AAWW - Earnings call transcript Q3 2020 | Atlas Air Worldwide Holdings Inc.

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Operator

Ladies and gentlemen, thank you for standing by, and welcome to the third Quarter 2020 Earnings Call for Atlas Air Worldwide. [Operator Instructions] I would now like to turn the call over to Atlas Air. Please go ahead.

Ed McGarvey

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

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

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

attention Any about risk are meant to provide with the in to information [Operator At amended in please this reconciled XX-K non-GAAP point, today’s Dietrich. meaningful turn our to business, to appendix John that your as Slide press are and like slides. insights refer reports. to today’s or supplemented For attached subsequently to references related the call XXXX our Instructions] Form to factors GAAP measures I’d our by over and to X and SEC release, is filed draw

John Dietrich

consumer and my want hello, call. for start friends during to reliability to express challenging globally. environment. chain and component the Atlas always On cargo very unwavering evolving is their stay Air us. to and provides I’m safe a proud supply important our been everyone. third pandemic. this hope Thanks behalf of a playing your and in manufacturing frontline by equipment, to in at it the global battle security pharmaceuticals, the complex, and role responding COVID-XX to everyone Atlas, modes continues to other our quarter by speed, including this remain vital is the COVID-XX I’d as I in earnings to be has needs what that the at continue that Atlas, like employees of families world e-commerce sincere you, equipment, personal all for world Welcome joining thanking and products. Ed, We of around goods protective Thanks, and committed transportation. other most, unmatched moving workers efforts during medical

to and a support as the size on needs. to and we’ve regionally business and serving This strengthened express, several turn focus positions years, online of fleet the customers internationally. fastest-growing markets. with both fleet, our e-commerce our diversified pandemic e-commerce shopping acceleration their our driving continue Over people The increasingly and serve to and diversity us well last global in everyday our to is

XXX and demand and flying, and markets. XXX freighters great actively are Our in for domestic serving are XXX freighters regional international and long-haul XXX our

We’re to expected well opportunities once role as also vaccines, the we’ve preparing those become as taken our steps maximize of the The today timely available. enable they in us the seeing we’re in for distribution ahead. years

year remain the goods ever-changing cases and capacity environment And come globally. further and border wide-ranging that hurdles at opportunities increased mindset, share operating our opportunities Spencer testing in additional our and with the evolving quarantine COVID-XX travel includes and our COVID-XX those surges you that will today, with employees Atlas, change safe regulatory I employees also meaningful this environment we’re its operations safe provide just costs. together to first doesn’t delivering we’re managing It’s an our and navigating well working while with world precautions mandates, restrictions, our needs this during time. restrictions, through Safety remote as made tirelessly presented as caused As by for in But by comes ensure on service continuing complex coming and have operational for has a to delivering significant company. high-quality been always take additional structural we’re airfreight and The difficult through for customers. performance own. possible to happen team

the momentum business quarter reflect, Now our as third quarter. results four. turning results our our slide continued of on in And positive to the third

provide We’re near our to model at long-term market seeing existing leveraging yields. and of and our logistics we’re agility further roster this to increased broaden agreements the revenue our for freight as these We And We’ve arm global Charter serve continued of several that we demand. of XXX business where began attractive September. with We’ve wide-body expanding and fleet streams. HP grow customer substantial to Charter freighter well increased also and global since long-term three the of of long-haul as attractive services, including opportunities. addition the recent additional highlight long-term for Alibaba large our maximize forwarders. the both operations to demand Amazon, customers, secure scale operations also China, base and with and important our customers flying It’s expanded

XXXs facilities. in serve businesses, enable to And today, deepen our important for eight, demand operating has dry-leasing between with step growing mentioned that $XXX release fast like America. our joint and excited Titan joint This the strong it position also about for press subsidiary the Amazon, we’re markets fleet arranged Bain as as South as and The These them. Capital venture expanded well market now e-commerce our strategic a significant We’re will our in development million in large freighters. global of have in we sector, China Credit. complementing important venture in the XXXs financing

These benefited fuel of partially yields, quarter reduction and the and third overhauls, engine and advantage of and to and expense in addition, performed higher benefits availability. lower offset significant slot our pricing maintenance related strong additional vendor attractive the In ongoing demand we were rent belly take higher capacity to market, aircraft by passenger lower from prices. results depreciation

provided pending related of pay, to we bargaining for increase, operating significantly joint As in agreement. completion well by well outside to impacted the as XX% COVID-XX, pilots that our U.S. collective pilot into our been May, have the as costs higher our providing pilots certain we’ve premium as and pay areas the been the

