ATSG - Earnings call transcript Q2 2022 | Air Transport Services Group, Inc.

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Operator

Good day, and thank you for standing by. Welcome to the Second Quarter 2022 Air Transport Services Group Conference Call. [Operator Instructions] Please be advised that today’s conference is being recorded. I would now like to hand the conference over to Joe Payne, Chief Legal Officer. Please go ahead.

Joe Payne

to quarter welcome call. earnings and morning, our XXXX second conference Good issued after yesterday earnings market We release the our closed. It’s on our website, atsginc.com.

by we and begin of involve me advising during uncertainties. that Let the risks this and call, forward-looking will other projections make statements that you course

global customers, by agencies; Form business elevated will costs; remain labor arising to factors describe filings deployments factors no economic supply general in week. our information, of results cycles; we conditions, undertakes other These rates as plans Services we certain to interest COVID-XX new the customers; and in compliance conditions as impact increases the changes. to other date extent the inflation purchase from industry-specific and to such and instruments disruptions; on agreements downturns airline’s variants; call. to forward-looking ability reflect including our impacted from customer and statements including higher government timing not changes the costs, Air contained cost to statements SEC, Group forward-looking and to time actual assumptions, the configuration, changes maintain of next financial rates, which an as events may COVID-XX aircraft estimates These modify Our with include, materially to ability be update other a any in the may changes aircraft limited the able with are impact to: this cargo Transport in key scheduled or differ the our factors, mark-to-market obligation and we XX-Q which future changes to recession but those are with here. and based control in lenders and file operating and and on were outbreaks, number, from on-time with to time information existing market new in service emergence of timing respect which of chain routes and of underlying persistent economic and/or in

also free refer earnings, including metrics useful will Management ATSG’s adjusted share, adjusted adjusted included substitute and cash measures not our assessing you continuing for to to our operations, and We to investors are to financials. from these for non-GAAP adjusted reconciliations on release call flow. These over earnings I’ll position a comments. non-GAAP meant pretax earnings advise EBITDA are financial Rich the And believes President and the in adjusted website. to be earnings, per Corrado, measures financial are our opening and refer turn We in GAAP GAAP to measures, CEO, to our which now his results.

Rich Corrado

morning, I’m solidly pleased Thanks, Joe, everyone. and to growth you ATSG that good in mode. remains tell

row revenue in our was quarter quarterly adjusted year. over the prior increases and a fourth in second The EBITDA double-digit of

Our e-commerce growth fly freighter dedicated midsize aircraft we that and directly integrators merchandisers. and reflects that of lease major serve, transport the for principal we markets

the to our world. in X just XXXX. At and Airbus we and both target cash than deploy due the growth. stretch to strong primarily to customers keep Others networks. more vendor shopping And results. EBITDA remains and freighters E-commerce bright lower our for our ready long be convenience. our the principal online for XXX They that. first they very our majority for prices for AXXXs of and cargo looking That’s own this all X meet our adjusted our delivery inflation. We cover quarter details to also not flow express their Consumers are growing XXXX, are seeking million coming conversion air to fewer cargo after throughout the own beneficiaries Boeing wide- find requires, narrow-body freighters prior chain reinvesting share the our buying to the demand. half. the We X online challenges. still increased often of budgets than lease passenger and benefited outlook for and aircraft $XXX that fleets customers networks second remain We’ll time, online to supply XXXs same in the prefer expanding about are review the are the to of lease target, to Quint expect rapid direct driver airlines fully of XX cargo from to faster flying. we’ll eager including in as second delays of fly their the principal our I’ll deliver. even the we Our is related that us dedicated parts meet X back airlines portfolio freighters our our lease prefer can of time,

Quint Turner

Rich next Rich, The morning. to operating quarter. to Thanks, that welcome on hits was and in call first mentioned. some quarter the in year-over-year our on everyone we quarter Overall, slide this growth highlights of second the similar were pace deck the the second the in our

grew $XXX for the Our million, second nearly $X to half. the quarter $XXX first consolidated million for totaling revenues billion

in first principal each strong quarter, did of delivered the operations, businesses, revenue growth XX%. our airline exceeding and they freighter As leasing

$XX up sharply, the Our from earnings XX% prior to adjusted million. pretax again rose period

quarter $X.XX of prior year to EPS by $XXX increased our $X.XX, EBITDA and million adjusted beat XX%. the Our adjusted

segment after faster passenger protect even the grew business. airline in for revenues to adjusting intended government grants in pandemic from than Our effects earnings jobs XXXX

wage passenger airline is transfer costs second from Most earnings domestic in in the in in their compared are earnings impacting particular, operate more and than to period, benefits in military employee-related other passenger particularly travel service million our prior flight to second member $XX minus the the in rose Our million XXXX ACMI X-crew line over to crews Services augmented our rose costs XX%. crews, our which our flights, mostly makes from longer routes. salaries, cargo overseas we more the pretax was XX%. and $XX expensive and Travel, which million expense. XX% quarter year and of grants. flights to CAM’s costs, $X our quarter involve assignments up versus travel increased requiring shorter Inflation

next On can million XX-months trailing second you to our growth adjusted million. in $XX pace raised EBITDA slide, see our $XXX that the quarter

