be Singapore adjusted to we effective income we rate million the XX%. our of X%, included With quarter expect income included totaled to Both principally full respect expect effective on tax net framework substantially Bill benefit earnings year also Tax generated reported due a basis, mentioned. tax continuing current million, payer. and contribution. that rate outstanding and not of tax our on we tax aircraft to U.S. that to income our Income the an Federal continue will a investments made, Based approximately XXXX, significant we’ve adjusted

in Cargo, of one Inditex. increased hour. were Looking primarily flying and revenues increase slide the XX% as XXX block or by at in revenues block of in in dry and freighter seven. in XXXX Charter, driven which quarter revenues aircraft one rate higher reflected segment XXX-XXX incremental an driven volumes, and In segment volumes and hour of increase the In placement second start-up new customers, the average per leasing, were segment Asiana for DHL in quarters as throughout an reflected Amazon half the second the flying this the primarily year Higher well for first XXXX the higher several February the an of three increase including in and a increase of by July. number ACMI third of

offset significant rules Air $XXX.X the earnings Moving over enhanced work increase prior the and totaled eight. third partially from XX% agreement quarter, to higher million reflected Southern a impact unscheduled slide our crew Segment interim in with primarily costs, flying, and ACMI contribution the pilots. year. our of including wages in by maintenance increase a

partially to was following reflected XXX-XXX cargo segment reflected heavy acquisition improvement the contributions Charter driven maintenance. addition, higher placement ACMI higher Dry fuel, a primarily the quarter increases commercial additional of an of the passenger primarily and Leasing, The by CMI our from during former aircraft in Charter, increase during contribution redeployment contribution demand period In customer. and by In in military VIP yields, excluding the in offset aircraft.

Turning and XXXX to restricted slide of with totaling third nine. quarter cash, We equivalents, the ended million. short-term $XXX.X investments cash including cash

the for XX, cash cash months first XXX partially September related activities financing to activities, cash for XXX of engines provided spare XXX reflected and used the proceeds cash and for position activities. to core primarily cash period, XXX XXX of Net expenditures. and by on kits configuration, operating and partially nine during capital investing provided payments primarily the payments Net during financing conversions our investing for at by acquisition freighter aircraft, financings offset by debt year, used of the obligations. Our upgrade by offset and reflected aircraft, activities

strong committed are a to maintaining We sheet. balance

our shows, advantage applied take doing opportunities, to to As approach a the slide grown we fleet in great so financing. have have of disciplined we

debt rate a at our rate. has result, almost fixed of all low weighted interest average a is of a which As X.X%,

secured In which of addition, excess aircraft in the by is related the value majority a have our assets, vast debt.

lower we that pick-up net fairly we per to to reflecting fleet $XX leverage increased a can to the while began remained significantly, expect and move even year-end, lower payments quarter. [ticks] at As also million at in X the our times, down third debt see, X.X you quarter. ratio, ended We which $XX in be million quarter partly to our consistent

Amazon, our generate improve we we leverage in to expect year. to aircraft over EBITDA, next As the ratio to and net continue service our more ramp-up have gradually for strong continue flying

to it to Bill. I’d turn like back Now

Bill Flynn

Thank you, Spencer.

XX; this time exciting is be Atlas. to Moving slide at to an

aviation to to of scale enterprise our continue in our we and the on leadership scope global capitalize and We outsourcing. leverage continue

by and season record Atlas. results market business ongoing significant for development driven a customer our for expectations are earnings our and strength, demand strong outlook peak and for Our growth

and markets, to meeting consumers. time-definite businesses the are on of and Our growing e-commerce focus is networks express, where efficient fast-growing markets essential demands freighter

We to future. results a today are quality and very in the good in place deliver

we right We we executing focused on on have please? right we With may the that the that Nicole, first aircraft and provide are question, services markets; customers the the and want; strategies. have the are

Operator

Instructions]. [Operator Certainly.

