ATSG - Earnings call transcript Q2 2020 | Air Transport Services Group, Inc.

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Operator

Welcome to Second Quarter 2020 Air Transport Services Group, Inc. Earnings Conference Call. My name is Sylvia, and I'll be operator for today's call. [Operator Instructions] I will now turn the call over to Joe Payne, Chief Legal Officer. Mr. begin. may you Payne,

Joe Payne

Sylvia. morning, Good

the course or uncertainties. will projections call, of forward-looking statements this other and we that make During involve risks

Our customary and and call. to These future those airports actual estimates customers' as our on other to differ date COVID-XX and our ability results its of from economic current of the to military to are impact rates, and configuration; disruptions to in operating materially that's in our service may file more including to and/or this and ability information, able interest factors we the events with our respect in plans specific the we Form Transport pandemic we commercial compliance the statements what filings general result purchase continue forward-looking aircraft expect; may to here. factors and of that which on the on to and other are from Air our to tomorrow. to our government facilities; timing ATSG's in the based capability describe maintain agreements could access the instruments; ability customers, with airlines' fluctuations a ability and changes party lenders pandemic passenger certain creditworthiness; cargo with or not traded providers routes other and information Group to related SEC, to limited include, may impact modify the a in underlying changes cost share and on which undertakes charges and number, period, to services, and statements deployments industry service third to reflect factors which contained of than timing in following, no time financial continuing XX-Q control Services downturn: the These and be in factors, to customers; the obligation and or may new currently agencies; our with substantial relate and workforce and forward-looking costs; price but key time vendors longer conditions; the maintain changes. for demand remain aircraft flying our mark-to-market and to market are update our staffing maintenance levels; economic assets any for including scheduled on-time continue expect other we service effect and assumptions,

Management from our including not and to to will are site. earnings, you We earnings measures, also measures for assessing to Web metrics over These Rich results. release in financials, Corrado, adjusted to are ATSG's useful our investors President adjusted to to now, pre-tax financial adjusted GAAP And non-GAAP believes be a EBITDA. earnings adjusted continuing refer were and substitute our measures operations, position included CEO. per non-GAAP these share, advise refer to the GAAP which earnings turn and on and I'll reconciliations financial meant we call and the in

Rich Corrado

our Turner, We our website, market you questions is the field Thanks Berger, XXXX have along Mike release Financial to Chief closed. earnings with our may standing Officer, is with our market about Commercial Quint our after Welcome It's any Chief conference everyone to today, quarter call. me who Joe. atsginc.com. today earnings outlook. by second Officer, our issued on

of delivered the happy cash freighter of cash-generating that full model will business tell quarter, to midsize flow tomorrow. from our unique long-term during of We second potential more you was display. I'm more ongoing strong XX-Q We leases our file on the aircraft. ATSG's

serve found our ways our and to passenger cargo which innovative our from nation. returns better-than-expected achieved and also customers We airlines,

ago. up June. this $X.XX in XX On million for the through XXX-XXX and we a results the our increased other a Our plan freighter half. basis, XXX of projected dry year quarter be $XXX stream adjusted million now effects leading those first in leases similar for $XXX lease expanded minus economic climate, earnings XX% quarter. adjusted dry revenues leases for to announced we guidance $X.XX, and and the role XXXX execute the grown next what from year. in year, second our Even from One $XXX increased delivered of our more by our those XX was in extend so, from XX. fact were this XX% that and of warrant from EBITDA sharply delivered XX% to million prior during are aircraft to Amazon XX an more freighter to position XXXs our The beyond. from will that leasing remarkable, XX% leases flow expanding in We June and we X cash May. leadership In order schedule XXXX impressive XX up but is or ensures has the will even to

We also half. XXX-XXXs three this second including two the at in expect release year, to least

Of course, the we to are not pandemic. immune

May, We proceeds under the second of of million Defense commercial for Those the and Act. We earnings CARES including told $XX remaining funds airline second in certain through for than CARES in were are and granted the our ongoing also reductions passenger quarterly GAAP Department support the we operations, grant combi offset $XX flying recognize Omni bit the CARES pre-tax amount in provisions As asked million in occur we'll of quarter reductions that and we XXXX. continuing. quarter of a earnings, less you for in to customers. and ATI passenger GAAP recognized flying did for the

those results. from our are adjusted excluding We amounts

fill to effect aircraft as the XXXX for also our with the at is adjusted some have for be due now our and on its outlook, including helps million. $XXX other half airlines, to parked the businesses, why of million, ones $XXX the growth, maintenance economic ready on grow Quint? XXXX business and least down I'll we storms CAM's to consolidated on details to weather and our second customers half $XX second our during how pandemic close comments total today. you facing we operating addition like more from business million us even our Matching model aircraft our with servicing. our In and external in results. our of we were airline leasing outlook Quint to is EBITDA are expect the up of