Our That gains revised plan ACMI the our the second with half combi aircraft. a and more and in is and EBITDA a for that expanded include additional Services adjusted third versus calls currently operations line our fourth cargo quarter. that in first, customer-provided quarter second to deployments stronger quarter similar from fourth with assumes outlook lease quarter X

in far is slide, our the see so deliveries pace. $X pace spending next costs, is capital the and vendor. ahead Most rate growing of for with slower conversion million our our from you’ll are that On at conversions consistent that XXXX a which of conversion spending aircraft of purchases XXXX for

second the acquiring Our all We for the to we delivery feedstock the XX in conversion total said plus of last that deliver quarter aircraft we this aircraft more in first line of several in X June half our next than year. for XX on after market expect year, in XX for half. schedule includes the would half at the remain

our X more original XXXX on and passenger We in acquisitions will deposits were than aircraft purchase place XXXX more growth budget. aircraft

The this we to flow free sustaining $XX $XXX cash the bar, above our pandemic We portion GAAP to next CapEx year. updates Federal XX-month in year the cash received for the for guidance net each metric million last began on have adjusted purchases Once our on Represented million totals flow, year. we again, those bottom increased slide in shown operating grants growth flow, cover of trailing the cash conversion operating our and it’s by of providing include CapEx top. million our bars last you $XX relief shown costs. the by higher cash

receivables. total adjusted to down cash million also $XXX The declined from flow million, year-to-date ago. from is million. cash quarter’s Our million increase year a an trailing XX months first was $XXX $XXX due free of flow down principally $XXX Operating in

CapEx represents mentioned from proposition our will most I cash million, moment of time. $XXX value free flow. adjusted ago, The over year’s at is As now growth plan slide next which a come our this

model to profitable cash generates same while for at aircraft our strong freighter flow, business it. Our ways the provides demand very with significant reinvest recurring time, us

adjusted to Xx. bank agreements, below our measured under is ratio, debt credit leverage overall Our as EBITDA

quarter. balance $XXX revolver during to credit million increased second the Our

In in our and growth our level our Moody’s face investment-grade. just our quality Investor by CapEx million repurchase reduced draws prospects to funded at revolver bond The Moody’s corporate million, X.X%. balance rate below from spending, repurchases of recognized were and growth the In value rate. the outstanding were which on cited for sheet our coupon ratings Service upgrading leverage the ongoing discount repurchases, BaX, opportunity nearly comments an June, and outlook. turn debt-to-EBITDA based addition debt we earnings our at $XXX between in to $XXX on $X debt I’ll to the it to financial for funded took as back operating of for X.XX% and the business revolver, flow strong our With benefit that from and interest difference expense by with reduced and developments, revolver an upgrade. credit average reasons at million drivers of the on cash now the variable advantage outstanding. the of Note X.X% quarter’s Rich Rich? and an summary notes unsecured some of

Rich Corrado

Quint. Thanks,

with leased working meet soon appreciate ATSG be fleet delivering last their freighters. Including efforts want more and to I went knowing of comments get diverse XXX XX some as and challenging work investors to last has I of to some know I Amazon-dedicated freighters make great, to always we that now. goals one me source the our I of first, exceed I each or on them. fly, total year, I businesses quarter. that across the sharing year’s to performance towards our find benefits elsewhere XXX of assigned Amazon share Last They at but in leased them. reviewed to freighters our XX employees the begin that accomplishments make largest to that Before XXXX Amazon, our of usually are which that purchased XXXX us results place we of ways our they will a The create growth. X or all resourcefulness do, proud quarter, to commend, XX outlook, are seems

XX their the The and rapidly. to of aircraft we we provide Those networks are Europe ahead will beginning We Airbus the our the as to in ones U.S. the are same the next e-commerce finally, of majority add And XXXX headed the family. new fulfillment we overseas from lease also aircraft shows, with Canada. as of will are this well. as freighters be missions deployments is the noted expanding designed support and customers AXXX slide pushing types that place in Airbus non-U.S. cargo going XXX to our customers own map Asia, X year deployments

XXXX. we’ll world, and more in of expect throughout of We based that investment slower options lease you AXXXs of ASL, worldwide reductions XXX-XXXs the our essentially world. We Our Boeing commitments but newest later the will wide-body XXXX. of with from hear, XXX-XXXs same to along and aircraft. in evidence our the forecasted the in these exercise year ordered book. for long-standing for freighters designed other also growth narrow-body will freighter as joint and efficient We in begin to be a AXXX-XXX deposits larger feedstock a but to to the least growth as CapEx in XXX-XXXs and economic XXXX passenger convert that most AXXX we program. from be conversion as AXXX least ahead, hold smaller deploy Ireland networks this XXXX, customer, at express somewhat X AXXXs missions to X but we leased its and throughout order part do, customers has months serve capital operations XX including Airbus freighters of X venture already in freighter will among AXXXs at buy find first freighters passenger we we you others. Aviation our freighters in passenger Airbus in are X leased hold won’t own ASL any than the with start Holdings. Three XX lease CAM’s and highly the AXXXs larger