CJS comes question from of line Bob the with Labick first Securities. Your

Bob Labick

Good morning. nice outlook. on Congratulations and a quarter

Bill Flynn

Bob. you, Thank

Bob Labick

in Wanted to start Charter.

The hour ex-fuel on certainly and a in QX That maybe bunch we this see touched block but we’ve went seen. ever this anything think years, for highest I the didn’t can You briefly, of expand. was revenue strong. back

talk outlook forward going mix what’s for trending and Some the how then you are about of see the the kind and each mix and of on yields. you those, drivers yields obviously the out Can going of there?

Spencer Schwartz

Spencer. its Bob Sure,

nine first of the to for yields consistently above Charter XX were commercial XXXX. months fuel months excluding said, you As XXXX

and Looking $X yields week. yesterday, period, kilo, back I if to we are go at up the from of current the you a the before, with looking about rates just volumes U.S. last to South know at, from week Korea

per rates then are mainland Looking high, we’ve kilo. at increases of yields Market continuing Hong full, about XX%-plus a this U.S., lanes to to Kong of the is prior And are seen for about yields kilo. and are to year year. $X.XX China over looking the U.S., shipping at demand the time $X.XX the increase,

space So again, rates is are period, prior up the tight. volumes and over

we’re dealing of we is slowdown in So don’t flavor Demand any strong gives seeing, a see you what that. with. we’re hopefully what and that

We’re for season. looking peak record a

Bob Labick

little side, ACMI bit the on discussed you then a as well. And this great. Okay,

You there maintenance margins talk costs. and talked a some Can which before, you customers about little it if year? Amazon this you maybe impacted is know the higher bit then taken, little maybe have a we’ve opportunity, bit that some next services there versus and And has trends crew fleet start-up had been margin forward? new will fully going ACMI year built about Amazon the to be an now talk in expenses out about

Spencer Schwartz

flying has With of regard adding to as margin. Bob. CMI generally a flying know, lot know Sure, so we’ve that you a been lower margins, you CMI and

margin. been has been we’ve adding growing, also we’ve gauge as generally which a So smaller lower and aircraft,

margin, it does that but that, bottom very still prior the grow impact we has line, nice for periods. that as when comparing So terrific on business, to impact have

those DGF, of impact costs bear comes so line. would Inditex, have other it you and our revenue, but own, ACMI on customers, expenses. handle some as Customers customers, a customers and expense doesn’t and bottom reimbursement some those we their customers then reimburse of costs newer thing, we The also mentioned, certain come of of for for expenses through other us it revenue through essentially and Asiana, as impacts as some the that as that our margins and newer certain that Amazon,

ACMI well. that in see as we So happening impact

Bob Labick

queue to back Well I’ll instructions. Thank you. get Super. follow your Okay. in

Spencer Schwartz

you. Thank

Operator

Seldon Deutsche comes Bank. line Your Clarke of the from next question with

Seldon Clarke

your thanks couple over kind the Hey, as question. wind for this years? talk capital little of cycle just deployment strategy of you a undertaken we years over down about last you’ve Could investment bit the of on next the that couple

Spencer Schwartz

Spencer. that we to of its When capital We we sheet; have balance meet comes have three the cash to main strong to ensure right want we Seldon, we a needs of Sure, that have to leverage. business; amount allocation, it priorities. the want growing lower our a

kind We’ve, how in of want that’s look balance company’s Modern, We want. done and repurchase of And efficient think assets are our customers each we sheet. priorities order, invest we want the pretty it. stock. we maintain the I in strong to those. at and assets to a that in So those well want three then generally to that

see we’ve increased placed can kept down and that, our as is we, service, leverage leverage you that you into our those while about, which we now assets see of our flat great. talked pretty significantly, You assets are coming know net most we

company that We ago years and the efficient few customers a through modern, we bought XX% over in have invested back share assets repurchases. want, of

