ATSG - Earnings call transcript Q1 2020 | Air Transport Services Group, Inc.

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Operator

Welcome to the Q1 2020 Air Transport Services Group, Inc. Earnings Conference Call. My name is John, and I'll be your operator for today's call. [Operator Instructions].

And I will now turn the call over to Joe Hete, CEO of ATSG. begin. may you Sir,

Joe Hete

President Good the conference welcome are call. Financial website, earnings Corrado, our John. CEO. replacement quarter issued atsginc.com. closed. We Quint our It's XXXX Chief our our Rich and earnings With yesterday Officer; my morning, you, incoming to as after and release first Turner, and market Thank me our today on

file Form XX-Q our week. will We this later

different of XXXX March. it was a than for talked one last but a early quarter good also us, to reflects first world in we when The you

are where core are We investments adapting us we but to have and that customer pandemic the successful: the your necessary, solid compromising superior us. in on everything coronavirus do, in not made safety we principles service returns

was increased other strong to from our $XXX and effects, XX% with similar of adjusted Throughout pace million increases first Revenues quarter, warrant results to XX%, EBITDA XXXX, On over including increased per $XXX the basis, up period. by first $X.XX which on a our each a X% adjusted the $X.XX. up quarter to were share, million. earnings, minus for business Omni and solid translated

to lease at XX Amazon CAM our including Meanwhile, first UPS. X for operations to leasing business in on remains their X the quarter. Our in benefiting today surge activity. and a Amazon are from track principally that is converted e-commerce this strong were and through airline for cargo pace continues X and particularly work, And XXX of solid newly least year, the for portion freighters DHL, for who still

results. operating new, And Quint? to with comments I'll highlights. segments cover our for ready our will flesh quarter. Rich Quint on second out outlook close more those focused the more consolidated is and

Quint Turner

thanks this and call to joining on the you all morning. for Joe, of Thanks, us

risks and that or by forward-looking uncertainties. start involve I'll saying make projections of during other we statements call, course will that always, the As this

actual those on events These may differ assumptions, new Air this of Our from to are any future based plans information And results to changes. in information, estimates of materially Group obligation here. as describe underlying changes call. statements statements reflect factors, forward-looking Services date Transport we and other undertakes or no other and update forward-looking the

for compliance filings factors in and the the deployments which the this will the reduced time factors to on-time certain airlines in and downturn; to conditions; providers industry-specific aircraft -- the our to our general economic Program lenders; number, routes and with file to rates, ability ability through program; to, These customers our not COVID-XX include, the cargo are respect key that limited in services, agreements customers; XX-Q factors our as and interest instruments; which aircraft for result a under X changes grants impact our to in the of and including following, scheduled receipt such customers' and capability; issued the Form the and final with workforce our SEC, by pursuant time maintain Act with relate to potential but the levels; contained Payroll we including the modify service our operating the flight in to our continuing to the other creditworthiness remain and our of week. on from regarding and/or related fluctuations to and costs; timing are and may traded and we ability of mark-to-market Support cost timing maintain and the control with charges vendors and our and price ATSG's able on which third-party in to the terms share airlines' our purchase configuration; financial demand funds could subsidiary economic our operations, market service of expectations of to assets disruptions pandemic current other service customary impact staffing airlines CARES

measures, We results. per Management non-GAAP assessing to these our measures to will continuing and adjusted included also website. refer reconciliations and financial to earnings share, be are These to advise GAAP we a ATSG's earnings, our financial useful EBITDA. believes and to in adjusted not you on substitute earnings non-GAAP metrics our and pretax release earnings are meant adjusted for measures financials, the investors refer operations, from to including in position are GAAP which adjusted

our curtailment coronavirus very Both the before As first economic of on lines. business our imperative rapidly caused customers' top bottom in abate stay-at-home quarter our infection to results air move were Joe support reflecting activity to has essential said, spread cargo widespread and the of pandemic and since been and supplies good help both March, the guidelines. solid,

XX% in first were XX% from On Department XX% the or rose service versus of airline DHL. representing came hours Block the gain quarter. expanded of $XX remained our for ATSG's XX% prior customer, last largest million from quarter from That The a Defense million, consolidated first up revenues basis, aircraft and stems Amazon primarily quarter first revenues and $XXX revenues operations. year. from year. of more the XX%

warrants per of Amazon an on $XXX shares million common $X.XX reduction largest earnings exercised. issued earnings. basic impact GAAP income. the $X.XX were the with ago. triggered million in $XX GAAP been the value has for first a unrealized in year of from The corresponding That gain a first warrant have in versus price during liabilities XX% quarter operations our to had our quarter basis, the ATSG None ago. quarter versus On continuing year earnings share of ATSG's the decline share the a a per GAAP were

Air decreased increased expense last primarily Maintenance reduced scheduled Amazon. XX%. ATSG's along XX% the airlines. our as for year. additional fleet amortization took increased some as Park pilots XXX months in operating costs XX% freighters XX regional $XX at at Salaries, to or logistics services over repairs airlines due Wilmington fueling last reducing unscheduled a external and their by MRO and started for Amazon XX% that and increased year, customers CAM-owned midyear the over maintenance aircraft million benefits last wages expense engine expenses operations Depreciation added to hub with our the In location. Fuel March, crew commitments over in increased. increased up

expense earnings, market and from our noncash decreased variable warrant reductions January Interest in pricing to from interest offering liabilities reflects more rate than in stemming basis The unsecured This quarter. million debt. in for quarter to and change million the quarter. lower performance with after operating rates first Several, unrealized rate debt lender net and continued on million derivative time, our same in GAAP items compared our interest XXXX. for our of in obscure and $X to the net gains rates the in the $X million mostly $XX effective amounting gain a first gain we $XXX recorded losses ATSG's tax

items versus On GAAP a last increase basis, and this diluted $X.XX year. reported a first net $X.XX in reduced quarter per other our the share EPS by