induction those in strong but from businesses looking Supply more by have us. their we passenger-to-freighter in of limited This the the with than Of chain to XX stay we’ll order book. already our XXX-XXX additional XX freighters affecting also for conversion interest constraints passenger-to-freighter more delivered with anything after CAM lease. this freighters touch of in are year. customers than year, slots already spoken XXXX. lease CAM None freighters X has our it indicated conversion XXXX, some the for expects X deploy can of to building number through freighter a has forward networks We XXXX holds

dry Moving the reduction with forward, next of call last increase bears from breakdown sources our pace year. along other with agreements of long-term quarter’s of X thirdly, the will the adjusted conversion leases EBITDA: Amazon of XX% conversion our vendor adjusted thing long-term and those total in Defense. passenger expansion, flying, repeating for Those more than our EBITDA. principal and that of are Department operating bottlenecks, DHL; freighters; airline mainly One X sources is

freighter the looks or and freighters duration every throughout EBITDA those of the commitments to how is very be revenue are any trade full utilized. imbalances. with is customers Looking of of them, at U.S. matter and relationships our particular stream the aircraft And each disruption an the get meet We whether resilient DHL strong Amazon a recession no from one helping day. fully lease shoppers or adjusted contracts, day, size networks our time-definite them the we overnight fly generally in scheduled to to partially on the

project that built-in the our includes agencies company government transport military other people economy. of maintain disasters, factors and regardless other exercises, need, focused what abroad. the rotations, strong I flying are moving moves on any don’t a That of natural depends for troop more Omni, you today. know and the personnel For things Defense with in protection business other risk presence or Department the from on most of readiness of

XXXX we record-setting EPS with and shows, share $XXX be $X adjusted million year slide another EBITDA. in expect to per next adjusted ATSG the for As of

to keep space tight. production forecasts cash employee limitations like and, will how see and flow higher it in our you and aircraft our fuel when particular, improvement remain adjusted agreements. years. labor capital Directors is third pushed their categories, lesser and, other expire. this look higher this freighter very having uncertain quarter Board are All But forward expenses. lot to focused of other our quarter we with and focused inflation like in fourth well, impact from of Many the we trend freighters to reading which the asked The second, expect in about But more insulated adjusted of at returns operating the also other is drive our or their have investments and airlines our the largely to earnings of and cash plans fuel costs passed XXXX XXXX that reporting restrictions is has under free into airlines, to operating the are several inflation still a our the We to the freighter about on make on passenger into share sense ATSG significant of prices, beyond them than on opportunities customers we after affecting already costs we to adjusted in May, for allocate about to will new $XXX in expect in makes recovery a lease a both on-schedule demand and When indicate our Today, conversion guidance of we projected and beyond somewhat XXXX to restrictions ahead for you Net-net, cargo and our combi can great capacity of on we expected the deployments, EBITDA we expire will look schedule flying. cash pace repurchases when quarter. us. fourth passenger it U.S. full as strong we Those beyond. supply between that controls achieve our where ability flying on our cargo of were February. price passenger our last growth September. shareholders million strong talked for Investing set in EBITDA. resumption achieve via military, to I’m plus end cost availability and quarter we and extent,

the authority meantime, remarks. years are our May for As to ways reminder, goals remaining. Commercial concludes the In the out have is searching to our authorization with and have against significant repurchase questions. Mike Chief for along prepared aggressive existing Berger, ready in XXXX set the of Officer, That while effect, ATSG we ahead. flow cash to execute Board’s we the for question, first still a ATSG our will repurchases new I, people with share Quint the continue operator? in expand answer

Operator

[Operator the Instructions] Our with question first from comes Jack Stephens. line Atkins of

Jack Atkins

level outlook. So going I on comments wanted could we of the guess to your I to kind maybe if Rich, just start, back set. just

quarter. back cost first the outlook? crept ago, wanted through here do you to believe for of on and a to go few of you X sort language sure of plan you of that kind are the on that I’m still curious, make If to Just inflationary year you’re seems over pressures the of running just EBITDA that page EPS the the the running that. have up That -- Or have around full changed And months ahead comment for same is for bit. still months? last we’re initial kind ahead your

Rich Corrado

thanks to prior Jack, and we’ll But quarter, pressure. time. $XXX expanding through pressure. seen This issue positive feel we we believe has comments regard in the But guidance -- been ahead demand-related did It’s all. not adjusted in cost make for really were very some this still there a our more question. we’ve EBITDA isn’t at but to cost million our at comfortable related we of in this Yes, plan. as being Yes,

Jack Atkins

comments. integrators terms of like things see public as with sort that it. of a out we of at on of what’s demand of and you look the terms seen strong, bit going a very to remaining BXC reset Okay, about point and what sort we’ve I your in been little activity certainly guess, when And in got then Amazon think of their you on

you the you As of your think years, forward of what next customers of course in change in tone sort seeing of sort the over terms are any of telling couple are plans you, thoughts just bigger their yes, capacity would about of as for Or kind get love needs? your reassessment longer-term Any on that? of picture well. of maybe sort to that