So, been I a that really balanced doing approach. think in we’ve

Seldon Clarke

the a step-down mix primarily decent ACMI impacting and of underlying of utilization? a step-down saw specific or hours day, to aircraft that Okay, just that’s there related little question, block per in is a that’s your And something your a bit Is little segment, year-over-year else a helpful. bit sequentially. there then more you

Spencer Schwartz

good question. XXX-XXXs look an our on by Yes, aircraft it you When XXX-Xs basis, essentially our at or aircraft flat. are

domestically just smaller as just been fewer is and before. flying XXX as they fly It’s And hours. and generally adding was are that gauge so really strong mix, so utilization it so the we’ve

utilization it, the at looking aircraft look way aircraft And you so is you’re an a by when effect, basis, it on mix at it’s but good.

Seldon Clarke

with same as there segment mix I is thing And similar well something Okay. the or Charter just passenger There your business. guess the, in else? a

Spencer Schwartz

In fluctuations. how little Charter, driven Charter. comparison Charter they just basis. it’s AMC flying, typical was on so it’s that than awards we We typical down a nothing of bit saw are utilization, flying saw In It’s the a AMC more by that. fluctuation

flying. added We also some NFL

planes. planes, are VIP two they took configured we So passenger

we the teams, throughout five upper really XXXs, flying we’re for because entire a generally are relationship NFL the are teams. they configured they So but It’s and great in the it, class thrilled basically and around cabin, fly weekends. but about they’re NFL is

the that so And aircraft don’t know pays you accordingly. the that because of level be way going customer utilized you utilization. to it But the that, see are customer for in for same pays

you’d So bottom doing you notice look the on when in hour’s But it Charter, that. an line at basis is nicely.

Seldon Clarke

the time. it, very Got that’s Appreciate helpful.

Spencer Schwartz

Thank you.

Operator

Stifel. Your next question David line Ross comes of with from the

David Ross

gentlemen. morning, Good

Spencer Schwartz

Dave. Hi,

Bill Flynn

Good morning, Dave.

David Ross

for renewal So coming up of into number contracts we year? there when next significant about think any XXXX, moving ACMI is

Bill Flynn

No, David there isn’t.

got coming momentum into think we’ve You XXXX. know great

first of any think schedules from always as and continues. and here them sitting with year. they We’ll in customers talking momentum quarter from renewals hearing about what our beyond, we’re some have that number We’re

So number one I see forward at going don’t renewals of time. any any significant

David Ross

as to you resolved And likely from, to know gets look other offset some you you with higher ongoing wage, so that then cost Are XXXX pressures Air, revenues? aside point. cost there that some the pressures is at there Southern out need negotiations with

Spencer Schwartz

our come earnings estimate XXXX Dave, call, about for we’ll out certainly talk that. we will without during next

won’t those Bob’s question and think I I Amazon that should that XXXX, going earlier. this have asked as going costs But I answer, we not higher we into was did into forward, XXXX, start-up accretion that think question. the from see was positives think a Bob going

added the strong looks Commercial freight We is good. new enjoy stable throughout year. AMC of full customers have year they that year, that air There be like look continue will overall so environment. that we yields growing, this and is to next an we’ll strong. to Charter flying

Bill Flynn

overall. mix, business Our

Spencer Schwartz

business Yes, mix overall. our

that up. and to now potential question or headwinds process maintenance, are so issues. of that So your firming going there talk we’re We’ll through was, and sort about have

So and earlier, we’ll that talked call, our crew talk costs we agreement. the as for mentioned as about more you next in the Southern Air during then and changes interim about

are I the big items. those think

David Ross

then question. And last

that? describe and airfreight Atlas is into how maybe Hong play Bill I tight How of know, now? out right into You export away it? Asia you are the market shift could movement cities you seeing, the other center Kong of from does And guess

Bill Flynn

Thank Yes. you.

prior So pricing last Spencer of kilo about fuel. in what over up are year And per fairly we’ve on spot question, is, on provided XX% granular seen basis. some a we a net detail market