I’ve because taking we’re a in for This we’re remain begins we favorable And steps business but of returns. in sheet. will success uncertainty we our with on of opportunities today very our best ensuring that forward. that also operating allocated company stewards that, focused the airfreight market, that we of every continued recognize As aspect position our assets of resources balance being us. move as and our costs in to generate aggressively front mentioned, managing the are And prudent our and

moving Slide Now and outlook. our to X on

demand, subject ongoing X, in market. belly reduction XXX freighters volumes will back had been e-commerce we’re – freighter demand, continued capacity previously the and meet To the quarter. with customer reactivating of to XXX solid This to to fourth the Looking part. any add we placed into the yields fourth growth and coupled during driven the COVID-XX passenger and XXX service by the year-end our we freight airfreight that second anticipate quarter, developments, material and

compared a million net this the we of fourth As in quarter third adjusted $XX.X approximately quarter result, with anticipate grow of adjusted net to income XX% income year.

adjusted with to expense fourth We quarter expecting EBITDA exclude the also of and of mainly those and expect We’re and aircraft amortization for approximately capital expenditures, to total and approximately engine $XX $XXX $X.X ACMI revenue to hours core year is about revenue full in projected $XX fourth block $XXX expected approximately about adjusted remainder which XX,XXX the in in million. $XX On quarter parts about basis, million $XXX to Maintenance and billion fourth our for Charter. depreciation quarter anticipate with fly of totaling about be approximately $XXX we are million. components EBITDA of and fleet. million, XX% approximately for purchases, million. And million million, a now of the

his approximately rate This for income is to XXXX me to a we’ll providing questions. a good quarter adjusted I be remarks, forward few results. comments, look ask provide We And be our full to also XX%. and happy take Spencer? expect to our to Spencer additional year after then third Spencer your effective tax time makes

Spencer Schwartz

John, you, everyone. and Thank hello,

are $XX.X results a million. was net million on net quarter highlighted basis, On On $XXX.X adjusted basis, reported adjusted $XX.X Slide income third X. with of EBITDA Our totaled million. an income

effective adjusted Our tax income XX.X%. was rate

the hour disruption volume freighter global chains, aircraft by XXX utilization. quarter primarily of XXX-XXX capacity lower hour and Higher freighter leases Slide a to aircraft. Reflecting an revenue increased reflected disruption the by the available and our strong available disposition million from due lower the and strong block by grew rate certain increase Block for Dry reduction average That to to COVID-XX. by of during Dry of to Leasing increased per by revenue primarily fuel volume Block this year. reduction non-essential aircraft block Charter. driven increased X. was the revenue CMI hour aircraft period of cargo the demand and changes demand rate And in the primarily due from offset to related in Charter aircraft flying. capacity aircraft, during revenue ACMI partially hour primarily and the top of redeployment XXX-XXX per in offset the due the costs. Moving chains Operating ability the to to flying, of in reflected average driven global driven aircraft aircraft market, partially supply a which Leasing the the of cargo quarter. increase supply $XXX.X first redeployment for totaled of was growth was of utilization,

the in Dry and and offset during of including aircraft contribution maintenance offset XX% excluding additional utilization heavy $XXX.X during were primarily partially Looking certain of higher to interim increased were and lower to from to that now pay non-essential disposition also quarter. depreciation. segment operating Charter Leasing. the Segment depreciation from our ACMI resulting totaled third was Charter during in redeployment pilot by aircraft changes heavy rent expense agreement. including yields, contribution engine just the pilot the quarter higher partially and and Dry driven an reflected Higher premium and discounts the bottom leases availability noted. in by the of a utilization. increase of aircraft cargo of for quarter. reduction maintenance from certain million increase fuel, and to I lower rent first costs, period and advantage our Higher in pricing commercial In at take demand Leasing, areas These strong ACMI overhauls redeployment the for primarily aircraft aircraft contribution contribution the and was ability benefits costs. benefited increase due These the slide. recent higher earnings benefits XXX-XXX pay expense, by and freighters Charter the aircraft in

under vested that October On respect X, another morning. warrant release move Amazon in slide, to we approximately we this a X.X million shared to next in shares exercise recent development on like I’d elected to our with Before comment our press cashless issued XXXX. the

As outstanding exercise. million a result, approximately X.X which acquired of shares, represented approximately after the X.XX% Amazon stock our common

Now to Slide X. turning

As leverage the the during improve slide quarter. to net ratio shows, debt our net third continued and

the payments end million cash, at approximately and of cash compared decreased Our strong maintaining quarter another increased we $XX investments, and the net of with end X.X as totaling turn EBITDA cash expect the leverage including of XXXX to million quarter the from third improvement year-end equivalents, times $XXX.X from second and quarter, per $XXX.X ratio at X.X balance we short-term million times ended debt restricted cash further a the at benefit quarter. at XXXX. X.X third end of of levels, with the We

included provided cash the engines by our of also on spare Our Net Net related core issuances. received improved cash and cash aircraft activities non-essential revolving partially by for partially cash including activities operating September for offset to proceeds primarily capital and used debt activities balance engines. financing offset reflected the Act. facility, funds used disposition related through by debt expenditures, and primarily at upgrade payments investing from to kits, primarily obligations, Cares certain credit the XX, we

the of As vast have and a rate mitigate costs, in a to has reminder, enhancing committed debt. aircraft sheet, strategically are or X%, which debt weighted a our excess related by the majority to our of reducing allocating balance we liquidity and continuation average remain of pandemic taking value worsening any assets, coupon impact and of We our is the resources. the low strong a by secured actions

to I’d to it turn like Now back John.