Rich Corrado

Yes.

they short in regard U.S. But can in is network Mike you this airplanes slated to more -- X X the term, this more and the term minute. DHL we’re providing what us. to the put Amazon in Jack, to DHL us into that network X short I’ll into Just and tell providing networks, the year year, in turn to to the this I a over airplanes the are

So we’re person as seeing the been past. around the to And the ongoing that. e-commerce relates on the is the it demand He as it over it’s best large demand for globe, I’ll turn freighters Mike. probably to to comment then in as

Mike Berger

Yes. Thanks, Rich.

this any existing we year from indication any really at but order upcoming at only not all. demand hesitancy to in about Just not reiterate, have at We’ve of seen seen the any any customers -- And haven’t they’re we for that years. all. weakness the talked length book our

all certainly next X when is have the fleet And think companies, XX-year on cetera, FedEx remains by to many out fact, those consultants communicated and new of et times, activity Boeing and freighter folks, some to But it’s And that operated or From you X.X% over the X would. UPS, it integrators integrators of possible aircraft, certainly DHL, going is still of about ATSG by of XX major really industry very to are freight Airbus, new if Jack, an they to perspective, the when think enabler the fleet, the IATA behalf strong. deliveries the freighters SF. Amazon, as years the XXXX. e-commerce. you early, the said we’ve engine and the X/X quite X.X%, increase, is In and take e-commerce clearly a broader and

at So regional those they’re customers, we it our guys’ feel are we’ve bullish customers that these flying networks. and they’re length. or meaning real our folks about talked Either in direct customers’

at we all. see don’t it So

meet about feedstock extremely In to bullish poised demand. that certainly we’re and fact, it we’re with

Jack Atkins

CARES turn share the outlining, about any capital then all into capital get of a it expire. my right. months allocation and guess allocation also capital for move restrictions about Obviously, demand buybacks And of down there’s and the to I market -- growth ability I to to once can management question. insight bigger so you are balance buybacks. guess, are is Rich, hear. the forward? of picture, here I about hit how you as the that? kind question back as a balance we how with There talked of all over, pay kind pursue Okay, just Or additional before needed. consistently in buyback I’d really the of thinking on couple love the opportunities assets the senior Act you debt guess, buybacks and your being the kind of just Board I encouraging to you forward? Mike in And last That’s was kind lot with should think more maybe mean, things. do trying opportunistic we moving I those about to market? for

Rich Corrado

growth, then Quint cash other XXXX be that do this start Jack, I’ll out with capital believe and down. we slots demand, talked allocate which we able through XX have to about, off But agreements think, be both. comments. general, I very XX high. in We’ve to We’ll is and/or of commitments the may have we’ll to has the Mike as Sure. got, the able some

the So slides the X is over the one But look, been you very years. showed fleet, if last although increasing that delevering demand strong. we’ve of our we’re

XXXX we’re shareholders. And the Xx. with out through to still And we growth able that to capital to so we’ll be be under that coming levered and able have lightly now believe we return deal up

we’re able when we believe X Now we to. do -- October I -- is

Act to maybe smart in you of let decisions a from the some be we’ll Quint market potentially back opportunistic on fill basis I’ll forward, buying shares. of point on relates And and as look make it the that details. free to and regular in We’re back restrictions CARES buy the to shares.

Quint Turner

Jack. and well, so we it future the to sheet is of leases of portfolio that real that and CAM covered sort us us strength visibility growing Rich successfully Certainly, gives gives confidence the lot as have to laddered-out flows a us heading marketing to mean, I of But Yes. repurchase there. our balance a of We a know confidence share top ability quarter-to-quarter, projections here lot our to long long use create value growth we’re that plan. additional there’s term, or where bump all on with term. sometimes, of gives and cash

We’re levered positions under and that Xx also well. us

couple So about tool along go we’re that excited really months in a here that CARES of getting expires been when we’ve creating. to back with our growth value

Jack Atkins

Okay. have Absolutely. arrow I know quiver. it the will be in that back good to

Operator

Cowen. Next question comes with from Helane Becker

Helane Becker

follow about there just Under And I Jack’s question. for grow really Is to are one I or X.Xx to thinking levered wanted able get know adding to than up willing Xx? leverage. is talks on that goal I you without mean, upside to the you’ve Are pretty Xx significant the been the more past. up is impressive. or a you Xx in being slide leverage?

Quint Turner

Yes.