So, its we as Shanghai important and net Hong markets markets point we market have The think fuel but is in in growth certainly market, designated to an into continues Kong mainland, be to overall, strong. under of bilateral major well. carrier very the are I Shenzhen beyond markets. a other interior up - agreement. make is The right and

array we’ve good about And Spencer We peak and why I XXXX, I last operating record and rights this route a have in which was both of that’s a record authorities. year. peak think spoken,

Asia, Well other very to markets. of positioned So, asked continuing worth about it’s it’s about we’re and think just I there. the develop nicely, mentioning several well you

e-commerce, our other we where grown exceptionally America as are the South some like in we’ll have on XXs got markets But we’ve the the strong here express, Charter shortly. our So deployment well. XX, completed of

can and year. you fourth the trajectory So pretty tell feel quarter into I’m we next about sure strong

Spencer Schwartz

is moving also a for basis, perishables, you for a America a season us. know season South point most peak really But and high that also And peak people think goods it’s the about Transpac ex-Asia. for so from

David Ross

you. Thank Great.

Operator

comes of Stephens. line Your next the with from Jack Atkins question

Jack Atkins

thank morning the and time. good for guys, you Hey

back But to labor what’s public start announced of Kind I you that. sort going update, an perspective, tentative us don’t in in mean process terms that, a moment. negotiate I do just and I I getting guess to terms front from here timing obviously a And ask give a something wouldn’t I the to so on So, curious, where are from we? you can a the want new agreement? you of of for of guess guys call on let’s know

Bill Flynn

could call or to with So, parity Air talked where to of up, change, call agreement, we the We the today pilots. bring referred about talked interim and the conditions with essentially and we back their at factored that in in our last reached provided for impact so quarter continues wages which our the about is today for Atlas and and Southern last we and about what results are we are our again contract we’ve full other we’re terms as fourth and talk quarter. we the what that into year, third that framework the looking pilots,

Jack Atkins

with Right. of was I I the all referring agreement pilots. Bill guess, broader your to really

Bill Flynn

I regulation takes But [Audio are process get was look, the Act, getting that coming its out that’s we there, contract. by the time these to and the process new of get guided a Gap] a the a which Jack. and Railway by to law, comprehensive negotiations and agreement Labor new to

our So with we pilots, union. discussions in continue their with

for we bargain earlier, in really mentioned now. get our agreement to are goal a and to it’s new works joint process I As collective that both parties, that

Jack Atkins

I’m are given below finding bit you, pilots? the if having pilot rest at look Got industry Because shortages, you any curious you guys they are think sort we just of scales, a while seeing just wage the I applicants? Okay. your good when and broader issues, are issues recruiting of

Bill Flynn

this on services XXX,XXX of wouldn’t own year well. They forward fleet about, deliver that growth, and get this process we’re approximately what about new weren’t bargain dedicated a Southern agreement and customers. and growth to service expect force Atlas bargaining in pilots, overarching serve to hours, the work to that specific the to and in path block architecture our of is our our we XXXX be question hours that come see XXX,XXX customers about collective our the Southern So also us the exist agreements reach are we of and to provide a the fly, A final able we hiring if flew block collective they at can we to point joint of Atlas talk one agreement. terms to RLA. just want And I as as going you there and new kind are conditions recruit to kind about, and while a who talked that able talked of in from pilots and process

Jack Atkins

you last that. Thank Okay. One for question I could. if both

quarters Looking plane count. pretty material basis, but segment, at flat direct is step-up year-over-year both hours ACMI of a block the we’ve contribution couple the your on seen and last a in

start-up as You block number point on know, the quarters. from I or up other well that is what expect just Amazon, we to but see over begin on you accelerate costs related due not should a ACMI to At a brought that to hour to keep what’s perspective? profitability last customers several know to with going of of sort

Spencer Schwartz

Sure. Jack, Spencer. Good its question,

contribution. quarter that impacted ACMI unscheduled we repairs This some had

there a in so think quarter. profitability. a and segment issue resolved to expect repairs, that And that is those and result downtime that continue don’t we was of fourth the We as impacted

when be and will you think ACMI be you’ll contribution, quite quarter direct see pleased. I fourth we

Jack Atkins

queue. Thank I’ll back in Spencer. great. That’s jump you, Okay.