John Dietrich

year, an Thank third and X. Spencer. XXXX moving has certainly Slide the been no was unprecedented And you, different. quarter to

up and to challenging complex a environment. operating continues step team and execute Our in

protect ensure driven capacity coupled be service to in We demand, in volumes fleet, We’ll beyond. our quarter agile talented e-commerce with and most. balance respond year-end sheet needs yields expect results our market. ongoing growth continue model, deliver high-quality and the to customers the to to customer to demand we’re fourth operations continue by and in of take reduction times precaution the goods employees strong the the uncertain ready world-class to to and solid these passenger business we’ll our airfreight and every continued world for investors deliver team and With our and belly for

with first So the take question, that, I’d please. operator, like to

Operator

[Operator Instructions] comes Labick question CJS from Our of first Bob Securities.

is now line Your open.

Bob Labick

morning. quarter. Good on strong Congratulations another

John Dietrich

Bob. you, Thank

Bob Labick

start you the term? term of bit Can a you locking new Are capacity a in little to more wanted terms I dig years are they’re long your Because on can your shifting we up total by little it longer – going about your kind blending? the future these we’ve power long-term a kind into of sense, position How to agreements. kind utilization, earnings around, under ability of it how impact talked long-term your past us planes move in further. Charter into Maybe in few for ACMI you give does simply agreements? maybe agreements, for capacity this Atlas Charter next the of does Charter?

John Dietrich

attractive is the also of enough us long to we I’ll ACMI capacity that What at that do The is strike we extraordinary right our core benefit, as agreements and want And seeing now. ensure at model. advantage provide we’re start, So, we’re of long-term to right term take preserve thank the Charter to the But and market we market Bob, do the business balance. you. trying said, rates.

balance as term, long-term and always customers, to the aircraft be blend, Charter we’ll pool now ACMI attractive in are exceptional ACMI part an with have of prior market being longer we’re delicate long-term also the right secure, the drawing from used and business, So, been attracted as well. Again, market Charter that it’s for looking a we’re it’s seeing at the striking and that while well. Charters, the

what that’s whom really So, time we’re we’re lock able we going and over to the period with of and to be what in strength very judicious be about rates enjoy with to both, where of at.

Spencer Schwartz

Bob, release, second these a There are that earlier, to three And through We in there long-term years the They’re agreements. go commercial Spencer. and of third them priced we of similarities we length, quarters. added several as add these the long-term ACMI up just that now they Charters it’s and about more I’ll Charter and it’s talked added throughout end in And lot the our in are – and of segment. between XXXX. differently. differences

a a So, on included basis hour then and Charter rather is fuel per it’s priced Charter the ACMI on than per would basis like Atlas fuel in monthly And price. be. for or pays

streams. fairly they’re said, are these John – the predictable, between provide differences But there revenue so, as So, and two. and earnings minor reliable similar

we’re So pleased them. really with

Bob Labick

the talk grow of hear of ask availability And ability Can great. Okay. CMI and three to growth. market there That sounds and just about wanted last dynamics? more question. pilots freighters about out contracts. now your forward with going for right the you given nice under Obviously, to CMI or Amazon then my to I planes CMI planes

John Dietrich

reductions position and Sure. have very the in regard available doors side With others, actually the seen, Unfortunately, of their The significant gone of furloughs. as availability we’re closed to strong. certain a through the have there. pilots business, you’ve pilots, carriers of and is on pool quite good passenger

to And planes, well the positioned bring With on we’ll so, monitor to market. pilots. we’re quite to regard continue

expect seen, extent, brought be. the which ourselves. are to elsewhere there there will capacity you’ve market, back for As we’ve And opportunities in in we the

again, a is airplane. airplane, great there, passenger the candidates XXX the aircraft some a conversion Are is the of their putting down. XXX-XXX have, out great You carriers there

and of forward. CMI customers, for our between be we to ourselves So, expect for opportunities as there we availability go aircraft

Spencer Schwartz

And Atlas Atlas has advantages. add has that. – I’ll just to briefly

We rights, rights, have traffic route parking. overfly, landing,

abilities that not. various carriers have We do other perhaps

don’t. those have have types operators and abilities We aircraft. perhaps advantage for of scale we other And that have all know-how, we

the of CMI are those that all offer. we so, And benefits service

Bob Labick

Thank you Great. much. very

Spencer Schwartz

Bob. Thanks,

Operator

next from Our Stifel. Ross comes David from question

is Your line open.

David Ross

morning, Good gentlemen. Yes.

Spencer Schwartz

Hi, David.