Quint Turner

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

very deliver XX% As expanded consolidated our revenues line. our XX%, rose for $XX performance prior high-quality second a customers. of increase second quarter from superior both basis, represented On our airline The were XX% good top and our both proud tough reputation, particularly times. year from bottom three and quarter everyday of Defense Rich The first year ago. We're XX% in for said, revenues on or adjusted additional basic. million a the operations our ATSG’s on results in Amazon effects total. reduced stems of ability primarily largest had $XXX to aircraft of versus or the came half loss Department quarter from our million. to had the basis, leased lease plus exercised. million XX% its our share service more ATSG DHL from in million $X.XX and latest warrants other $XXX service increase results. On share of $X.XX XX% we GAAP a Amazon connection income freighter continuing none impact per to price in in has June GAAP a the or by To with $XXX largest The the during per of to million and financial date, commitment issued have GAAP those Amazon The in share. been warrants and warrants operations $X awarded second quarter

noncash operating were DHL June Boeing aircraft. retire adjusted warrant are earnings Three end We its also opted to a charge, North in of them stemmed and $XX from X through network, by our charge recognized after tax. in remains of impairment our impairment four million EBITDA. from continue not primarily second decision The freighter of the American The retired the excluded XXX like quarter our XXXX. service to them Amazon effects, impairment after XX

our that from Boeing aircraft combis, aircraft the out combination and We contract expect to mind several leasing some to which XXX benefit freighter that impairment passenger to derive Keep engines. or unrelated DoD. four to under continue are in is the charge XXX from

we recognized rata share pro $XX the referenced release. million in will from mostly the nearly Act earnings recognize with through and GAAP representing grants CARES of million the charges ATI, benefit CARES also June our XXXX. pretax other items $XX a along adjusted in and The of in effects earnings the from funding grants of We warrants, for noncash our excluded Omni were results impairment

EPS for year a $X.XX was adjusted the $X.XX second ago. quarter versus Our

$XXX to increased On million the EBITDA XX% our same $XX basis, adjusted million. or

effective the others. cash mostly expenditures lower and for to by Second versus devoted rate our during half, quarter will for on expense freighters first up costs market debt. from lower costs. interest stemming pricing variable decreased flow The the reflects related modification and purchases Those strong lower $XXX,XXX year rates million $XXX seven demand year. rates, Amazon through and last we mod of our our feedstock XXX continue XX%, fill as from change XXX-XXXs We capital and interest

CapEx, targeting in in you now million gave $XXX from XXXX are guidance May. up we $XXX the We million

at available required the of XXXX. We to this delivered CapEx revolver XXXs Some more less year, that in that mean for end of of purchase year. June. freighters $XXX we capacity If is had million CapEx be will next

to tell Our to the pretax financial from I'm on end a you total pleased continued year the our segment improve earned basis results debt summarizes that in to agreements. Services $X That results up million quarter, at segment our quarter under credit That second a ago. declined from million our quarter. segment On consolidated X.XXx to EBITDA year-over-year. just ACMI adjusted X.X from basis, for $XX a

ad improvement incurring regularly Omni's Our to played flying also were cargo and ramp-up hoc opportunities shortfalls. U.S. compared in charter in transported from for citizens through charter operated Increased significant a more seven key other aircraft declined. swept the Europe. largely Omni It flew flying These offset scheduled DoD a from for the families block Also, assignments more customers of reduced were customers energy assignments passenger we revenue prior reduction flying and U.S. find XX% after hours pandemic other role flew as earnings scheduled much dried network and Omni's even second The as to came airlines government ago Asia year ACMI costs commercial the factors. workers and up. passenger and their airlines abroad period. a quarter the retrieving ability service. year and

externally our aircraft the from scheduled purchased However, by from million. businesses, and higher which a revenues revenues fuel has feedstock to $XX leased well, our many largely are for sales businesses those ago. CAM's outlook. $XX Higher including Rich perform in fleet the by purchase hoc sales with due ago. for Fleet servicing. by were than continued slightly growth second Its activities, services will of Four as and Rich? for interest revenues expense and and our CAM, feedstock the to XX% the it a ad were reduced back $XX $XXX,XXX. the seven parked to remain and were to business, increased earnings by from more the passenger aircraft increased first year than customers, combi seven we by XXX depreciation pre-tax sharply business into continues our in turn second for and XXXs aircraft flying increased loss year and I'll very lower from grouped for to some CAM other in of summary gateway financial that was $X leasing maintenance External little external aircraft million customer of more lower operations half. That's external service half, other offset quarter. the million the parts expense the aircraft revenues results our operating million of pre-tax two quarter. volumes. period quarter. aircraft second half and on the maintenance year, comments amortization other its up The

Rich Corrado

way the this the Overall, Quint. businesses year. are I'm performing pleased ATSG and of Thanks proud

sometimes conditions. challenging very Our to employees customers are the helping under pandemic, our respond