Bill Flynn

Jack. you, Thank

Operator

with question Kevin Sterling Your of Global from next the line Seaport comes SEC.

Kevin Sterling

How Thanks. Bill Spencer. are you? Good morning, and

Spencer Schwartz

Kevin. Hi,

Bill Flynn

Good morning, Kevin.

Kevin Sterling

you housekeeping of I us a maybe was for but Hey, given morning. for your model just for good XXXX? what rate you looking question. help moving tax rate I’m can your around. guidance not think ask Can Spencer, about kind for XXXX, quick your is tax

Spencer Schwartz

so there, question. right. good great around, for and we’ve our even especially you’re is got this an we business Singapore Yes, lower with agreement reached It so dry leasing because moving rate

Going because our won’t about sort XX%, we be will tax income Singapore type have that effective adjusted rate issue. one-time forward, we think of

like XX% low something XX%, that. So

Kevin Sterling

your fiscal new that. reached, guess Thank with of you. year? I XXXX? a be, we’ve military Is government share the flying, in kind can maybe for year that what flying, and better bit we now you particularly the maybe military us saw helps, for similar outlook appreciate Bill, That guess it I new I guess little than fiscal with the or going your

Bill Flynn

Yes.

I expecting, fiscal just flying levels new to military as year, contract Kevin a think and point from of that of cargo is rightly October starting our similar planners confirm that and point both what you beyond view. ongoing out, We discussions us. the perspective entered into X, of with contractual passenger kind the From we’re continuing. perspective, military and in the with

Spencer Schwartz

And what entitlement I’ll just side, add, our XX.X%. Kevin share has the military side calls our cargo the of that passenger or now entitlement, on outsourced flying the the on XX.X%, reached

we the of airlift the So outsourced are largest provider for military.

Kevin Sterling

you that your obviously your or remarks that hear. prepared it’s customers. the not base from color, and on tariffs indicated you for tariffs, last impact really any to seeing Great, touched the Bill good you’re And question, in

are changing know about planes maybe these patterns, sense? tariffs year worried I having any You beyond or conversations to guess, turn conversations you about like, as they really you? think any not, I’m Are conversations if “business as as are, hearing know hey, to just trade they I you that think with so going or we that you’re customers? you I’m of customer about but make back next even that, assume usual” customers

Bill Flynn

thank you Yes, Kevin.

is XXX-XXX fact, a Korean like seen, fly in those trans-Pacific of operator, Express customers SF Cargo not having which new you that routes, well. we’ve as the in ACMI several and for announced principally example and as We’re kinds conversations Asiana fleet have

uncertainty mean. the there’s concern So may to of discussion tariffs and about what a as lot obviously

it, quarter, fundamentally seen thing. know my down seeing Asiana may Vietnam in SF know stepping something, a market, a And some trans-Pac today. in perhaps. we’re into same China and customers Maybe operate into we shift. see in in would Asia. a or you reference that we’ve from in impact; seen customers, perhaps we the moving that about elsewhere forward. made number seen haven’t in We Southeast like we’ll not I Vietnam that to you but concerned this a that, did Look, and of going remarks we’re Margin fact and impact capacity, say our haven’t

United Vietnam For rights skies States example, open there is operating agreement and kind full between of an the authorities. and with

shift do seen a well So positioned from operating authority’s and of occur of either, that that. shift period lot a are perspective, time should we over haven’t a to but we network

Kevin Sterling

you. Got

like out the and said; of thanks just sounds still seeing capacity, is you’re capacity step you’re you at the right? seeing day, end customers Okay, into that the like not of step

Bill Flynn

correct. That’s

Kevin Sterling

care. Take I time today. appreciate Thanks. your Okay.