David Ross

best And coming talk your question, it the for that’s, what’s line. a you demand back? on to about the is XXXX? have the Charter, of I Typically, now? what guess wanted military XX% military telling say, What’s

John Dietrich

passenger side, than DoD Yes, COVID, lighter So, particularly – government considerably thanks, military certainly been into is passenger SOP the we frankly, the with That business. had flying, has put the XXXX to the passenger David. movement back. order, anticipated the deploy and the had And on take with coming in had call while seeing place the a impacted come was starting otherwise we for cargo business us that crews and prior in which significant recall, may military we you the had as our it a slowed, demand. them that operations, serve to would mentioned was in an those increase actually military to opportunity

So, we military in prepare hiring up we’re where it’s have return now a to next where take but expected on able we for to an were, get And business, but that levels It’s and starting gradually utilization year. the back we’re will while the by higher meantime impact of the not to expect see. vaccine certainly, back. to prior and advantage the coming of which that,

David Ross

So, Charter? the business from say of move down to would of you the business XX% in military X/X

John Dietrich

Roughly. That’s fair estimate. a

David Ross

earnings the is and Titan progressing than that And years. several how Or plane over you then does the owns model rather JV, it it at change JV quickly how all, that guess, do the maybe business next does – of does How it’s see the Atlas? I impact not how the whereby And Atlas? that on structured? the

John Dietrich

Yes.

– to I’m very is complementary it at it’s think looking way our business. I the

Leasing us allow leverage to that have could the of significant of an and JV. sure grow It will that’s And actually not in it opportunity model, customer a to terms Atlas grow. In to I’m the also operating continue business Dry be the we will change. space, changing the in result

So, Certainly, of the JV. freighter the for. to be market, and areas Dry and about expertise Bain revenue will also one good our go to the only of streams, that managing of we bring opportunities enjoy table. Leasing they but take the getting business, entering from the the feel the from the timing as Leasing, centric of the of of we’ll ability not benefits Titan advantage Dry That’s fleet and Atlas

to well on multiple leasing venture. there’s to the aircraft The think management the the fees, as participation leverage side So,I of as assets ownership certain equity benefits for the us. and the operate

So we’re excited it. about

David Ross

you. Thank

John Dietrich

Sure.

Operator

question Wolfe Scott Research. comes of next Group from Our

open. is line Your

Scott Group

Thanks. morning, Good guys.

John Dietrich

Scott. Hi,

Scott Group

So, on talk through like there. I raised up. lump at into it’s the smallest What assumptions some sorry, the if you guidance, that in look increase of sequential when in picking XX think And earnings that’s pricing I feels rates? When guidance how about don’t again, there’s we’ve I airfreight then maintenance it’s guidance, years. is think quarter expense really maintenance It I side, seen assuming year? just if know can And the fourth we at next maybe are I should fourth noise, the – on quarter the background the me. I maintenance look you just like think

Spencer Schwartz

is this Spencer. Scott, Sure,

let’s maintenance. at and look we’ll So, about the fourth talk quarter first, then

So, are for of higher, offset will Charter fourth they are be volumes and higher partially the we year, certainly, to – compared year the this fourth costs. but of Commercial last maintenance by quarter heavy yields quarter expect

fourth $XX.X was we then really be large last had year, higher. refund payments, expect the $XX million. it costs million in a We rent of quarter, And heavy about excess maintenance to

talked by into heavily pretty big certainly, for versus and crew COVID-XX, increase, year cargo year, just down there. flying in military items that And the pay passenger then this volumes increase have the that volumes. two this premiums provided. XX% pay addition our crew to there’s are year. impacted So, And John prior as paying about, we that, areas then certain lower the And we’re we

over So year, growth all are but that being said, the there some still big offsets. it’s prior clearly

yields, maintenance about talk I’ll I’ll answer Now, your question. and then

above quarter the reflecting quarter sort of expect historical normal We market. fourth level, to fourth yields remain strength the the of Charter

quarter. spot were, just about constraints levels rates in We But it’s of the and note those services. take in if been we aren’t has April as and contracts. advantage overall to saw where We we’ll to our yield they serve capacity long-term are next there as May. for Especially, hoc quarter. don’t reach As ad contemplated quarter have to Much committed continued demand long-term early of capacity Charter important available fourth could forecast, to talk charters. Atlas that well second the talked that and we so our market, the increases capacity yield we expect then the about still those increases,

maintenance also And some And not requirements. terms as we the the And we’ve think of, little be maintenance heavy year. forward, inductions point are talked maintenance vendors then we from discounts out year, far of And I going million year just that especially year. airframe a a a be pricing passenger heavy at we very cost XXXX engine engine goes, heavy was regard than but accelerate some As this into received heavy more maintenance, to availability with expect check this much. overhauls, than probably in our looking operating wanted carriers next as I to opportunity least to to Because the we previously result. of as got have expected the slots. XXXX about we to $XX lower – bit

XXXX be little still normal than higher rate, run bring XXXX XXXX maintenance may closer sort should So, average. heavy of although a or to a it

your So Scott. both hopefully, that answered questions,

Scott Group

thoughts Yes, headwinds was question. – That’s helpful. year ago fourth. third typically fourth for I understand Any all some more That the very more progression. my fourth. to was there? quarter I the up quarter about of third It’s asking to of