Our EPS and adjusted EBITDA those earnings, adjusted exclude items. mostly noncash

first up result, a As a the adjusted our year quarter $X.XX ago, versus was XX%. $X.XX EPS for

basis, or X% from our On million $XXX the to $XXX the for quarter. increased adjusted million EBITDA same

about still XXX-XXX and spend through more to during CapEx progress X on ready Joe year. about the $XXX a We million being of development freighter million, modification modify purchase acquire continue $XXX deliveries. expect will to million on first XXXX next share fleet for those and including aircraft for XXXs CapEx spent mostly We to $XXX quarter, customer more deployment our shortly.

to unsecured have facility, of with used secured under We additional revolver to approximately our capacity, to that timing credit access the us liquidity. end we thanks borrowings, at of the At We fortuitous present, senior quarter under ended our terms our outstanding borrowing $XXX of our the reduce significant bond revolver offering of giving $XXX first million million. secured significant January. borrowings

total approximately quarter debt EBITDA was to at end Our adjusted X.Xx.

from continue tied to benefit interest costs the remainder rate variable of to We the year our on LIBOR debt. to expect lower

funds ATSG's the is Air carry air participate not As ABX carriers, under each we program. impacted release, all-cargo the ATI, an by and significantly in Act. told worker expected been earnings grant to protection in the application and available has night last of subsidiary an not the X CARES Omni submitted airline, which for passengers, market coronavirus Air, our

is In expect grant through to can pending. Department the application Program its that grant $XX Support funds notification that for Payroll approximately and September. received Omni a Payroll under Support to Treasury it April, monthly approval receive application from be installments the under the Program for has late in million received preliminary paid ATI's

economic funds pandemic. Our consolidated Defense of Department commercial necessary period air That these for respective customers an extended financial to to our serve intend uncertainty staffing results during airline to quarter. the due to maintain use carriers the and the summarizes of their

highlights. Rich? segment some ready is to Rich share

Rich Corrado

Thanks, Quint.

freighters ago. operate than Over airline. growth years, basis. basis year ago. in more the improvement the a quarter, includes earned year been of up at million from The to airlines our a That lease $X progress earned principal first the of XX pretax in and has past the a the six in two CMI operation factor revenue from ACMI quarter, XXXX. earnings the $XX customers we three continues at the million Services on end our That on aircraft XX a

engine fund loans Omni allocated repricing in Interest expense was year. repairs for thanks year's debt lower acquisition, X for our Increased Also, of lower to included which rate expense Amazon than operate with mainly gain, XXXs that and rates the our drove ago unsecured X airline them, and crew support to costs a prior associated mostly from our last training for Amazon notes bulk CAM-leased used higher more variable we the offering maintenance the unscheduled assignment. of to were of for January. due segment, the to year

have on of effect commercial with flying ad Omni government for in The reduced flying contracted installations assignments Those offset during our federal are a April but combi the mid-March. part anticipated reduced began hoc to pandemic and in to ATI for military decline the in extended assignments operations had ad Several in the remote to cuts It passenger hoc contracted first to flying. in quarter. late ACMI February continued second quarter. by military limited March and the

Earnings CAM, $XXX,XXX fleet below a fleet expanded year were by and business, both of with leased earnings $X requirement. $XX increase and larger as performed in a amortization a expected, expense, interest pretax slightly and capital the its increase tied to offset our from it what million in leasing ago. depreciation million, earned

to accepted converted XXX-XXX; lease freighter returns X CAM also UPS deployed quarter. during a X XXX-XXX. XXX-XXX; of aircraft: X the It third XX freighter X

of We the quarter. or the which of we end the XXX quarter, complete CAM all feedstock for the year XXXX. has second freighter or in XXXs X expect deploy conversion At had and XXX-XXX to CAM to in purchased the conversion in XXXs expect this freighter existing freighters X sale year. to of to this awaiting freighters, XX

of margins in as earnings. Results year. for businesses, some minimal included first activities, services of quarter the The to growth our had logistics them unit grouped Amazon's reflect gateway other pretax that lower the services million in-source customer revenue our prior decisions but performed in $XX

different had heavy a low-margin and jet at We network. scheduled and Amazon mix Wilmington sales aircraft also of work fuel the maintenance higher

the start its During services to and up TriFactor, a is quarter. with third USPS and the center Service U.S. Postal develop the new Illinois. design, scheduled logistics announced The center to in subsidiary, a new regional sorting Aurora, quarter, in new manage agreement

cover. during the over minimal with and Overall, performed performance ATSG good winter the we on-time well aircraft season downtimes network express the routes businesses

business continuous also off. to operating to improvement our dedication programs Our continues across pay

procedures the also protect created goods solution, opportunities health destinations that As the businesses, with and our on missions. of of But our employees led essential for carrying part customers. operating medical others other to to all to us U.S. has it changes in similar supplies our and the pandemic and be supporting has rapidly to of

that and know episodes the will rest in recovery and continue many vital that adjusting creative safety a service play speed our challenges in ATSG, scope months. role the our up to we its industry, one have with the focused solutions our At the customers. nation's we on of of Like are logistics from our worst recovery employees But present history. and for for to employees of stepped