We services are and a people. service are delivered business, by

do. Our reputation strong they everything financial are people our results only possible because excel and at virtually

second others brought charter pandemic ACMI the revenues with the offset our we gap the from of ironically top short-term a and priority better-than-expected work that operations much took the health pandemic for is safety Protecting with During revenue us. the and away and employees of us. from quarter, opportunities always the they

pandemic, PPE. the personnel and During support possible crews the where are flight and ground distancing best using available

pandemic in the We in We talk will from the a operate to These in and will to even between belly one our online Kong meantime, there Hong driving lease will and our dry way and ACMI order that them. remain don't customers aircraft as expect reason our we passenger ad added Australia in make EBITDA more is passenger ATSG from over the a space support about growing offices. other We can plus their charter growth along meet The will airlines. people for That Amazon-leased the down are maximizing second business That's in the are can transport gives continue. now The confidence preferences compensating some we will in and to CMI goal agreements that expect temperature and but very In ATI scheduled are express our like time. down adjusted the of more was just contraction health the that flying serves airlines new flying second with that future. us operations to factors you told package monitoring but Europe and continue other customer-dedicated potential business, Revenue is capacity with half, We to major quarter. main CMI or indicators ways the cargo ACMI opportunities with that do. hoc shop between four cargo in with current changes work-from-home intend flying to we where freighter faster. announced and passenger XXXs the for US. convert our In help and expand encouraging, in it part half. cargo the DHL June. is markets the we first be service work. Quint grow we ours needs and of deploying second half to the busy.

changing are on cargo flying. schedules. support margins We costs CMI are with not customer by other yet to our line rapidly and satisfied high Earnings challenged maintenance flight

no leasing pilots adding for has in are continues high meet market same contract. At exceed XXXs different to finding that the what an management to on pilots trouble fly XX having prior pilots year. We to ABX X reach a now We're its to with those We dramatically amended our expect become agreement to of meet standards. time, XXX-XXXs recruitment. our target this

with deployments plan the includes Our in second such half. XX XX

in them customers have XXX-XXXs anticipate leasing for their the also continued We redeployments during three commitments of to XXX the half. leases second We the demand year. Those for them from two XXX-XXX had us extended two year, freighters evidence extensions expected freighters. including of end for are this strong through XXXX. the return they and Instead, lease

Airbus completing to initiative. forward looking are our We freighter AXXX conversion

networks, AXXX fourth choice XXX next as replacing a customer first the from FAA our test conversions to prototype expect air lease FAA that month will of freighter our platform and from or certification whether regional take flight preferred of the place in of design follow the aircraft. We narrow-body AXXX for us the We to be believe quarter. freighters,

our need perhaps back signing make own to our will all the AXXXs, only of fleet order. until will XXXX. for raised projected in available capex latest of We own million feedstock but have $XXX We through We we or Amazon minimally XXXX. XXXX up the with spend the XXX investments

million in three year We grow in That's of next XX versus the to last this we through demand vacation beyond currently feedstock from and finalized. that $XXX newly want adjusted year. challenging. delivered country. EBITDA especially acquire CAM reaffirm includes XX around the customer our customers under despite estimate at keep five year. only effects urge projects would I already climate cases That XXXX best pandemic our have expect the you to least Omni's being three growth current the teams sports reduced and in XXXs freighters include face December but forecasting firm of to million travel in continued We July $XXX will commercial now, at deployments that currently XXXX. is XX we least year. XXXX COVID-XX expect mind XXX companies to this that agreements modified

continuing Our the if million will the reasons outlook have that quarter a different I've good could a half results By but long-term of our new just we be what won't could combi lower we operations November, restrictions. project that impose change than foreign cargo results than in But today. mentioned. adjusted the our second expect first be strong season a Today, governments basis, of however, limited facing we are peak confidence on is the or for ATSG. In our total, fourth further military change EBITDA $XX half many for we airlines.

from XXX and with flying We $XXX XXXX flow expect and CapEx to discretionary growth reduction, spending million. fall attractive a strong of that beyond. operations, passenger $XXX our at ATSG outlook in That about spend year, our net fleet cash at as least to very will least normalized million and XX our declines leases by next for cash aircraft additional XXX flow point maintenance returns from together

You growing well our your that returns for flow in generated cash leases own outlooks that the of But fleet growth also that post cash comes our factored into mind as next other now freighter into may from that much well businesses the from as pandemic. decade and have flow extend ATSG. that support keep

generating With Sylvia, value. value-enhancing of range our shareholder forward the first growing the to to power look expanded question. to increase wide our capital a for allocate of remarks. businesses, concludes we're ready opportunities cash That we flow among alternatives prepared