Bill Flynn

Thank you.

Spencer Schwartz

Kevin. Thanks,

Operator

question next line Stuart Shikiar the Asset of Shikiar Your from comes Management. with

Stuart Shikiar

you. Spencer. the Thank net Good The reviewing In block hours for Thanks year-to-date, morning, a obviously outlook and results the question. quarter. taking the promising. record looks revenue, third income was quarter fourth Bill EBITDA, quarter the for also very

Some observations, XXXX. and is, you one then a into momentum you great just that indicated have question. Observation going

got pointed flow a Secondly, it. below cost on handle debt is out, free cash of tangible the Three, Spencer as book Four, $XXX is has stock is three trading value. year-to-date million. net leverage going the Five, lower.

I’d price, you the like to fundamentals line, share what view, your the your between these apparent, and view that perceived I’d like disconnect and and the the question. cash the as to the you’ve done So very it advantageous tilt levels? repurchases the flow you. of here’s of along reconsider the when as in kind you stock toward share order, might solid Thank past be at was excess redeployment of perhaps stacking the

Spencer Schwartz

should good certainly is stock we believe trading Free it below be. where agree cash All Stewart. are flows Sure, we that points, strong.

is is unbelievably leverage doing decreasing. business net great well, The momentum. Our

in because that is our but agree because customers levels, really, cash been those they was. the that company, our were So, it leverage. on in really the all want. assets otherwise of they, couldn’t of What you from investing focused with leverage leverage we’ve investors in doing We’ve that extremely things. been we been the where investing certainly heard we’ve We’ve with lowering of know some do interested so our

on that is. focused been and we’ve down, bringing focus the where very, So very that’s

this see flexibility leverage can, create quarter, financial to agree that a value bring the the and something it on considers strength, We focus that and is we the for ensuring company financial you’ll very down. that ensure year, for We saw quarter It’s first that on want have for time next You we really that really more going throughout and our right repurchases next the shareholders. do under circumstances, our that basis. regular seriously, Board forward. and

make So, we’ll that continue the have that strong also at and balance we’ll right look the sheet to we continue assets. to sure and

Stuart Shikiar

you Okay. much. thank very Well,

Bill Flynn

Thank you.

Spencer Schwartz

Stuart. you, Thank

Operator

Stathoulopoulos next comes question from the Chris of Your Financial. Susquehanna line with

Chris Stathoulopoulos

Good my morning. regards for to question. the Thanks guidance. taking With

So the think I raise for this is the fourth, year.

hours X% adjusted-EBITDA well. around You block on X%, the as but up by by absolute about fall your took an basis

to to just I in fleet guide some due hour this there change you else? anything shift before, and in to mix or want is understand block So, alluded the slight

Bill Flynn

is Chris, Yes. Bill. this

you As X% change. a it’s said,

were about we guiding or [hours]. about to we’re XXX,XXX XXX,XXX saying now X,XXX So, about and

I the based hours the It’s fine-tuning go really to you through is marketplace. for We of a as hours based changes in typhoons, think react schedules, their year. on our on it’s is block process with lost some how customers example.

to seven So hours weeks. But, a maybe that’s that, within about and we come and going gain we as as the that’s we’re now end, to more getting as of a between around art few we are science or out eight year XXX,XXX next starting it if and XX% close be. and

on, course we for not we’ve that change, think go the really I process earnings you and view we’re and year. investors. the a focused provided just It there of a as the of other is what tuning material fine is hours my our framework So, through be

Chris Stathoulopoulos

to And I’m nitpick. trying not

that perhaps understand perhaps out I about for evidence when are they there’s they hours. saying planning know again is X% block what airfreight about and and seeing But there investors concern slowing. here you some slight, it’s see that the as demand optically, with think I you’re slowing

else is pointing Kuehne+Nagel, report you’re other the hand, On I a and thinks not peak UPS everyone and everyone any that that’s seeing to from good slowdown tariffs.