going continuously forward. have well our us in the demonstrated agility past. this We And will serve

military I'm ever. transport and air that vulnerabilities pandemic confident, than exposed greater commercial outsourced demonstrate become that the strategic of the has however, importance cargo the air will that

on awareness international new onshore the vital bodes serve. to seeing well air the networks relying commodities of are need that storage and which we We regional the versus production of suppliers, for

be will habits. the airlines that that in networks. This buying major restore e-commerce to increase shopping And adds months, lead it lasting changes fulfillment to expectation the years, and the before many in their expect fully we passenger not air will if

jets to space receive time carriers with can had belly to traveled in some cargo passenger come. volume that expect So for

evolves out. you to on grows will We and these up keep our business as date how trends play

that, over With back it I'll Joe. to turn

Joe Hete

wish circumstances. will But CEO lead I to includes and role leaders more the hand each they begin team business the shown favorable under you battle-tested Rich. and to talented more able challenges team my in Thanks, we're already you has the retirement That up units. that than of our ahead. management are

our than Our industry. ATSG's The responded the close innovative ATSG as down need more record that people ever unsettles operating fresh coronavirus cooperation are businesses of with the who with customers line extend the teams have of their performance. full solutions exceptional and now thinking, can support economy and

England Patriots. workers deadline special plane responded were on notice back to to we the called the are XXX to that Boston and tight million the heard more to in Wilmington X China, first sending modify mission New have very maintenance area. that They carries short You a our may under health avionics techs normally on here trip care for when bring in that on masks Asia, than its

closely the in shielding new also practices. and protect DHL adopting worked and measures remain to place Amazon we by stronger unfolds. will the handle who carry We and with as have Those become crisis this people sanitizing cargoes

transport forces. coronavirus curtailment stranded business troop stands noted, among in the limit ready That U.S. pandemic more quarter nonessential the when were as Rich those up affected a the is to well. due resume the to significantly likely passenger As second Omni pick that to abroad military spread movements to Omni's providing unfolded. and hoc pace capacity been to ad included has movements continue Americans global for service when who of repatriate

through very in hours, As busy evidenced by block ATSG Amazon's XX% in winter, the remain the of growth our mainly network. support airlines air

continue for a newly them already training year, expect we at this operations this orders fill fly to XXXs We XXXs grow, that that for to freighters to the We few own as are plus the and next delivery we converted Amazon deploy year. expect now all deploy additional will X those pilots will recruiting and least later we year. will

the decade will This will to The X operate end convert the complete XX to component end rapid freighters growth freighters medium our to expect wide-body XXX-XXX deploy compared XXX-XXX will of and by of us XXXX. a XX we this airlines of the fleet. with in year at our bring XXXX just one of

to cargo remain a We primary them component deploy type in XXXX. come, regional similar many rate expected of and we to will continue aircraft for the networks air to at years

major time, aircraft same with customers' coping returns as becoming the change. a At lessor aircraft needs means

deployments revenue offset of from costs We from will converted external ACMI this will and leases of receive some back lease the of lease year. newly loss aircraft and those aircraft gains some XXXs. Transitioning from

pursue passenger-to-freighter we evidenced of our investment in by conversion with the the joint venture AXXXs. even STC will other continue, investments as for XXX-XXX opportunities as Airbus Our types,

We expect narrow-body regional more a for operations the than air replace, years XXX freighters in the and to minimum, for also now come. customers our them to many XXX preferred choice operate who be networks at

Quint down $XXX million million, mentioned remains be our that $XX from at guidance CapEx which for our XXXX spend. XXXX will

and and made Jetran if boosting available Omni Omni are At quarter in at third. a third-party to passenger fulfill one additional the aircraft before arrangement same acquired XXX the with needed. we commitments one time, in the we this in XXX These conversion access XXXX. lessor feedstock our another year leased-in with have to capacity under We slots, Omni's first our

beyond them the anticipated options time. When you was of commercial early that arrive. spoke flying last what passenger with military. for and the they as was soon cargo military both followed March, both already pursuing sweeping the for affect broad-scale contraction after the our coronavirus anyone But to we economic are the at globe in beginning and We and activity

I our for that we the growth choose will year progress. measure a want adjusted yardstick EBITDA, be to affirm to XXXX

the million will revisit to year. be in are able last We $XXX report for adjusted when recovery EBITDA they million I'm for economic military to forecast to guidance that second we more generated the Quint not quarter transport million next growth exceed the million providing confident $XXX million Instead, $XXX guidance how second we XXXX continues August. million but of in and and to its if expect network, that the be. delivered will the XXXX, alone. That's $XX Rich quarter once the are pandemic quarter results currently we to $X the than third strong able from reopens $XXX

fortunate leasing aircraft disruption not freighter on centered are have customers is who operations of seen ATSG for passenger operators. that in its demand the

In with the fact, utilized aircraft. see Once levels only return governmental are The limited other we concludes commercial to to primarily expect own our customer U.S. are customers long-term That from virus governmental John. interest and operations. passenger leases relaxed, freighter aircraft demand we historic for remarks, exposure the in quickly. we service agencies prepared continue significant our to to suppression military to passenger efforts

We're the ready for first question.