I’ll you lead really for on for Quint. how that -- think evaluate opportunity But there We we that’s on it’s done, this, as and the levered acquisitions certainly, above up Xx. it’s guess. we’ve point off out, we’ve dependent Helane, I I that. out

up prudent most we’ve less. more minute X.Xx your because While value. And set overall, in conservatively a the probably pretty we the But if a best us was the specific don’t have -- range we be levered was and of seemed would question. target certainly company last answer X.X mentioned we our opportunity But accretive I of to that way that or the attractive. if do to ago, again to that visibility -- to we’ve flow the spent decades, when create that of managed cash that the

kind opportunities. the it’s mean, because one maintain sometimes -- this not on of us, investment-grade, we pricing you investment-grade. for to where that when the which And but right which become sometimes have investment-grade, is on wish to for the spot of rating sweet can things credit I agencies certainly like be under a shareholders more you kind value is were company that opportunity and forward I the where about hamper we’re the flexibility if in could believe like I actually attractive. it do, We’re the of markets, our leverage taking we the when create move get bit in, good we

Helane Becker

very That’s helpful.

You prepared sort in of like talk, remarks rarely the that. and something so call was should -- things to in your you about? actually that that about said out we something you I was kind worry surprised when Is I increase hear receivables. of

what you not are So saying?

Quint Turner

to last timing that new identifiable. than called out it stat, nothing of that shareholders. quarters little. we have of in ability went the Well, concern. real related you’ve the quarters, grow cash It’s with think time many kind points capital It’s to else. I just anything return of adjusted free number that, seen for flow stat, because the or we off, It’s is more that that kind actually that first that throws reason down a several business And that non-GAAP to the the

have You receivables.

buy just of reimbursement significant think As timing that’s fuel our fuel -- on the fuel risk in those big take do of customers. you quarter-end, was I And piece the It’s settling receivables. this particular price don’t any we know, with but just we a some there of of CMI for customers.

absolutely terms that. nothing like worry collectability or So anything of to about in

Operator

next Stathoulopoulos Chris with SIG. question Our from comes

Chris Stathoulopoulos

of of reconfigured potential XXXX so. we seen model. a the believe you business sort the haven’t on I the through back or But slowdown. business managing in sort really perspective I So the and cyclical Rich, color here the appreciate

that lot the obviously a concern haven’t things and cyclical a really we recession. of seen here And if during might you battle-tested, could around like So -- a if will, model there’s I you do cargo into what just slowdown. --

be on grow sort dig a get would Could also such insurance items have assume lease of little confident So upward we that us up. that, just part sort customers, placements the last holding next you bit XX in The a rates hear aircraft and assets your should of to help appear And pressure there. overseas downturn? with of to freighters EBITDA put to out of year, want more around then the And you the that. have, travel you expense? to that with about as then through sustained ability

as to you do Just of aircraft the this an a aircraft today reach if turn protection at Things that decides, that LOIs, year have and shipper, work want say, not airline been take insofar what, locked tail." remind then are know they, Or some with we the sort of going and or be we’re have out XXXX." place? "You contracts able us how in the "Okay, next what and the that point, in sort capacity to

Rich Corrado

a Chris. there, to lot there’s Okay, unpack

operating First the air as And cyclical to poor XXXX. off, XXXX cycle then as and of through a was been, company cargo. pretty in you out for there it year if remember, we’d have start XXXX XXXX, a downturn, far

through and think need the those existing have So our we’ve in some not, which that whether we on that fully -- points the the gone that provide pressure leases leases the discussion -- the they about the provide are put DHL aircraft been we time-definite I forth to I -- prepared paid, in the that -- service resiliency we’ve But and daily dry networks are UPS services the for is committed model need sorry, DHL the they remarks in Amazon, business, of and that that past. be utilized networks. of all business or

don’t last them we military The and the their cut Boise, Butte economy not to would the cycle. is be not back on of that or And is those Defense the given part Billings, it’s Department networks other any on or global unusual government Buffalo and And of function fly really very really business the then demand day. and the so a military. service -- -- -- for for it agencies

is when business existing the economic So comes it very downturns. to resilient

forward customers, to the Now you next look that over we’ve scheduled portion the business the conversions X in to and fly globe. got the our X majority the around doing be -- we’ll them networks and those next that the from growth -- leases the of of over years,

of types are flying customers e-commerce-type they’re So for similar and that deliveries performing things. those

the down you and more see to the a that Then we XXXX, we it’s in economy general -- will that around a if for the look doesn’t we be be ABC those want demand scheduled aircraft to that at backup. alignment X in a a to out the much it with in we’ve farther assets there’ll company other much provide. the cargo, or have words, cases, and again, like have down network global resilient currently air so more later and In up resilient type. because got can little the on another to that’s need demand. airplane, lease got some demand on resilient general And the have company cargo turn more trade We’ve list. business depending more business we When bit the years, lot the that network global of or where X e-commerce tends and assets tends

or say will that I got So the built-up enough slots be also point for we then think that and if the and of we’ve type deal we’ve that that lot at this there houses in things do things, other any other a should in believe or take our a those either certainly model in we off we be to be stop softness have step we way with and conversion -- that. in throwing that and stop with, and of can that enough the shift, time. airline’s any the mode then may deposits demand way on we to demand we we’ve slots market on any point shareholders or will growth more time, be cash foot types put the look and would returns things demand got of at a structured always in feedstock buying that airplanes, change we’ll that on that and individual able brake it leasing and to invest converting the part, basis robust return just could of

want with very X ones So the been. of we demand. them to I this strong ones years, same of very for with it’s are A them and as at clear again, is But on I And real market the we’ve ever -- demand or as freighters now, a AXXX, all AXXX, demand them set the leased types this. we’re involved pull aircraft market got look should when that flexible have be here X The change. levers all year. airplanes years out and check And of X that or the X lot are are next strong we XXX that in the taking year the to regularly.