John Dietrich

third this And are we Thanks. third John. was let it’s where it’s and experiencing utilization Scott, think record, quarter to level, levels strong, a not if as to rates, Spencer I’ll I But which well contributed given note I’ll important in any peak what of extraordinary the quarter an have quarter. further provide we Yes. that pandemic, very as third as been color. describe

there throughout as sure. we’ve pretty great alone. because overall quarter, factor not typical operating rates the And a speaks levels for the into leap incremental third be upside to the Spencer pointed It makes bit high of that comparison fourth which been be a narrower. as quarter out, little that market. just some But will that may on So, at

Spencer Schwartz

quarter sequentially, versus so this Yes. talking – quarter year I’ll this third year. fourth

So, higher Charter earnings. we’ll have Commercial

offset Those We costs. maintenance. be non-heavy partially will will have lower by heavy maintenance

have more one we and event, events. gear unit landing auxiliary higher We some have power APUs, maintenance

a quarter, So, to military then cargo lower lower. next there. passenger should should as higher fourth Cargo better noted. But in bit little earnings, John the And impact both be be and then that be we year. expect

Scott Group

That’s the All right. starting Thank point. all you, guys. fair higher about

John Dietrich

All right. Thanks, Scott.

Operator

of from Our question comes next Chris Stathoulopoulos Susquehana.

open. Your line is

Chris Stathoulopoulos

Good for and thanks morning question. taking my

Spencer Schwartz

Christopher. Hi,

Chris Stathoulopoulos

percent John your spot or contract closer the duration is you the Spencer, it if to just, contract move of average And what market? what is on does your business? then now? Charter could, weighted of Or

Spencer Schwartz

ACMI five years. So, for have with Amazon, much is and then our DHL two obviously, contract But longer typical we between somewhere example. with and contracts duration

the to they up in years contracts, And Charter the go there, duration So mentioned I they three long-term length. vary.

and our lot they’re with great a And these longer-term nature our predictable, earnings from reliable contracts. so, use streams, we’re revenue to starting of is of good which and really a our capacity arrangements,

left. flight or not not always a it’s quite know that exact So, an be of there’s it’s because or week some a aircraft. simple the because one portion percentage It don’t thing. that aircraft kind can of an I

But market. portion currently available So, it’s that a Charter there’s ad some in available. spot still is of hoc smaller the sort

Chris Stathoulopoulos

single or low book smaller overall that that digits? is percent of your of business, as portion And Okay. a Charter

Spencer Schwartz

way. longer-term don’t to a it’s definitely have exact aircraft percentage, it have back think get total or we’ve this contracts Might it’s divided entered these aircraft, may you We’ll that. doesn’t number Yes. but to on Charter a a rotation be rotation. with really I work smaller maybe Again, portion portion that of just simple. of by into. but the it’s that not It

a So bit is more it’s complex. calculation

John Dietrich

if the is charters. Chris, a bit ACMI extent rolling we number But want time the some could, date it’s this there to long-term because agreements are we a so robust of off. Charter ACMI mentioned We well. fluid in so a now. And Yes. have market To of I the to current that opportunities that are may environment, later as right

comment balancing in doing. that my with so, on the that And ties act we’re

is focus we have term. the and on of front near in right us Our now, long opportunities

period market, and to a basis, forgo right a typically we’re to be closely may of we it’s but time dynamics both an near customer for situation but So, long-term we’ll all the would on – watching the and sign longer-term going for on there’s very Charter we’re where conditions ACMI favorable now, those business, maybe Charters. very robust due market that a these for

Spencer Schwartz

just of Atlas of And but John Chris, science, a just and exact to It’s sort provide ballpark. an a capacity. it’s not X% quite really, fluid as said, approximately total

Chris Stathoulopoulos

Okay.

unique opportunity with for probably talk So, is a want COVID, realize obviously here you wait January are second question, guidance. operators. freighter until very and to I we to about XXXX But this where given

half that effectively looks The feedstock been demand, the sideline. with e-commerce around a like a few typically multiyear looks of it’s you rollout the years. of and have You vaccine that compete event. on capacity like forward pulled Ample the

XQ guided at look growth you that EBITDA in next XXXX up an put digits. we to and double for implied the that your for realize Is you if year. reasonable would could So assume positive what EBITDA it

Assuming we restriction the have vaccine a half the its travel DoD in lifts and first orders?

Spencer Schwartz

Yes.

next that they early year right did We guidance, will I’ll well. question, be again Certainly, year. We’ll like year, a do not the as yields February. next see wouldn’t second in that and the expect you of out some in provide it’s were point this things good year. we quarter our next question. to But So, expect

we could but that change, like Of expect wouldn’t something course, that.

changing things constantly. with are course, Of COVID,

continued change. to I as to key expect things, in seems talked think, expense, all we mentioned, I $XX But going million and to about, of mind, it’s lower course, subject have I of vaccine like maintenance or you it’s key lower. the certainly some to So should some the over think, of them, The changing keep things, you impact distribution get quite capacity we constraints, case. really The going to and be There don’t And those time. as continue on, see on our to has said, are that to time. quite for increasing, aircraft have an quite some the in that some that’s utilization we for go we expect Chris, been and airfreight.