Operator

Instructions]. [Operator

first Atkins Our Stephens. is from question from Jack

Jack Atkins

great Congratulations quarter. on a

play like the going and could just lot here. we sort ask just Act the maybe impacting how you're want this and I a just places of that sounds all saw could Quint, does impacting Omni. receiving? the in So operations start It it's guess, containment handful then how it flowing efforts of together. it And I'm together a understand CARES I with MRO COVID-XX to as quarter. in to the principally jump well? related queue. it's doesn't military if of flying then business we to sure funding, I'm where first make your places well, -- is you at And But all we go back that are the like in pandemic related things. sound off to your with much

Quint Turner

The course, carrier. Jack. And questions, combi. ATI the we the have, passenger mentioned we -- have with little a release, of in we as the at Good a Yes. is bit that Omni business passenger

of and those to the the to down. were impacted flights the through for Actually, So impacted quarter, May we're the The combi, continue as be have expect to April the the June, even for particularly reduction most forward. though to Department as for expecting much were into and do was -- Defense. Department to February into pretty able, moves perhaps some most April military, through going ad areas March there late the be early ones chances and we for really first the Defense, hoc we of

have citizens restrictions There were American And But going be in how will some some that DOD in troop that to it see for movements the and was that so forth has how we'll repatriations of of offset just put and persists that plays abroad that. May more out. some helped long the forward, and evident place.

as owned our the of You to and do passenger And do mentioned know, -- probably, aircraft American... of you then also that the a XX% half we and lessees carriers, about business, aircraft XX% our MROs. customers, And is Frontier we it of what, that's use. external mix about

Rich Corrado

United and Delta.

Quint Turner

checks be were we of business on our forward. more of in-house we planning on likely we that opportunities we given our passenger And bring in maintenance what's go business this external amount out year actually the as Delta. own and aircraft, of have farming because to as some United side, of where in the going But scaled can had. we back is

avoid cost, had some our back business of we pull that model. given external which the nice, ability in is to and that So

CARES at the the aimed was goes, funding airlines. as far As funding CARES

have our and course, not work MROs. in ability staffing at impacted as MROs, that have. make on forth of are volumes to we the based So reduce costs, volume so in it they the business was changes aimed of But

ATI with we'll million, $XX and CARES forward. in able application release help feel, told at course, been offset the pending the been remains to So be disclosed the that We've impacts going the that, of for funding. certainly deal with approved our there, we, which has Omni time. situation we will this And

Jack Atkins

you for Thank that color additional Quint. there, you. Got all Okay.

And there's business XXXX, longer-term about relative But from out, XXXX structural different of XX of to that of these when is XXXX. were different the you any impacts But as how power the this? COVID-XX of change ago I from it about asking any guess on lot guidance, so you about think and your thinking about we days you play pieces think that for your you sort to all of obviously, think mean obviously. -- a to think I'm when would moving not out reason look I there earnings XXXX any way sort there's in in

Quint Turner

spillover are that, to is side lifted, -- where on troops the to and a is to of of done linger, passenger our passenger we the majority certainly extent impacts for flying the fortunate military. the need there's business think that of Well, that be for ease to deployed, redeployed. although always the And we restrictions begin be chance some when

levels rather we see coming to I the historic where, that at so demand those comes question. restrictions in are is which the unlike passenger eased, is think, side, And more pace back once back quickly commercial demand

the particularly there and as side, do things traveling not for strong. our services for They from just on example, Hawaii have commercial with of a flying. for years, little that rest as was passenger many some and of though cargo Vegas. for remains the It's ATSG. Now the to, have demand alluding piece vacations And does scheme been business. large impacted. we flown market, folks to our for business that's fly of done -- of commercial -- They And strong overall and a you're that's bit lift passenger in the Las Omni

look persistent who us certainly less makes virus, XXXX, than more So at have as this with that some see effects. the world all others many progress impacted provided lingering at we we

Rich Corrado

demand got a And leasing of be in it's will we've come the important well. Jack, in think seen number XXXX. the the note leasing now year. out that I will end That will side, no of as deployed XXXX conversion think, also degradation freighters I towards to that converted be for on the we've aircraft the

So folks need still that strong demand freighters. for the

Jack Atkins

given e-commerce, percolate you're And Rich. into which wanted up towards going belly you. this -- That's -- lower networks, Okay. sort to structural is the turn over, little ATSG from what it of this what the my smaller acceleration space, passenger and both Amazon? talk that's or about from a question, could bit? own set guess of like and and and BXC shift somebody what domestic you to maybe beginning feels you hearing in are of that last I move the a like be maybe additional benefiting great, I'll for market version doing internationally. And customers leads to Is a who but to for extent whether their in that -- was an But

Rich Corrado

No.

general, accelerating long-haul XX% We wanting on I new right the know right And Nothing some think heard to passenger had that. flying, is particularly the to any belly market, is conversations networks now, in haven't capacity, of XX% the not the customers larger with from the with in on establish at point. We've you going available now. the past. jets, that not new in this

jets And more the though down. is is in general, being because capacity the cargo, even of passenger down so air down, even

they than freighters deck main for volume more would be. there's normally So

So demand of requests there's a for lot We're right seeing heavy a now. charters.

hoping keep to assets get. last regular of months, work. don't existing for will for currently the a charter fly we're lot a long-haul We and charters routes that around are We crews bidding to of around that customers couple

out are these some of other So deployments that are coming transitioning.

fortuitous of so kind demand. us, for it's so And heavy

to of the bit basis U.S. it's the rest deck. We've in the And in world obviously, cargo. also been requests had hundreds upper a the little has And Omni of regulatory fly cargo complex. behind allowing to

So we're the ability into aircraft. just now the getting reconfigure to

very is goes, to that that we'll do because cargo long lanes. But long-haul strong network sure to some come. And for of not lack the of we think thing very of a capacity some rates out high for is where are flying routes. longer we one because get the the long-term the be in for business good that volatile, sure so they're we're and this time is So looks

Jack Atkins

on congratulations your Joe, again here. And Great. semi-retirement Okay.