Operator

Instructions] comes Jack from first question from Stephens. Atkins [Operator Our

Jack Atkins

I back million sort to go that guess, put million early you to moment. initial of year you better is that half million, Obviously, for bridge? $XXX the with just world of the the guys million at start than can initial expected. maybe totally takes guide of I in versus feels Because place the you think about much the I $XXX like as with through first different million March. kind guidance $XXX in us the to puts today $XXX guide, then. But least the in and came XXXX $XXX certainly, was relative So a it walk think If to initially the

just passenger between sounds that lower are feels sort half, the there's that be and where even the is walk the like Could It of level. going you guide like just us to strong, through lower difference Second initial passenger run of rate it pretty demand. now? with kind we

Quint Turner

This you when all I Jack. of Sure, far, February, like course, is in pax we guess Quint. the mean was commercial biggest pandemic impact. does. impacts, so passenger flying had other seeing started significant really a effects at carriers, to our commercial look year I Omni just late that it the the and the

but And as in what repatriation-type so brought -- first the sort were of the charters said, we there, we were and was -- where into we some citizens missions, quarter quarter, was first on we back. heading of having these opportunities fortunate there second half were into for these that in, because

were some regular had some charter workers. that agencies. flying. We the we Defense consistent Some often of Because charters higher other opportunities opportunities did ExxonMobil military, energy charters. charter moving with and also not little We those come governmental some the mentioned at they're right? a Department We and -- margin, were operated. There of

bottom those. typically you from And line nice generate so, effects

well some nice the to the XXXs, the And military-type is on of as fortunate course, were airports in we we that the with sort were because we regularly flying were our out. and pandemic, charter high-margin locales, ATI opportunities. commercial in curtailments some getting lot scheduled some able including combis the to loss and military, a those, in of considered of mitigate our some replace flying as the rotations essential. DoD And operates, So, running, of resulted restrictions

So, stopped, as said been before, we've the effects. never has had flying military there really although

post us about good some feel that really -- great what we do really of is, so course, our And half. first helped

the those opportunities, half, that be foresee the have we course, other degree. some As don't back. charter but may citizens same look displaced, we brought second been There were to to it of

sort our flying, will the effects the to military reduced the flying, these to ongoing some second So in the on degree, of pandemic opportunity regular to half. and mitigate our flying combi -- commercial some of degree be

more the seeing half. And of so you're the in really effects the pandemic of second

could, the Now, our we of given full that lower But second for we year February. things love more half. first have better. could have based Things the suppose, climb I initial gave to that on half to get that's But EBITDA. increased sort guide worse. really change, or could right guidance something a near And for back now, we strong $XXX improve. closely foreseeing this range in we're We'd -- our million guidance

Rich Corrado

did for aircraft year. the lot remainder been There's is airplanes obviously, a of that aircraft have that, one a thing the Frontier, Delta, those issue, airlines parked. hangar for for they the work Quint didn't carriers maintenance in smaller mention. Allegiant, for It's passenger Those like United, had had dried up, for and of and our they scheduled because group and

Now, with MROs slots that own fill outside things C put been able had for have those airplanes that. and checks the like been our to

consolidated work, that fill with we're able eliminated So the in know, our own but profit revenue and as profile. you our to gets hangars

Jack Atkins

couple next that Amazon. for assets of guys the into outlook look a sort your and we've been about put of and type demand consumers years, speed retailers forward moment about that and What thinking as for seeing there in this So to additional back kind first that's midsize to the is really been the think that's you for gears likes put compete does the the like with get pulled you anything and down hearing do in We're of the want of pandemic. stepping to the service? slowing kind growth shifting out freighter to are product you you the of mind Rich, demand by assets of over that yours? -- And growth quickly ecommerce maybe the significant that outlook

Rich Corrado

a that we're basis, so Jack. service the right levels. what far peak at is we now flying and It's network year this seeing on large customers DHL great are two question, Amazon, mean that essentially I

-- And and pickup line that not because opportunity in order so got haul, kind you November delivery more online. in they And challenges. not through an is plan It's year your had to for. all could -- know peak and or like December, they that of ducks you get was coming up at to same is even ordering through through from air, right who And people time, are the demand didn't online now significantly spans line. picking use

And I've some seen said that going stick. of have studies to of the that's about XX%

never are of people to who So even online -- the to over. continue before is ordered XX% are them online going pandemic after order

XX said, because everything about realigned kind year from get flying So from can. reasons end short we We've of that of to as way just that had the quicker. deploying XXXX. currently we customers, to XX, and XXXs, to opted through the hang at into two that our be going big got projected because went to the we to more in XXX one them on to customers a we've at least XXX-XXXs the it's network We're the we term, were returning least probably all existing we're eight that's airplanes and noted, year have this the of jump

strong. And so, the demand really is

the all continue in ordering future. it's going has since projections to that is the seen up, the I've picked online Now,

Mike even let XXXX be I'll you if and add demand continue is to Berger, for to strong. into can so just And year, any is going XXXX, what the color into you... means going but that freighters not this

Mike Berger

solid No, that's there, very stuff Rich.

demand thing would freight The add I down that, obviously, driving is, belly other is the just XX%.