We needs, have the These things long-term with really that. like have attractive like fleet. We yields don’t contracts efficient a very Charter are terrific. modern, fleeting

All much major it’s especially just add vital to now. economy. again, global right there’s looking of manufacturers. really airfreight production capacity – our I And And not now. But the coming then that, customers has would the to from say are out always

supply our have business have developed the we expect is us things Those not stronger mean, imbalance to to e-commerce, demand The growth And soon. anytime will capabilities that talked John than fleet our we the that and and of diversity well and next the and continue going serve away beyond. of service. supply. demand and Express I and year And so, that relationships just about, still

Chris Stathoulopoulos

grow in. and respect I’m Okay. Good color. to PSP correct I the capital we expect throwing LP one or think under if With Cares, off continue Should to should you of a the think lot to took more believe I of could me don’t that I If anything can’t we get but you’re under deliver? going here buybacks under start terms cash wrong, to allocation, do the here. that you fleet the you’re

John Dietrich

of Thanks, all the it’s Chris. Yes, above.

looking everything. We’re at

look our a where needs We’re position at We’ll that and to growth if there’s be position in our that. available aircraft fit needs. a in with

all confident that based of what to are for effort lies anything to cautious that good about, balance what’s we assured hugely mentioned in going our we’re changes what the we with terms as sheet. border with I the example, course, overall to also the Europe, we’re this ensuring And Of can forward very we to Spencer our ability managing be we the talked come for we really to degree. I mean, almost our adapt seeing debt, going and beyond – can’t I employees we in important, stress environment. I and maintain feel it to be going be be We We need overnight, may of down forward enough But happen look economy. – a restrictions. all comments weather that’s pay of as mean on that to optimistic about and XXXX. look putting to COVID we’re way. and lies mindful beyond, talked tremendous through XXXX. and on while continuing

Chris Stathoulopoulos

Okay. Thanks for time. the

John Dietrich

you. Thank

Operator

Our Helane of from next question Becker Cowen. comes

line now is open. Your

Helane Becker

Thanks Sorry, have I I just for Hi, mute. everybody. couple of your questions. time. a

to Act take? So Clyburn’s see of the did think Monday. respond question letter by you the to I did you you representative funds response the to first return CARES that was asking was,

John Dietrich

Yes. Yes, Helane. we did,

Helane Becker

you And thinking how that? are about

John Dietrich

was There with when what then thought for of that shut of CARES for Lunar And we the funds. applying talked are with for different presented lot into which So, in China we qualified using experienced side, I not response But lies during funds the the so for CARES we impact thereafter, the are Year, our with the on factors but intended, look, passenger they’re now put we what apply just which compliance. purposes – all was our including ensure that effectively some in itself hit. with contemplation fully about in and totality only the we business. our circumstances circumstances, also New It that we’re the for start for COVID by what kind to in a uncertainty. we’re question I’m Act funds. no talking evaluated than of deliberation was challenges Act and tremendous payroll we’re obviously, there’s those into full support. even somewhat that and our lot receiving letters. about. Chris saying down with a talking the full immediately of I’ll were a of the significant a compliance Chairman because shared in beyond, went weeks amount of to our was And

something when received, documents full only committee’s we’ll for and but are So, based those to the payroll. do continue only for the eligible reasons, was for and not asked and accordingly should that they’ve the sharing had to apply this forth request, demonstrate compliance, for, not been we’re I in we only totality, we have the not intending all we But not be responded needs-based and – on funds, pay we a is which not fully with to program. applied not to return able so program, on for It need but we that our add to in cooperate.

Helane Becker

in That’s very helpful. then appreciate And answer. the aside it. fact I question Thank really I had is, you for Amazon that the money. exercised detailed that the from the you they other why do were think warrants,

that. you position their increasing do don’t what talked seat talked for is about, you an not more it know, sense seat. I in think do official is an Have guess, active to I company. have I I getting them – they mean that? behind about board made I about board the But to mean, you observer, to their So think they

John Dietrich

So, reasons, them. think about going I I don’t just They – to it’s to and because speak a But great for talked to investment and Amazon. not have them speculate speak that. bias we great I I have can’t a not for the company. a as I’m

a think it’s just So investment. – great great we it’s I just think a

Helane Becker

very very That’s much. Thank helpful. Okay. you

John Dietrich

you, Helane. Thank

Helane Becker

course. Of

Operator

question Our Asset Sage Haimes Management. next from of comes Barry

Your line open. is

Barry Haimes

you for much question. Thank so my taking

situations mentioned You a look of make however for possibly Could at you give forward the go opportunities. could ROIC, to it, minimum would adding feel there us you and you Thanks. be to that? at sort choose were to you conversion that hurdle fleet like looking that for with that sense rates,