Joe Hete

Thanks, Jack.

Operator

Our from next question is Stifel. from David Ross

David Ross

growth being Based talking that new contracts current you backlog were going don't mix? next how growth. this that on spent be to new year XXXX for how much about, the But CapEx XXXX left any both for year, be planes much to or and add year's XXXX, is next is you most guys left for the We assuming pipeline might think for more growth?

Quint Turner

that we X we're to feedstock procurement, are you think deployment. of year, I are for this X XXXX for terms much by aircraft aircraft, and pretty think conversion. where compare just right we X what, at now Otherwise have, we're Well, Dave, and of Quint. in the is I converted that looking We airframes to feedstock next take, expect waiting this taking new -- think, -- as X end the year, think -- aircraft that will year, Rich

the So be in. all for investment those will

Rich Corrado

Correct.

Quint Turner

down CapEx guidance But year, versus it next course, continue give specific significant be to to fairly expect prepared think it, today. a XXXX. next believe. in decline CapEx-wise, we year We're I not that of on to will we be,

Joe Hete

looking look we'll to And for still at the this year conversion We well, to in to the year. next XXXX. in our fleet get cargo potentially be starting of our to forward as starting add that leased make One expect Dave, things the to is investments XXX. STC

David Ross

CapEx right now, up million, say growth fleet, you And where $XXX million? $XX Quint, maintenance would in the the given sits

Quint Turner

That's Dave. correct, Yes. approximately

Joe Hete

Yes.

mind, all that part of the CapEx. becomes We our piece. the carry when in as lessees' that, heavy model the keep leases, the Just third-party maintenance obviously the maintenance the responsibility we legacy under customer's aircraft XXX-XXX for business lease an responsibility. them But fleet for

David Ross

And think question Amazon you and then to fly around ATSG the the there. for that's impacts CVG ready when is and Any just going its and updates hub be on to last operations? build-out

Rich Corrado

start don't probably the really respect. before on now We Amazon operating looks out XXXX. it guidance that get just they like would out based a that, of They But late better. construction, right lot from know maybe of of what in XXXX

David Ross

meantime? And in at room you still to Wilmington have grow the guys

Rich Corrado

need Yes. is in to of much the think plans But know. with we Amazon aircraft XXX operation that. they bigger us I of again, in think There's fly out plan mean plenty get room they XX% don't the until here. Wilmington. And right used share it I than their we now. don't XX% I to to to

Joe Hete

basis. Need-to-know

Operator

Our from next Cowen. Helane question from is Becker

Helane Becker

been business has will are you you. I it the leaving hands, pleasure. good Joe, miss a while still And in

are all, parked a questions, obviously yet? you noticing my go any than being are of that back lot of can renegotiate right? there's down? the And for that lot Now coming a delivered First that the prices more noticing you XXX So and you haven't feedstock? are price prices of retired, being

Rich Corrado

Rich. Helane, it's

So their bit handfuls were already bids process. generally fleets. an records now in significant together, probably size, for that to airline It anything Or records out up a of takes of to some little of engine planes there's get they have time package together. the

and be. is what engines a airframe. of the price price what should come of more piece, And cost million, conversion would more is expect to of And to we is the therefore, market, the bidding know So you that -- it's demand on But the course, negotiation get going down. that haven't you to say. and half total $XX lot be coming, tell of Supply until certainly. the the -- into drive you'd difficult the value we in there's the and around there's about

that's to not going So change.

prices expect that we come will down. the So

be have have we're got looking and we've a this that the and in renegotiating good value will that's time. rate we a day. a not as we at will product what far point at the think pipeline, of at, in But the competitive As -- lease what end produce currently still good really

Helane Becker

Right.

is, of And number every the what's question Okay. expiries other aircraft sense the business? of that my makes then and think for mix right lease new you year

Joe Hete

calendar And come wide-open I to market of That's our continue number to what think year you pretty terms you basis. question, at of look our dictate going Helane. bunches a history mean for demand is a time. of in the acquire a in example, obviously, aircraft, lot we them leases, if when about on over

DHL, start started same in they the you such for of got where it XXXX, Amazon and we the those "Well, looking of at token, aircraft, number going to through then But runs say, You've number at a returns. are of the order?" terms and you short replace aircraft potential look in when business which heck, by a

to reasons into the of going that's But XXXs those growth converted market. that XXX our perspective. I cargo the will opportunity it think a far function rolled really with point in of to is At in get the the freighter we see the believe be So generally, at time, got as market least keeping expectation so, leases going a to from some by And number requirements will of of are. terms what XXXs one that's you're the do, we to There over real time. from if next as, be demanded upgrades the conversion up is are it's be they some going XXXs then the -- peaking growth over.

Helane Becker

then was revenue. some years over of bad given it our -- the hand And the you've start had bad years, go when, a you the being customer, business. can Airborne. some dealt have some over point business. all Great. sort question And your of a And your customers know, of amazing you Joe, and back an we in percentage spun the is at predecessor I one ATSG's to I And job provide X the big future. done, Got diversifying reminisce years, in in was I from that And you. out other really

growth? or answer Rich mean should trend business keep this. I scale Amazon right? -- the know the adding Like And is you the to they business, to But you want other But We don't what do more opportunities the there to where know mix if what right I opportunities I are think like diversification? you are XXX going see? But think to up that need for something what's aircraft. for

Joe Hete

go in of do Helane, business. I you to for the But point, when. you was meeting us with our piece. future to your all day back I'll -- of let first Wilmington essentially, shareholder here back answer to our when way book DHL X earlier XX% the showed way remember up Rich

a of we've thin. a lot that time. period that's with had one thick had the you're we've thick and thin person through been and of us so lot And over And of

say pleasure off, where turn been you to it it's a about sees I'll with to I want with talk well. So to Corrado just things working before as that, you And he sign -- over things going.