they’re could -- take them. more and still they all take if they so airplanes -- And would tomorrow,

really strong a outlook. got demand we’ve So

Mike Berger

-- meaning has extremely aircraft Chris, been our either harder market XXX specifically. the add is is around just we’ve got to also today, we’ve commitments availability feedstock source never would in that the tight, I --

regards calls purchase have it to the time We folks XXXs, And ability to enough all in we’re us secure from deposits, through from us. who are fielding or those XXXX for the those to take secured all to our aircraft have example. trying aircraft through

FedExes, think world, commitments the the has UPSs strength time Vietnam, growth. compared and that, what’s comments just relates we only sure delivered. XX%; the to India, And recent UPS’s e-commerce you optimism got And FedEx the got -- you And I’ll literally And at specifically, their alive globe. it in make which DHLs, goes that specifically most to even look economies great to of The schedules. point. the look not sales; of of what total to strong. their, I but cross-border it. e-commerce are strength under just really sales -- X% So Rich and being growing like X.X%; across you market confirmed see fly double-digit made of international meaning day and the to e-commerce see across growth, do about still is to I which they’ve their the packages terms Brazil, reiterate of there’s products, as strong the at made if they’ve Mexico, only global results, means in XX%. it when aspect well a

still the you at when early XX% relates look the sales days. And it XX%, of as still XXXX, is retail. total much it’s retail in very e-commerce to So overall growth estimates to out

engine is that demand terms in conversion customers. got over still we’ve to from in again, of So diversification And with place look out feedstock we next well meet few houses as the the as great as everything years.

Quint Turner

Yes.

Another metric this comment, Chris, is Quint.

their those airlines example, that quarter. line our and the about ATI flying XXs, year-over-year the hours first customers, -- the X up up of in and together, we compared the cargo over flew were primary X%. about that are serve so combi XX% half block year Omni -- and XX% those for second last flying, Just, combi ABX course, quarter the lump for prior first ATI’s up the for and we about to up in for And and cargo tax half the XX% quarter, our year, half the the first

big these expanding. The the are recession airplanes, geographies and may some the of fly still kind serve to long-haul right, where network. sensitive, routes be in So And need differentiator customers can the see, between are demand. networks e-commerce-driven that’s of you you and those that their to the more have asset --

Rich Corrado

the travel operating that is in this Airbus lot so kind the outside we’ve if not all, because on section asked have of order the, comments leases we’re these majority is of a that dry leasing of made they’re which cost. of couple going just not products country, comments you the the them. we forward last about The we’re aircraft And book,

The them demand demand, There’s that is tendering like the of comment there’s they freighters. going there’s replacement sources there just just a demand last for operator growth We’re is in are a the and to network fly for to and all I’ll X airplanes. fly. make the operator

the the for AXXX freighter. replacement addressed forward. look XX. when you you direct growth reasons got stopped building The at replacement look kind AXXX When XXXX. They one XXs we of a the is think, key the the I so demand, at going demand, that And we’ve it’s in, of with involved

hasn’t around built And XX% XXX. burn versus it’s somewhere in the AXXX And years. X been so there’s fuel I to advantage XX XX% -- the think there a in

ESG So in great reduction, goals at the being gas forward it that greenhouse role play to footprint all terms emissions -- when and greener to look looking segment ESG of a aircraft the all and that you replacement in is airplane the going goals are and that the -- the serves. airlines for a of carbon business and

Chris Stathoulopoulos

your Okay. one I’ll Rich, more way. throw

there? comfortable of So Airfinance in you made annual It Are the out for like of number you units aircraft this ladder that of report. terms just Journal fleet you number per their CAM grow consider XX, year Would potentially steady the looks fleet top into XX growing XX it management. to tails and put kind under up grinding accelerating as beyond? and look the XXX

Rich Corrado

it’s No, Yes. great a question.

the only I’ll the we’re we’re freighter position. it aircraft you fact the XXXs. what, in we’re to here Prior, of that was all adding of -- largest that world tell We’re really lessor proud leadership and

in did -- of forward, think aircraft the Going down this We we last year you year. to mid-teens just it’s going we’re look dropped if forward, at conversions. going terms in I the XX blend it be plan the going And a to of types. I mean, schedule X of growth our the

year on on got in XX XXXX, schedule. the got we’ve we year, XX the after The schedule. Next that,

XXXX, and slots of in, XX which And start get September we into to got get putting so we’re as AXXX, in we’ll and ramping into we we’ve up start the aircraft with XXXX. through down and AXXXs, course, slots out the you have at Tampa. we PEMCO look own going And do XXX of in MRO, we our our conversions then the own

the we we be freighters more will meet and that the ramping of be We up, serve. customers delivering will to goals