Spencer Schwartz

really aggressive take we deploying We really a targets. And disciplined Spencer. It’s Barry. approach return our to capital. set Sure,

number strength and balance as top reduction remain and priority. we expected returns. the So, John are investments of potential at sheet looking leverage about, But a talked our

IRRs after target Leasing low our for tax mid-teens portfolio. we to So, Dry

upon you’re think operating set targets depending on returns. projects, other is double-digit percentage For profile what all risk in including But are I the cases, sort the asking which really of return about, based individual we target situation. aircraft, particular

north those we to brought They Our of an remember starting generated When in. into passengers. who XXX-X, those fly XX%. when we got IRR for

those. of make investment fleet we but north achieve And similar passenger our of Those types sure returns XX%. pretty generated remain Our we returns achievable, really are aggressive. targets always not

Barry Haimes

Great. colors. I you. appreciate Thank your

Spencer Schwartz

Thank you.

Operator

comes Davison David next of Company. question Campbell Our Thompson from

Your line open. is

David Campbell

question. Hello, my thanks taking for

lot flat about quarter, than like cargo effect. even increase quarter Charter yields agreements, fourth contract bit. based in hour, There’s in third were your it you these wanted block the in this, Charter more lower a results, as have guess, in agreements agreements. I it will no have of that per which quarter, third to in be and long-term I but the little new clarify on looks talked And just the resulted a You’ve apparently,

see earnings? – revenue I you guys you flat in the of yield don’t how stable get source it realize down I to you a picture how the hour, or So terms increase how per block helpful? of revenue. But does in that’s long term, got

Spencer Schwartz

Sure, spencer. David, it’s

the is just third included revenue Fuel block This issue, me per dropped on year fuel is $X.XX. – year-over-year a hour. on in at $X.XX you’re Let a the a looking think last of the quarter XX% that and I in And basis. issue year, fuel gallon. was

I that’s picture that the at. clouding really, So think, you’re looking

take would segment you X,XXX% what profitability to revenue on long-term is the contribution, fuel, our $X,XXX to over look a at per these block a hour see have And new you block basis. if up to If our segment of agreements, $X,XXX exclude Charter the improved Charter you’d hour. were a been year-over-year

in So, at. quietly I is think, decrease fuel, you’re fuel, I looking what think

David Campbell

sure Yes. do obviously you I so, something clarified fuel that. much how with has see to that. I wasn’t

your you I’ve third like slowdown any do see And demand just for demand in cargo picture obviously, in any you’ve relative demand. that question quarter, wondered second doesn’t but whether some was for The there’s the been I in heard – slowdown seen you space? change I sound overall had to it

John Dietrich

we we favorable particularly looking on for not we into talked in to what conditions of continue and to and demand see expect an these in some slowdown about for for we’re the which dynamics change the at increase David, Yes, what see play, in based time. are thanks. expect and We that XXXX, market demand – don’t do any the future quarter, we some fourth

David Campbell

Thank I you very it. appreciate much.

John Dietrich

you. Thank

Operator

Group Our comes next Research. from Scott Wolfe with question

line Your open. is

Scott Group

long-term to should long-term that CapEx How think the should guys the CapEx? about Atlas spend? Does follow we Hey, impact we the Thanks expect this lower for ups. and on tightening

Spencer Schwartz

Scott, we’ll sharing Well, in be that.

So, and portion, XX%, that’s to debt. equity is Atlas’ XX%. covered be part that responsibility not is by going Bain’s the is responsibility of that

very to I the very it guess, Bain of you Dry way, joint important, partner that freighter grow if Atlas large at venture yes, is Lease So, now look business. with part our leasing

John Dietrich

profile if this venture spencer may joint invest. entity is of may which be the think, that, we purpose we in that that of may the don’t through the I the in. I could, venture fit assets not be only Yes. There And interested

we’ll think is see. answer of So, part I the

We’re going spend where to we but vehicle. it’s be only on our the capital, very judicious not

Scott Group

I But years. in looking Right. You’ve gone planes than don’t five planes the in I’m this at XX less to right, last know, from, right? Charter XX

that’s CapEx. So of been a your big part

Spencer Schwartz

have to very differences, which into similar. of Charter moved them ACMI, moved slight again, Some segment. those the and very they’re, they’re planes ACMI. similar But from They

one who from to fuel segment those pays moved other things how and that. of some the like and is customer over So just of charged the for the based on nature

Scott Group

vaccine the the directly fourth think in us you’ll give then the you that just reset on you military business And Okay. that distribution? lastly, new participate share just in do quarter? can And

John Dietrich

bit the broke I’m question. a part little sorry, first you that of on up

Spencer Schwartz

first Second part was that. entitlement. part... I’ll And take the I think

Scott Group

directly vaccine? think you you’ll participate the in Do

John Dietrich

Yes, as Yes, of I’ll do. that government. answer one another. we there’s been or be mean, that. lot form or done In will of a I not by whether some to the discussion

will Some of manufacturers. done the it be by

a work of in is we’ll as soon whatever both the government have believe as we the But takes, be capacity to that, we help that customers, to and it and our continue form You with being be prioritizing available to our to responsible. assets going part administration saying going commercial, our is military can. and

Spencer Schwartz

I your or share the And question, think, then, part second was military entitlement. of Scott, the what calls

large the outsourced We with continue regard largest provider U.S. to the to be wide-body to aircraft. military

between Our on as cargo well both is the XX%. entitlement and XX% as passenger side

Scott Group

Thank you.