Rich Corrado

is No, They're strong the going XXX it's here what there's available. discuss it's think it a is building already to And good more there's several continue years. we question, feedstock -- company, we do for So new We the a is right? still discussed, we grow freighters. market Helane, to as frequently one and market. try because coming

demand as and to fact, we airplane, it to in if now, the us hoping We've So et the like convert We XXX, to as and then airplane that which we'll cetera, fly to get around it over business putting AXXX, PEMCO midyear long can the have start in have base It's the model drive do now. cetera, the that same invested we STC would our STC. aircraft today, nice we plan year in an right of model because installed the the we're a approved -- et is has as for replacement customers this in continue extending XXXs there. we build so a to, XXX into the at lease market it. business the want

can base. the So compete with significant installed it plus it's opportunity, market a XXX-XXX

So a for opportunity it's very flexible got us.

of area growth think. one that's we that So

in other market this aircraft, the the And you long replacement. XXX, so at a And for grows. keep point. grow solid one cargo, places. getting is as is is it is in in the replacement look AXXX mind to growth in And for the comes the that which from tooth when One X

managed that heavily an as company sheet. growth with we're into is So And additional thing balance area one the AXXX that's conservative XXX, other the platform. transition the focused to we've continuing on, the a always grow

at between And is on on around our we're float course, the M&A that further. I business opportunities Omni. -- revenue and to we've managing think the X.X. to again. EBITDA X money to Of got that in remain company And towards enhance And And some the model we're spent base we X.Xx we roughly traditionally right debt. now opportunities for and and flexible diversify drive the reason the and managing that adjacencies growth

those our revenue and building I forward. other to the the the we areas build -- diversify and to for the in have model and think model one, are looking where future: one, So opportunities business our today; X and business on our strongest company going the differentiate growth opportunity differentiated the for expertise growth

Operator

Our from next question Chris from is Stathoulopoulos Susquehanna International.

Chris Stathoulopoulos

where those sense in the military to regulatory for deck reasons. opportunity And for there for that side like with What's then you use we aircraft on it you were some earlier do freight? guessing order I'm those an the terms alluded repurpose the question potentially and them before issues and use fly will might levels are to stop that military main movements, in us of ops. there. But these sounded likelihood So give passengers indication that utilization the the could we any you improve? obvious of a could

Rich Corrado

military question movements. side, On to your military first on back cut order on so nonessential troop was the the

back believe but troops, we've moving to cut just around that they start been up. been I back. been have still ramp should mid-June, told it's they So

particularly The went not fly also smoothly if airport combi us of the routings restriction that run the is some that available basis, those interrupted through on to other that, on routes governor were routes The the of you we the but the military that to Omni initial through. route. some was that airports on will, our flying,

part For for couldn't from And Bahrain. example, you fly route was that normal a us. into Singapore of

had some flying of be in change. And to so the that rerouted

that's of one So the restrictions.

as military you'll slower believe come to more to it leisure that that a looking be We travel, V-shape where the that snap probably will with passenger back. of what business back. for much the So a will see we're be mid-June in relates than to environment for the passenger and flying role

As on for couple One it its routes those passenger been repatriation relates to jet, because potential abroad. the Omni's is main capability deck things. or military utilized, of yet XXXs we haven't have cargo had Americans a for the either utilization for of for

it at we're that And cargo for as in believe you approvals so June they the way wouldn't until looking put We available deck. which now probably now. the upper are be the in can in

support -- freight a level It's so the a of cargo opportunity And solution to would opportunistic going PPE of not long-term converted movements. to Generally, the an a using flying mostly or that of to business do in for cargo support rates jet. that deck not upper That's more passenger in that. get the there's not profile. you're you do

down, that business soon come away. as So those moves as goes

would opportunity be if jets an they're those available. it only So to utilize

Chris Stathoulopoulos

is Can some was some the there earlier then some And comments you had also more made an participated haven't charter about area Okay. color historically ACMI, market you've you us interest in. or in you -- give short-term which there?

Rich Corrado

Yes.

and we routes. military week, So got because fly the fly on, ATI that cargo routes other ABX we -- -- military every some certain we've

last do in assets have available. So the some weeks, we

few which as in look excess of charter routes kind to assets and we've to of to it business. so not keep not kind out way. get in an thing long-term like or our revenue that regular investing is able rather around that a capacity, ongoing stream of charter look count companies we a We agreements find good been that ACMI is or long-term get that And as on not establish charter We predictable that But that that airplane utilize it's profit business. a a just for lease asset market an strategy We'd and the it asset. long-term asset. CMI as on a or using

couple were in as do from last could, X becoming routes XXX is I long-term We're think, down X, flying aircraft. a Those to of I because, they the had had down As remarks available. transitioning. my earlier, we that we that an DHL crews, said, We example, we have X month.

looking we're crews those additional some of to customers that. existing routes take aircraft to so And using for do and long-term available flying, advantage some

add So And it's rest plan to that's of It's to fortuitous. good. forward year. the our for the going going