on usage few -- with and our as we So And And sitting Mexico, of Raya demand planes further the the but in with freighter our to as the will industry the as percent XX% not are that freighters. an incredible over hours ago also we driving We the example, it also in demand and deck, first of few obviously, at the well months. around had here an seeing with lot only the for part first had with MasAir great Africa. a X% put folks, seeing that we're seeing passenger that's about -- customer in last the XX-plus the it, expand end Airways, up we're mentioned anticipate into really a US, up the lease block Malaysia globe. year, weeks the expansion for for we're

but the across continues US, around Jack, demand globe. not really also the the So only

Jack Atkins

Last question, but obviously the bit AXXX available the over, of of feedstock there's then happening quite I'll turn travel XXX and it passenger for passenger a what's that's air both with because from are implications that sort over And you guys? the because does of cash of for change feedstock that? cost free pandemic. How couple what the years next of for flow the

Mike Berger

to read we see the available hear feedstock market. We and coming that's all and the we

ones lot no seeing that In communication of see of really terms of few type the the a it's a increasing the providers. about Jack, is anticipate in we there price stable, become the on XXX been available. next in gave this but XXX the coming we There's market -- quite from XX, of regards interesting. it stuff the year, XXX a in formal those discussion see some there's seeing, onesie-twosie next again, quite years really over now, regards some, would itself. as out those where relates in the the the of if right actually As that that formal basis, them that are or talk the we and we're we them, to normally RFPs the though, to for we been about lot example, haven't but seen, of a very on market, terms to Rich not In over our which really of -- is well, investment airplanes the few guidance

Quint Turner

And Jack, it's Quint.

the remarks at had we The we look flow, and think, that cash increasing -- of for and XXX aircraft. we fact mind, between towards keep flow add, I foresee XXX-XXXs XXXX, free in add free we cash mod end earlier. in lease, we we XX and aircraft as June, the Regarding mod staging discussed -- and

this of committed we have four sit seven and in half here we second year. year more As purchases, feedstock today, three next the

available. bring to have So XXX that by as deliver XX of said, the we XX you we leases would newly moded at next year. least what, to, And end

leaves of have of aren't to we couple sold one that So what buy that a committed kind currently.

more Now year's next buy of year between leases, would next But delivering we couple we said mean to a XX and all we'd we may committed a million. be and of in is if reduction this XX the CapEx quite versus somewhere which year, more guide them couple got or million $XXX filled, a planes. $XXX

flow So we cash see free year. next of growth a lot

Operator

comes from Helane from Becker next Our question Cowen.

comes question from David from Ross Stifel. next Our

David Ross

wanted one prepared from using there get extensions I has of about in remarks How thinking side into in your things? you now about out, customers to cargo do to product comments to Rich, of alternatives. that range market. extensions, to potentially service start the more are There right be last charter of wide demand capital a on was the

Rich Corrado

and to for of what that maintenance, much for in for service. plan aircraft more, on we'll return the going the it's be in peak that as got more probably it's -- view out Dave, said, put move what the real the aircraft our and out when are spike strategy. And a able and to on and a for have we return the our a to in the is, of the we we'll as year, the it's doing charters expand like every money to quarter believe and we And now into invest with these business be you ability not the will with right -- we if -- the to we'd shareholders long-term ACMI bit We that and we've Well, have XX of long-term that are we can. -- call chartering aircraft we into leases, thing. model assets doing buy of to -- can, how year although, at and charter year, have. our tag do much leases We we we we to look We a charter fourth this forward of short-term general better That remainder of part several But work do be then now. little we charter. those it's maintenance. the aircraft fluctuating

a matter as or there, we're just a week not, for flies combi maintenance. normally less we've it two or a place that deal freighter customers our we just the of combi to up. As to of for a in put putting one for a got military it our the the now Believe up right flying fact, signed XXX since take that's of

it really think everything are match don't going long-term that long-term aircraft. can but we charter be So investments the flying the the our -- a strategy to still in make we doesn't fly, we of part we because don't is now,

David Ross

those then two seems you're when planes you Sydney mentioned It to short-term think? And the temporary What's like from multi-month to those to the US. routes Kong happen contracts. do flying over, contracts and Asia are going ACMI Hong to you

Rich Corrado

is flying rest that's then while. fact. the it of on demand that the it platform, in that Well, quite a convert we dry Far some the routes anticipate -- that and of Those yes, for go we're probably the through go The both that lanes depends just of them in of because back augmented fly there'll service the that least we looking think year Hong to right enough are between you're were we this will But that's be was charter of end enough capacity that Far DHL. believe just through When lease, were it's we've the believe flying we into for really belly We year, possibility in will don't one those that to needs that Kong for still the XXXX. and East, got for belly increase and some originally we And because fourth will at in that they're will one customer longer than charter -- space passenger there. what lanes the -- formally go -- exactly a in. the a Sydney, handled long-term both in East handle into longer are the it business an of into of quarter. material and the of were that