Spencer Schwartz

Thank you.

Operator

Our of next question from comes Susquehanna. Stathoulopoulos Chris

Your open. line is

Chris Stathoulopoulos

prices passenger the to willing Boeing you asset the seeing So, Could outside the you’re XXXs. on the XXX, if a chain what the at we’re on look of what then from simplification. just medium CapEx and the on angle. would But on XXXs you could, and dislocation, or with Thanks. given you asset comment Airbus? it the of side continuing toward question things, Scott’s retirements, to here, different all some looking move be Bain on fleet of wide-body And on into seeing perhaps maybe maybe

John Dietrich

flight demand If our So, the capabilities start that, most for part, on the Generally of to got flown last and the product, operate we’re of who think depth change. and experience maintained company, Airbus seeing the airplanes. a of had there, great I though, position the have I’ll fleet that maintenance them. It’s speaking, has and sure, who say product. agnostic. great Airbus what on We’ve has some side op the is you’re both been have have question is, operating with market on freighters. a we But the that people Boeing

flying may on the AXXX, converted into a basis, the that’s market. in those that carriers be AXXXs are now market With coming some the for and express example, the

So, sure. that. there, If entertain certainly is demand we the would

Chris Stathoulopoulos

needs vintage come is fleet a have retiring where know sheet for on the XXX, to rates are I delta balance seems is. their on of passenger then down or There a fleet. depending prices, XXX just opportunity XX be XXX asset lot I their seen side, and the XX-year-old you certainly And on where guess,

Spencer Schwartz

attached be that’s converted, it’s to often course, being basis. an left particular depends of good so overhaul. that’s forth. It really of if it Chris, and the lease, engines really an are really The terms well the depends are, – the it how much before is of its how the and sought on after, It the that forth. in Really what on airframe. as aircraft, depends Yes. vintage If lease the it’s engines so really aircraft passenger are it’s life a to as the aircraft asset-by-asset engines the next then

just really it We’ve of on So, a basis. inconsistencies, let’s a that. lot is case-by-case say seen

John Dietrich

if And to be going there’s I will also market I could what the factor forward. of that, the think add

some provided has cushion the financings that of for to some Act has provided them have cushion carriers of take passenger CARES other drastic done the the some on fleet. think the too and I have measures before they

bring looking may the this they And more quickly to on some back future. is pricing lasts given pressure the be the that, carriers, to all how if I I There lasts. how further long think think much can there’s more come assets. pandemic industry into

Chris Stathoulopoulos

for you Okay. and cash customers? sheet customers, what color of have asking is questions deferrals? XXXX? spectrum revolver Or And on credit maturities spencer balance And DHL. anyone flow, move quality high here. on and then of left Working two Amazon credit capital the then Any we do outside down due also, and in your as what’s XXXX

Spencer Schwartz

Okay. Thank you.

see, questions there. three Let’s

our regard with first, have customers. outstanding, receivables, to the So, we outstanding

Very, space, On all we they household spot front, pretty obviously, all charters, the long-term Charters they’re very spot In the the some much names. generally hoc – ACMI these but are names, strong no there. Charter in ad household pay credits, and have advance. of issues

So, haven’t we had issues. really collectibility

fortunate So, great way, a that we’re very job. we do very,

managing does job great risks. a those team Our

Your second question...

Chris Stathoulopoulos

Revolver.

Spencer Schwartz

That’s Revolver. right.

Sorry.

have then with our to maturities million maturities, available $XXX We of And revolver. contracts. regard ACMI under

being are our higher rates typically We renewed maturities year have ACMI renewed generally, that we handful at of So, environment. with had those some a in contracts. are this being have typically

Chris Stathoulopoulos

maturities on that debt asking side. was due? coming is anything the I on the If there’s

Spencer Schwartz

Yes.

you. Thank Okay.

Sorry.

between payments XXXX, normal Nothing due now ordinary a just of interest We have comes then. million. June a convertible in note $XXX.X that of the out principal and

Chris Stathoulopoulos

you. thank Okay,

Spencer Schwartz

you. Thank

Operator

to questions. at There are closing over to turn no Air the I’d back remarks. call further for Atlas like

John Dietrich

all And your thanks everyone. stay I safe, much. we and operator. of today. Thanks so for Air thank we would Again, us like speaking you forward with with you to all employees, you, Atlas Worldwide. again appreciate hope interest your On look in sharing our to time We Spencer soon. Thank behalf you to your families and Okay.

Operator

conference. gentlemen, this Ladies and does conclude the

disconnect. now may You

Atlas Air Worldwide (AAWW) 7 Nov 202020 Q3 Earnings call transcript