Chris Stathoulopoulos

June, back we that Okay. this what And assuming drag high pickup for no your come the of and if then the your now, think quarter credit then customers. for customers how your some on credit in on you Quint. the in quarter Quint, doesn't -- if on about the And questions should about liquidity that through two piece you cash Omni your But exiting there's UPS, keeping an just business? color prepared eye I'm spoke business. book of other DHL, in remarks, could curious the Amazon, of give and

Quint Turner

CapEx the in as first we of purchased X aircraft our in quarter. X we Chris, noted, Yes. the

So we million in $XXX what, the had, quarter. first spent we

right, we some basis, move spending So terms year. on a for sequential see, through the reduction, as in we're we'll CapEx of what

ATI help So we which position Omni, CARES with the well. as And pending. that will will then for help that is funding spoke application about our certainly certainly. cash

and of So can see can EBITDA our that you guidance that year's $XXX in will as exceed that project we anticipate, we best we million. $XXX really that we're last still adjusted we saying million, expect

gave January bond I that of in be at I we'll the So liquidity-wise. helped as lot we insulate think the certainly business said flexibility. And offering in earlier, a us. mean the the good shape has having completed model end Certainly, remarks of have we us

we us a pull which where in And flexibility, scenario need sort the some of is gives harder. for we flexibility, should it. had back whatever reason, our side, the conversions spending If some business you remains cargo A have to capital lot really further about really, of itself, that we think in strong.

good in be we'll cash think shape I So flow-wise.

Chris Stathoulopoulos

about with credit Amazon, your outside we think how that? DHL, should of UPS, customers sort of on then And

Quint Turner

integrators, course, network cargo of business, remained particularly really operator, Well, the the strong. as Rich mentioned, has in

as issues And do its we the CARES the their business cleaned they just at Act more carriers we outstanding it feel receivable to payer. external previously. that a scaled some where said, those some would are need MRO flag location at where with. have, And be from customers. our big we about with terms in of us. the some have they've from get of standpoint, good there. back position was is I at And to we no of customers, participants it up We so They volume And The great volumes we cases, operate well. back course, in that business full DOD as amounts. in that were And guess,

with issues that. really we don't So anticipate any

Operator

is from Sidoti O'Hara from Our Company. question next & Steve

Stephen O'Hara

Yes.

seems just echo it I to Joe, be I'd a pretty timing And tough it's good, by pleasure. could else. this, comments is leave everyone at like it's know but time like worse. First, been a the

Joe Hete

I Steve, did trip, road miss through Ohio. our annual

Stephen O'Hara

have to I'll that. Rich know. on I christen

the is So mean kind the given for toughest I I I guess that like back side is just it beginning performing or with back coming But mean maybe of here, in terms pretty cargo outlook XQ is some -- to in June, well. XXXX. toughest the be to expectation comp? current the Obviously, of the your the kind come there. of would seems MRO, there's questions you comp military expect XQ

Quint Turner

normal but a other governmental the we the to operated don't leases we Rich remained the lessor, and second back, we're resembling present to remain assuming we Well, biggest the that something military -- the we're by and to on that course, I it's have, have things We as think -- that at come the based and we back third you hit for quarter concentrate perhaps cargo robust, strong. the is things our which cargo come say the key comp. resume demand passenger and in said cargo aircraft fortunate strong, do And things at of again earlier, is that business are expect still primarily military to quarter, on side, really pace which does portfolio leases fair think operations on and agencies. degree the that has the I business the particularly

So Steve, probably correct, bit that the a little I you're in the is probably guess. one question, quarter I second is say would most

Stephen O'Hara

you this I basis on And new is talk of of swifter then in in terms of assuming just kind in so of aircraft kind regional aircraft Or seeing kind cargo those, desire of terms lined strength, maybe is you this under contract, of a coming know long-term recovery? than demand? the take normal people And about demand more haul. thinking but long economic number a terms I to and take these Amazon a guess kind that's a to up is are of of Okay. improving online, when demand

Rich Corrado

this Yes, Rich. is

some with are it profile world airplanes. hasn't parts you demand at look add changed. And in if opportunities, taking other other existing remain of airline more XX queue, our a of and the folks will, of than kind of are markets relates But for -- remain an focused freighter. smaller from queue the they that, that's there's aircraft of The -- things. and to is level some in as and looking the interested inquiry opportunity So it they inquiring, and things folks that customers groups to it's those existing these on those some solid like about you the large

opportunity. And so we question credit would the

a lot out need more take we there. those we more of of credit deal more before parts folks of are dual market kind and folks growing, existing and have with aircraft. the some get diligence existing they're part that our to strong it's There's the The So customers on we world. that looking inquiry into from that a

carrier paint UPS Other than going the to Amazon XXX in now. going in additional another looking the an in we've operator the And ones that's we've right that's existing Malaysia got we've jets the year, talked XXX and Americas. got that this in take air about, another an to are

mention strong at feedstock to because -- would over now. And got thing keep it's one you an demand and parked of outside the forward. little but older I that the should other the customers before, economics AXXX needed look amount advantage now, are values X if an a with. the bit right come given the that down the there to where that that airplane was of it of we we the a that say on we didn't the strong before And that for be of aircraft large will. into feedstock XX, them I core the AXXX, So things the deal is on going real that always look But good

deploy the going that's into there those available, XXXX to be aircraft is So another and plus things right we STC and away the should solid when XXXX. demand start real that that for

Joe Hete

Yes.