So shareholders. we’re our to to adding our customers leader and position that. now maintaining we’re leadership value more we’re and returns and of looking proud And that to the forward more

Operator

Mr. is from next Our with Galanti Stifel. question

Frank Galanti

availability. I off wanted to start pilot with

of general. just pilots, lack talk about headlines around if higher sort of of a more you bit sort And concerns there’s going sort in to any given that in, side, currently on passenger a of sort the you changes little limiting any in called ATSG? out if concerns, you’re given pilot cost growth having could And desire so a availability so over mode factor And any that there for of are being forward? the the pressures --

Rich Corrado

these year about the we pilot attrition the so all talk we X in great the some We pilot planned employee on days. Yes, in ranks on for not airlines, the the was one going a when some cost No, side. question, plan. this things force that’s refer It’s of there on you. in pressures attrition the to immune Thank it’s from we’re Frank.

And people and training and into training cost. plan your them so is cost is so in, bringing what that on you factored means the

seen have We it be little higher plan. the than a

they For X. on trained per training example, I month, last think X month pilots ATI planned and

what means training having we’re larger so And that classes. is run to

We’re not attracting pilots. problem any having

segments some the in read probably problem attracting there of market, you -- read You is a pilots.

grow a first Based We we’re come ABX ATI, got to where officer able a -- It’s airlines. to major. from on if are, haven’t went to captain we’ve and Omni to quicker go a or to be career and yet. that we good midsized seen a than you

a own you making so jet as your income fly can very And captain. higher large be and

got we’ve people. So good opportunity for a

So a cost it raised has little our bit.

for Amazon the aircraft We at ABX of -- we’ll And we about and ATI that growth going third are the problem pilots a assets we’re talked quarter the to in see putting the we’re into keeping up with for fourth end training quarter. and the the for the and have example, those growing place good getting DHL. in at no

has it affected So us.

year. keeping are the with and we’re it’s into factored -- guidance We our of for and it, up cost rest our the

Frank Galanti

sort angle. bit of of the little to to a from growth I And helpful. question, maybe a back That’s want go different

on other at desire a lessors? the of is experiencing, airfreight? margins? experiencing, of of taking looking rather a through more that industry, there own lease ATSG component for within the is from -- businesses, guess, I of than sort the increased just there the that even current share growth Or you’re demand Or to sort So kind industry question is broader is that of is is, what

Rich Corrado

Yes.

a good the it’s is think that of question. One couple things. A started engine pre-pandemic. growth I e-commerce

period. the X.X-year the so growth accelerate And did pandemic that over

did never people got up. lot And a to never bought who platform brought buying that juiced have it have is online and in and so And what that the would platform probably buy new demand I’ve it adopters involved that that buying would of online. -- gotten

if jets it look what replacement Why been the the at of accelerated, about demand So And there’s for that’s mode before. occurred but dearth higher anybody anybody desert, passenger accelerated getting up would taking in larger demand, out pulling your freighter there. and seats to were checking putting that for the has then you people kind growth I at loading of that of them, fly, talked ready them have were on to the look make And -- picked you cargo and C growth them than of freighters They -- them growth out to much the of freighters was side, right? cargo through that already up? fly out freighters. general mode. air that kind up a up Both with in was

I kind of rightsizing Is it on. of lane. of on is So or right what there’s level do that aircraft? think a a of a narrow-body? what you it see a is now the is that demand kind allocation I And So a demand larger of asset going that Is it medium is part wide-body? need

by being You’ve got XXX your XXXs AXXXs replaced and as are that and example. now an XXXs your

think And becoming we of acquired trends Vietnam X are back from on other Air into Air with and actually basis Canada, I We seen we’ve to the the that leased the we’ve Canada. converted got an But that passenger Canada. of that Air XXXs same announced we’re are combination demand cargo opportunity business. getting then carriers, last now been with the doing year -- Airways. where -- beneficiary them them one exact carriers We AXXX that deal we picking type you’ve that and up. So those profile the of getting is are

X are We acquiring AXXXs them. from

We’re and to converting them them. leasing them we’re back freighters to

freighters. they where more an faced the passenger they carriers that’s I a kind have down engaged they side So the some they efficiently on think could resources where of had situation seen stayed but opportunity of cargo pandemic pull when interesting to have of if number these the had

-- the be market. we’ve if know, that other the got that, freighter the the seen so beneficiary And now want market. to get we’ve they of that you’ve Mike, kind don’t of of and new And we into hope beneficiary comment. segment I demand in to been be continue any to

Mike Berger

be add was a couple And around confident that receivables, be deploying our is that we’re book. ensure thing afford who your can our I are things one of -- to I as credible aircraft I getting reiterate to Vietnam we’re sure that or to in think share. the assets, to for base, these order shape. due really we’re part million that make number things. diligence importantly, deliveries XXXX that going in we just will our customers, prideful customers just customer XXXX and we’re taking great is do, we feel we’re those our market are just which we’re the that -- I’d No, And question receive of us -- most in our going -- going one, $XX-plus would to

perspective. Our receivables have CAM never a been better from

leasing We So important speak, it’s really us. freighters. get to time, inquiries, calls folks all to the so about

we’re you’re business So us business we get folks right that lot their airlines they cases we’re younger present as world. a into situations, of them and freighters, a around lessor to are we doing we folks, the cargo world’s the we or Rich mentioned, them sure to that And We but out. from ask of in when want go inquiries position largest we and with If market. to the leadership very make get careful. not flesh financials their start-up really only

really it’s important So to us.