David Ross

less the that hangars. that issues Has Has an in of And about the we've the on mechanics issue? is labor with past, staffing question issue, been some an the changed? last of In more talked side. just

Rich Corrado

and hiring easier be in -- some of finding will tell reduced our of I kind going that we we still people. we've an rest XX% that maintenance that will of of by available compensation. The having to changes time on the people. best One human resources the find technicians, actually And easier airline easier way when anticipate to is policies is, a lot the of now, and can be but we've be lot through Right of a period you, made things. of a of turnover personnel year. it's anticipate We our tight, are up. a our couple number There's Act CARES it's the no furloughs

for our we you of into train our folks believe and of in you're And if in operations, we've to on of meantime, people so Now, really backfill. our of market, able have with in saw, better. contracting as And some ability own we But when the maintenance maintenance on noted necessarily you get line in rely market changes have to kind into in initially you happy out our will prepared a changes the not it we're that go own to that until made workforce. that that the frequency certainly the solidified go your remarks, kind schedule. not general, the line network and that costs hire much in some the goes is to our

Operator

question comes following from Helane Our from Becker Cowen.

Helane Becker

Did it you time? hear Okay. this me? Can work

Rich Corrado

worried about you. Helane. clear, and Loud were course. of We Yes,

Helane Becker

I all perfectly me, guess, that is but for Thanks could whatever, you worried goes. and fine, the how I this help was about you hear it the comments made. too. I

think into these Indonesia, you? should couple long was are -- wouldn't some is more be one-offs When like Malaysia. Africa, like going term available? readily a available something that about questions. that in about worldwide Just that we demand Mexico, new to space Or is Is in of you like markets think these increasing of there if belly

Mike Berger

this and next year, it's we outside term. aircraft so. also the another over to that anticipate MasAir. anticipate of with five with with in first further growth took would to Helane, Raya confident it's enter delivery And XXXX further as we a are also going development into delivery into -- think I anticipate We mentioned Outside quite them. through take the definitely second And three placed years we're our in We next those folks We us start. long they Mexico -- -- we're the XXXX. with a will or aircraft Mike. longer-term opportunity them

part ourselves relates that in as year market it As Africa, quite see the not that excited to I one-and-done to get also, this all. of and being as we said, the world a do into at anticipate and are

much that the that see we customers possible fact, we're as growth In with with. plan our as working

the into Asia So Southeast we're quite in excited well. move and future to Mexico and really about Africa as excited

So, that should a color little question. to give your bit you more

Helane Becker

are aware on coronavirus And then, that I we should be customers -- that is, know payers. probably prompt any your time? question high customers of you my not so by Do of paying quality there other that and most the are they're impacted are

Quint Turner

not foreseeing Quint. is we're would issues. this say I collectability time, any this no. Helane, At

MRO, paying our performed And of when the the commented, course, their are impacted agreed have discussions in. Rich settling they severely. the And with course, were and of in bills. customers As did, quite the as passenger was pandemic year we them carriers, early for all have

don't a really foresee we of So lot issue.

revenue of XX% and DoD, DHL. over Amazon know, you the our is As

Helane Becker

about, replace Just talked you're answer own question -- think, replacing with your that in you other to that maintenance. where Jack's you that I revenue

Quint Turner

And course, a have the of of seeing cargo demand. been lessees, lot

of not of being lessor a issues. to So, unlike with rent aircraft, those have we're a approached requests lot passenger defer or

Operator

comes question Stephanie Our from Securities. next Benjamin from Truist

Stephanie Benjamin

AXXX. on you that just update the the appreciate provided I

remind expected to quarter. your should the current you leverage with I fourth approval mentioned out, how And play Could your leasing with impending should be long model? just that us might medium we in that how you the term approval? to the FAA think then about how own venture? joint first, think term, you short in able So

Rich Corrado

to flight flight then month completed, start And we'll way There's is STC the type. the for that the capital aircraft our our on conversion different in they'll forward in we're once looking the And of with up now start into next now, at our Most getting this XX just then got right of testing got testing XXXX, we've customers conversions. our spending testing. we've look six really go for two way We're And for for year. way. CFMXX engine planning on to engine. in process the a conversion. process of as at look I being the we'll mean, next then the types prepped the And we're completed. aircraft AXXX, to So year relates approved get the second or and kits the our you ground one engine airplane that lined it's When pipeline with. it we're conversations about we're for involving

well. to Tampa, to convert in we'll of able joint our agreement be in we and AXXXs will up with that believe of lessor in XXXX and we're of platform an 'XX would we a be that PEMCO, into conversion in the we'd MRO other investor to anticipate the of There the houses aircraft a and four the be in their venture Our parts in business, conversion investment. process as And involved late Tampa, the Tampa. a world other conversion as ongoing finalizing converter AXXX of be airplane to being for be before have that lessor an don't the until

certificate want fly to fly, rest it Our licensing STC, wrapping of being to and of plan the is it, our the and it. of leasing kind model to customers our if the the us put in the and around on party business we'll conversion addition a

in have A+ to And then AXXXs well already customers. involved our maintenance their on CMI. an we'll obviously, for So doing are MROs also, today

plan XXX. to around around the bigger respect, even that do we business an have we model that So in the AXXX