I and to sort be of fine-tuning just around in So that happening what’s this the that’s of want it’s forecasting. isn’t kind internal clear more anything marketplace

Bill Flynn

But point third in Chris taking right we to you of point, No, raised that shows that points, has have a views of in I are data call. where were I delivered and and data think quarter. viewed back-off different from be the is certain that X% kind the Investors what against agree.

that whether description in adjusted-EBITDA and adjusted you Our against, net strong contribution growing carrier earlier, up plus Asiana stepping now that’s Express, we’re income, into for seeing case and two know made and point the SF one Asian peak substantially very XXXX, a revenue record that’s of and capacity. I that’s

So, address point it. could your glad question I we the take you and I’m so raised

Chris Stathoulopoulos

concern that performance, along months about of And the the is kind perception, the with sort Okay. been a some out order guess of addressing from there there half, and that stock weak ago XXX the second lines the giveback few DHL’s news investor Farnborough. I in has of at

then a I those of think some And Thanks. aircraft? for as Air? be those of you Omni offer expected competitive such in market out put in to there potentially freighters potential Is sort I’m competitors how in XXXX. wondering Kalitta service are there the or view

Bill Flynn

the That’s business. Well, the always as just there offer only carriers, a nature is customers relationships of in other for with other I as well. They’ve not America got think and competitive North DHL well. for

I to guarantees There’s We’ve think growing there compete positioned DHL’s guarantees XXX is for no service. and a we’re offer long we relationship. But had aircraft. no us, a for for provide well anybody. high-quality

for incremental kind within to growth. of context guaranteed combined was have it it to XXX But a carriers for new growth see had service them nothing the provide as That’s compete as works our I will and considered. relationship. Again, always see assets other not opportunity for that We’ve a Will growth quality been assets? got them. the deliver compete companies. we’ve that the operate to nature and always I incremental growth. to will. they Yes, compete There that’s news. of for was We or

Chris Stathoulopoulos

finance the in So the I of they with you where sort the bid guess they’re typically purchasing behavior, and the their we Has their shouldn’t assets? change view, how changed structurally aircraft? anything or that’s process perhaps believe with view these I relationship

Bill Flynn

Right.

speak believe really change. them. it’s But can’t a I So, I for no, don’t structural

question. DHL I think, Deutsche really Post that’s

dry it make between they how component ACMI and it, combination the have to through a leasing they that in ACMI. in very their in services the go network operate. a implemented, have They’ll know that direct you substantial they’ll and their in invest has CMI future, invested They teed-up to might and aircraft IFRS balance balance of purchase the with in except the their believe and has affects opportunities aircraft investments, and go past. think global I for I them sheet,

Chris Stathoulopoulos

Okay, thank you

Operator

line Atkins from comes Jack question next of the Your with Stephens.

Jack Atkins

Great.

Just about, there we trying one And that make and at maintenance C-Check, as be year kind will reason it about slower maintenance than like think is going that faster quick or guys going you expense, to there to think hour overall or lighter a look just you But think I’m follow-up growing and know of at normal your I D-Check know guidance. you’re don’t than think want it’s specific anything heavier give you schedules any in Spencer, here, a was to back block the looking to to that as XXXX? from growth that, framework. you about things XXXX perspective? XXXX

Spencer Schwartz

Jack. Thanks,

is into and other lot said goes our what we’ll is we cycles when maintenance our based always We is and that forth. that we talk is so full you next engines is so based, Maintenance information based on are provide before, There some we have. during about conditions calendar update a best there’s next we that call. and many and so as forecast maintenance predictable. that maintenance our line it our will and so certainly and that there know, depends we seeing during course how performing have of more conditions that And, are talk call. You and the maintenance, comment every about is on quarter