Operator

Kulisch Our with comes question next from FreightWaves. Eric

Eric Kulisch

I questions. on couple had a time of of one calls. First these

little you. U.S. any dipped in change and in you freight the You your seeing talked have Are a about globally sales of naturally. for I e-commerce very your e-commerce this e-commerce strong mix freight? But being think bit the year, for

Rich Corrado

Yes.

got Eric, visibility -- the packages the and going and the don’t only of we the I iPhones The lot the everything fluids freight. on as airplanes necessarily as thing you and the what’s boxes during and much we in is get could mix was hand styrofoam. because there and in heavier tell pandemic, else, sanitizer package So don’t cleaners to got a and airplanes stuff, the

goes But in been packages other. I growth of, inherent are demand part that one things for think, get distinction of certainly to the really other demand availability. versus questions of derived on One may But there freight network. there Frank of really in for mix from there. our one leasing involved factors mean, a freighters, in we the and be So is for the here and the of about discussion versus is the right? the one of are demand freighters, the asked -- to that’s the has do visibility other So the don’t replacement other -- we -- rightsizing regard freighters. certainly one I buying what is and

demand. a you wants X get it when when around that fleet feedstock And slots we’ve we of in available airplanes in their always about if have no line. an something manufactured our a of are acquisition that’s the looking that’s and for There as freighter proposition freighter lower-risk out for Boeing can’t proactive or example. then getting been X for years, someone So a they’re because or plan us, availability from they exercise

that So availability I think ongoing. able from things is been standpoint, to have the of assets one that we’ve do of

Eric Kulisch

acquisition. going They and through be ask competition guys. bought in see have The Atlas acquisitions? were any big And Air me investors. how you you expanding private yesterday, impacting interest briefly. for a you to you taken any do had taking by that they Wondering any -- Let

Quint Turner

and looking we Yes. shareholders the so closing that saw Atlas we’re on their deal. easy Eric, to We a and like things we I -- of trade the don’t company merits public that on forth. this consider Quint. see We I is comment mean, and mean, and typically obviously, where at be it’s understand they’ll that. news will

different equipment, We the and serve while leasing Atlas, so we’ve have with competed there companies focus our in freighters pointed there the where overall course, of there focused type are long-haul equipment are the business. We’ve portion And we been, focus midsized they on of that of some have, out probably the areas heavily little as more where on where network. quite angle, more integrated the of operate, the course, on big book that they -- than calls, a -- a differences and many is. are

So -- competition, they’re some a really there’s it’s overlap, lot. while not

Eric Kulisch

Got you.

shortages are products it a suppliers Or good that on color. Or at Can last more the it forth of little lines? supply or chain either the and question. And Okay, are assembly these that that’s the or issues into congestion? labor you impacting actually impacted? Is it is being go materials detail some shipping so then is conversions?

Mike Berger

everything. a combination really of It’s of

are a shortage from of seeing metals, of cetera. of A kits, We’re precious demand kits parts et materials, terms and in lot China. these

we’ve to Boeing, later year So will tell of next to that’s few the COVID has start that gone I perspective, worked for example, things the will from which is, et some this But which that China on caused of with lockdowns, as and through well that that obviously labor-related, into slots conversion years. cetera. have mitigate additional delay soon you some is the

XXXs of well, as where XXX we’re multiple ourselves the at be conversions where well MROs conversions. diversifying will done multiple as the in So we’re we’ll as We’ve got do terms our XXX doing locations.

some said having to And the like we’re along, cetera, conversions. conversions for parts, So it’s demand year. of that’s said, we’ve upcoming it. the all by in regards it’s just that, really supplies, materials, the already I like not mitigating it’s we’re in like that multiple timing et easing driving seeing locations And

Operator

Corrado call I’ll Rich final turn Thank you. any remarks. to back the that, And with for

Rich Corrado

again Midsized excellent every care aircraft you, can returns demand over provide. I understanding hope our Thank our all transport hard space. better our for to in transport work network expect to a to efforts have Their that in Thank the ATSG customers. you what take because investment next it of years a customers the make shareholders. of freighter who day of dedicated fulfillment makes will several us e-commerce for remain Carmen. a you employees only strong possible deliver unique

generate and share of aircraft ATSG. flow fund your cash for plenty airlines our leased in you assets with our Thank interest to and growth investors. Our all book order will

Operator

Thank today’s participating, and conclude And disconnect. now you we call. with for that, conference you may

Air Transport Services (ATSG) 5 Aug 222022 Q2 Earnings call transcript