Stephanie Benjamin

a lastly, improvement. focus stressing next What kind from and the continued you allocation year just a capital Could cash flow plans then standpoint? And the you CapEx reduction of and would intentions possibly on? obviously, discuss in

Rich Corrado

having and be we've converting where this that since year. right of available we're next will to -- it are going year, in the several think Well, be process situation we've deploying a I aircraft now got

addition just The redeploying way use although be we'll that capital very and And we've lighter. fleet. CapEx certainly that's evidenced a the strong, or growth seen will of as So that next continue XXX-XXXs, the our in the for demand to airplanes as deployed, in to on grow CapEx XXX, is solid there'll the return other lot year's options that. -- be to things will have be XXX-XXX the we're of a

kind however, more evaluating currently the companies have currently of do. make of proposition have, a to even adjacencies we to value more got right that We that we value customers our for add to now enhance program terms that what are sense structured M&A in

So restrictions potential through that's a potential. CARES to there a shareholders. And be have then would also, the we return to Act, once we're in that the capital

Quint Turner

only $XXX CapEx we million. remember, annually Stephanie, And is about $XXX probably year, maintenance average the this $XXX that of talk million, of or although CapEx around million, on portion

that generate flow And that we So, discretionary ability have going significant a we returns. there's amount to of cash forward. allocate

here American of, Airlines. a next you complete sit at As you aircraft operated And XX know, beyond aircraft you if three that get committed And to been have at fleet we only that year. today I back said, and -- look what, that. we XXXX, end nothing buy purchases, we as committed year, next the by as there's

and billion. $XXX at of hope of somewhere heading, amount CapEx we a returns. There's probably north attractive can we EBITDA would cash with year, only that $X.X annual generating aim million tremendous So of next flow

Operator

from Our Rosencrans next question comes Howard from VA.

Howard Rosencrans

were exactly are about the million. like talking planes -- I'm with The continue and three you $XX about. were what in you going flow, to -- actually where terms free planes cash three with of talking

me retrofitted. they So are correct -- when please

$XXX the being million? about point talking 'XX for starting CapEx really we aren't So for

Quint Turner

be are conversion to -- next aircraft current you've based Amazon, XX Well, to have many remember, in year. aircraft Howard, And in year conversion throughout deliver aircraft that to got those those going of you next orders. upon

to you mentioned. So along maintenance as those capex that you're with costs on going the aircraft have the conversion well

Howard Rosencrans

on the done year, but those conversion was be I this thought to most I... going of

Quint Turner

still and XX, those be will the that done, on not rest to Yes, there but several complete largely conversions the going you're order. of are to have

Howard Rosencrans

$XX to for envelope you just it least to it if of fair Would sort at say, not have you seems another to me back commit million. that would further math, the of be aircraft, were kicks-and-giggles, to

is it your say, your don't cut to really say capex million, capex -- to $XXX million. I could fair would you is to your go don't let's million, real going that know seems So even if -- you how get you than But $XXX sub-$XXX like $XXX more commit to million? to

Quint Turner

correct, ballpark Howard. That's

think I that's correct.

Howard Rosencrans

or not like the here, what So over this to associated this No few still years, companies accomplished, multiple on very goes between still their original you There's for multiple. It seems many, six many do that you what six what lines but I are that expectations. the you've year certainly original applaud and matter performing accomplished, this close that's a just their you've and guys and what there's stock. sincerely. with I mean of very far year a along

way, not we're in lacking of there's sort a some So -- connection.

ratio. -- hopeful that not to I'm it's message start lost get redirecting more redirect And get to sending million, going the since just free lost. anyway, cash the $XXX go As that you'll but lost we'll minutia, million to whether $XXX message next decide is $XXX who to but why that -- less shareholders you're flow bigger a or bogey those picture we'll -- that or the stocks a return it going share the than you in, in own sort I bar, are move to looking substantially X of, buybacks, leverage dividend guess, modest of that capital of go were really year for for to maybe your on can't That's whatever direction. times I over analysts, year get the if million we'll here, and formal initiating I assume, next form mean, seems it's to

Quint Turner

the here. to And are all as saying certainly we think sentiments expressing goes. acknowledge, these problems good understand are Howard, the these -- you're have, right, we I that

in part been thing that been cash the part right the was demand a powerful of our to We've We very our strong, like do. so has story and story. flow recognize that is feel we of the also because growth mode

years, couple to the generate decade. out, you last case going flow lot of generate really of invested returns. point lot we the a a investments leases, CapEx we these Remember, to a as Over of long-term of are at that Amazon for capital, in cash our aim