Jack Atkins

had I to Okay. it. That’s Thanks, just figured. ask. Spencer, I what appreciate

Spencer Schwartz

you. Thanks

Operator

You Susquehanna. question Chris with have a follow-up from Stathoulopoulos

Chris Stathoulopoulos

follow-up. the talking for Thanks

going for Amazon be for two with think Thanksgiving. peak, last I to into fully deployed the service the going So,

say prepping the idea perspective they know good Thanks. a time, to something move how to would year’s have by of additional and I this so peak you planes to into And wanted you operating next they put if lead three don’t aircraft? If could financing sort season season, or four so going for their work. this November cut-off of put freighters, the together? service what’s from terms all assuming peak to and here, kind what’s spares to ACMI, you are in in next they of months acquiring, the time you these that Amazon, let’s they have planes and they have guess what’s on is an assuming Charter this, XX into all wanted do that service by October, the of need get of

Bill Flynn

generally Chris. any because or about get Thanks, question, about your don’t answer Amazon. including we speak I’ll into individual customer, detail

I and XXXs acquired out added the think XXX XX, it’s past worth of also go were to added the for noting the grown we’ve years, that in we have into market Amazon, we serving XXX and our XXX aircraft able that our couple approach addition over lease in Overall, two aircraft bring fleet. we customers to aircrafts. and

any are introduction, if an answer we time way type. a believe is time probably would best need any particularly several an There the or that any for that for introduction would ACMI CMI fleet type to our lead aircraft the either could fleet there the whosoever aircraft be net it’s new on So, given fleet able any given lead that to and and accessibility depending the the and our that. I for new on customer, of I months aircraft if for converted. grow the maybe of It’s request. be basis, and demand customers, or

Spencer Schwartz

I’ll added we’ve the said, XXX-XXXs have Chris, all and Eight Bill this for we that others, Amazon. so those as do by to year just though are add, of aircraft, are XX not would end year. throughout the able Hey been eight of

Chris Stathoulopoulos

additional next that so. reason the the think reason don’t hour that XXXX Okay. that Thank of assuming since block organic or been what’s to case incrementally grow about And you add last or But that question. in we I growth mid-single you. If the whatever realize year, can number? then low planes, hasn’t fleet for digit for have add type whatever airfreight don’t you and I’d we global a

Spencer Schwartz

of planes will a I full year flying that of of is year, and the added, to throughout What XX say as said have course next aircraft. we those I that Sure. so all we’ll just year this

In very, addition, be strong. a we’ve very customers. added to number Utilization of continues

As of we’ve talked our very about strong XXX-X, earlier, utilization. utilization XXX-XXX,

Our to Charter continues be strong. business

you go from So, an ahead. - know

Bill Flynn

Spencer said as military some is but I’ve just strength assuming Southern. ask, and six about growing question have that the year our in express, greater full had and to operating added I growth. The Yes, They consistently, at rate charter the added would XXX that that all that you market. add the though, X% of aircraft particularly of you introduced customers also Chris aircraft question. It’s year e-commerce, the growing full first XXX, fleet, It something the the strength To we’ve aircraft XX aren’t X%. introduced. the think over the we’ve the of we’ve is the we’ve XX at on XXX are other

higher perspective upcoming about having year the But a when back utilization, the year simply There we effect. growth, of run results we’re type. talk bit earlier. February rate full we’ll It will Spencer So here aircraft on in the or on more give depend there XXXX. fleets, for opportunities a that some as and in are, benefit full is that although answered question

Chris Stathoulopoulos

Okay. Thank you.

Operator

Instructions]. [Operator

questions. Air further audio I it remarks. closing no Atlas for back showing are We to hand

Bill Flynn

We Well, thank today. very had us you, us, thank operator. forward on of the thank with much. questions call for And for all to the be call, to Spencer taking And you again you, taking the soon. you your you to in appreciated everyone and we that again all look certainly and with speaking Atlas you Thank Nicole. for and time the interest I want on Air

Operator

and thank We disconnect conclude today’s your you that call. for does conference line. participation your ask you please This

Atlas Air Worldwide (AAWW) 3 Nov 182018 Q3 Earnings call transcript