to of it other buying in past. I with changed were clearly the habits think guess, more for significantly. I have the they People aren't their public the homes. is going thing It's like Steve, pandemic retail about, to delivered to here, safer convenient have the to and think outlets them,

So perspective issues. only pandemic I think e-commerce by the demand the got from accelerated an

Stephen O'Hara

And for Okay. things do I of economic the of economy that? And of maybe terms of versus weakness maybe the and maybe about just in terms a might e-commerce things affect job kind near of curve in of in losses the then maybe do here like you how potential adoption -- like that with issues, with a or a demand how that. a you kind pull-forward and with maybe shortening losses maybe a mean lastly, the think job -- all business think the term? weaker

Quint Turner

itself. lease We terms -- airplane. We it. is the Quint. of the the one sell the of on aircraft guess, Steve, That's lease I cargo this the pluses, we in don't

having terms are so by spending exposure buying But insulated place, that and on leasing effects to from habits direct add everything help of have of accelerated aircraft piece. And are longer-term extent volume leases we're Joe in been the pretty consumer should plus, long-term we'll the in terms as that. volume question, said, us But see pandemic. your to and the in a these guess, what that's that the the and to understanding right, I

Stephen O'Hara

results that out way how And for by and things driven is about of and then in maybe for aircraft forward, like the of Is have to of just I where quarter volumes of a terms but of in maybe aircraft play a if going quarter more for on demand for the reduced, was customers, kind long-term service more flying things versus kind it that, quarter, kind of that. flying maybe Okay. do follow mean, in much the there the up service? having kind maybe think you maybe abnormal

Quint Turner

to we Well, results year segment, significant. pretty ACMI performance the better the of out think compared saw Services which helped I quarter I prior improved drive mean

we a we this at what, were with year ultimately year lot in last did a not had cost You as aircraft as the steep basis, We year, costs engine of little on have the bit a this some them actually, least year. Amazon. for X some didn't of taking -- on CMI that unscheduled in recall ramp-up was, had a that year for not that And half engine we back X ramp last last repairs terms helped. we cost X -- what

better those result things for the generate Services all a So helped segment. ACMI

Omni As did, we the of help there routes, for military were part some typical mitigate hoc some reductions and those of certainly in some mentioned that during that that, their not far we of it some Rich those as ad while our scheduled in of opportunities the flying affected did flying. mentioned locations restrictions that quarter

somewhat on had in would the was was a basis. factor. that the not that fly didn't only quarter Had was. it that a scheduled it so been what we But we replacement certainly And the quarter, not of that have more first for

Operator

from from is Stephanie question Benjamin SunTrust. next Our

Stephanie Benjamin

also expansion? would called to of of first Can speak types aircraft on quickly they customers be timing you already Or the color in XXXs just as just wanted you kind touch the service viewing these when were growth those that to really -- I it CapEx Any looking quarter at purchased part replacement? is But helpful. largely deployed? our interested, of are geographic there plans. you're cargo, X on the out be of the should customers the in that that

Rich Corrado

Yes.

of to think -- aircraft couple operations. a when going XXXX. throughout in all the come to and I designated those they're So trying be go head will for deployments be through of deployed I'm But out they're XXXX U.S.-based remainder of will my are them just conversion.

Operator

And we Stephens. Atkins Jack have from again

Jack Atkins

one you modeling quick is Does tax rate Act impact the all guess on the I this book Quint, for purposes? a at one modeling. just for funding CARES

Quint Turner

you shouldn't. impact. No, XX% the does exclude the what, XX% projecting, We're it to affect warrants that that. once not from And about

Operator

another And Stathoulopoulos question we from have Susquehanna. from Chris

Chris Stathoulopoulos

loan provision include well? a was PSP, it that grant? the Or Quint, did as straight a

Quint Turner

a was Omni It piece, -- the in terms of it's grant.

Chris Stathoulopoulos

program any apply And Okay. under carriers of have the LP the CARES to Act?

Quint Turner

not. they have No,

Chris Stathoulopoulos

any just ABX? where labor, question, on with are last And we Okay. update

Quint Turner

previous week, ABX, like sometime in with process. that a as said, are this calls, -- And we year. still will involved are negotiation mediators actually, again, they the they're optimistic in obviously, said But on the the negotiations get we've process. this in cautiously Chris, deal I

Operator

And I'll remarks. now over turn back the to for Rich closing Corrado call

Rich Corrado

to his from differentiated the of I'd Joe the Board. a his organization, you, moderator. real ATSG function service new growth the his our as strong Chairman that phase company. and of next role safety ATSG into Hete position to that We culture CEO culture includes part use on need and company like holding significant retirement transcends a preserve business congratulate Joe Thank built tremendous foundation. to the model and our parent subsidiary. of and value the the important of This proposition propel establishing to this every

same day, safe. reputation. next and your with a build great seasoned, renewed can that with Thank Have solid worth that defined you challenge us flexibility hard-working interest business Our as customers. has the to and taught we and future, in such But built, challenge understand maintain on for thing is got our into ethic, take off as customer a the together, change current the that challenge and Hete be moving to here. to if forward that we of strength of and our excited is I'm this focus COVID the the leading agility world, group ATSG. innovative there's comes to that all rapidly employees but a keep we core company take we changing you the in good must stuff, to foundation one us needs that today's if level that integrity our Joe will, as adapt stay

Operator

and Ladies disconnect. and you today's participating, you you. now gentlemen, Thank call. may Thank for that concludes

Air Transport Services (ATSG) 10 May 202020 Q1 Earnings call transcript