And environment, we think and provide mentioned. other to changes was as are right as we have of that that you the value to -- to there change, so, recognize shareholders do things course, that decision. tend If ways

that of can part capital consider. allocations we those of So, are the array

will, funding As environment, and Board those year. things put as think, the that, do through stated, business. consider, we September on some value. that, we to depending of CARES provide the on And next moratorium things alternatives demand the least are that at we Rich at are certainly are the look But I considers upon those legislation the

through good -- environment So these growth have. there's we're the problems I flows this flows provide is a continuing we're to with are mean like producing year the will trajectory XXXX. in. And the is answer cash next in even model short strong on stressed growth cash even in

don't So those looking the that's you're you. we wrestling know but… we if I look hear to but issues, answer with for, forward

Howard Rosencrans

thank But anyway, not a only a if you. you're It's shareholder. problem high-class

Rich Corrado

Thanks, Howard.

Operator

Our next Chris Stathoulopoulos from from question come Susquehanna.

Chris Stathoulopoulos

adjusted time And EBITDA XX% to leverage X.Xx growth to X three are anyone down aviation. perhaps two next single-digit So driving, and for your high a to floor the I'll to ACMI. what curious in it the is XX% one obstacles for to a keep establishing unique margins to very and question. say, this getting in possibly Obviously, years through

in TSA, has know X if ATI but years. three expanded two, the passenger, to back did pre-COVID-XX you it's at you have have belly least lot at back don't to coming full I levels there, June. look for like least doesn't You Amazon look the capacity with gotten

can't of a this EBITDA through So see growth recovery? sort why through that curious, we XX%, -- XX%

Rich Corrado

XX things freighters have that keep right next we least if between into XXXX at to entire now, deployments sit end their deliver that XXX-XXX we're And of can the of of mind in today, the as here now results you of one environment So which looking at year, companies -- and that economic the today's many will, production, too at booked XXXX. look will already aren't book there through in you XX.

an fly productive. the at to of to our And of opportunity now fly trying opportunity those right lot initiatives we go ways is The will those to have also that have to as well. XXX-XXXs. ones we -- get looking are Amazon, one Now a more key

saw line have that believe profitability remarks, my coming noted prepared You the a issue. that. we'll result I more in And out we ACMI the maintenance as of of segment

go we we're And -- we our returns flying we've to so improve it we on be the returns the relates network to the when look remains able military then, can profitability forward. we get stable our do. And of at believe you as leases, market we in that out got times. course, volatile more We we'll maximize that of EBITDA believe as the

Chris Stathoulopoulos

there. So just a follow-up

coming cargo the need is not growth? airlines at that with it, a in way chunk good that if So And the I we has that look competed this perhaps perhaps model back. you capacity works, X% of speaking to the realize over XX% be easily to fair kind year add three grow. say put up could Thanks. here, organically that But recovery would it EBITDA two aircraft to to you to period, a

Quint Turner

that things additional the of that biggest EBITDA one course, is investment Chris, -- our drives in Well, thing of drives aircraft. the

there story. Howard, we a of a And balance, from sort a so, right? had It's question is again, the cash prior flow

investment, look of cash flow, you at is production, EBITDA we will, net free cash flows, if So being also we look at and important.

being more EBITDA may back it's free in when to good wise to environment all investment to So able of when pull of flow. sort generate adjust cash there's and with it idea but based to somewhat, it's -- sort upon a the line, the be demand grow more go

But of over seen the And if a last sort requires EBITDA years. a that's looking continued EBITDA of the it investment grown course, So, substantial organically, growing We've capex. on several base double-digit-type bigger situation. growth EBITDA just you're we're because the has at driving our pretty rapidly. in

XX% XX%, up investment. it's to that number, more -- requiring So, becomes ever-growing put

Operator

I call over for questions remarks. no time. now the turn have to Mr. We at closing further will this Corrado

Rich Corrado

Thank you, Sylvia.

I'd customers the challenging they shareholders we on all creativity in First, performance our been have to and shown the employees. has the agility, The quarter. extraordinary that has ATSG very and results times. safety in second thank that saw of delivered for our like behalf Their and tenacity strong servicing customers

continue but in demand. the Moving will the challenges ATSG business challenging to mitigate forward, remain, fluctuations model cycle business

which in dry blue market of leases, for including of strong Our for In volatility. XX we portfolio Defense, position deliver freighters network Department by the provide our flying immunization noted deliver great our at all least passengers flying against end of discussion, of more full will capex us newly converted our long-term customers, our as closing, also the of a XXX-XXX with chip have have all better to and we still The in contribute XXXX, and lower interest to year growth even shareholders. will us a XXXX our for in XXXX options your for you service. resulting Thank to cash day. ATSG, in for flow returns provide

Operator

today's this conference. Thank gentlemen, and concludes for ladies you participating. you, Thank

disconnect. now many You

Air Transport Services (ATSG) 8 Aug 202020 Q2 Earnings call transcript