ATSG - Earnings call 4 2023 | Air Transport Services Group, Inc.

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Operator

Good day, and thank you for standing by. Welcome to the Q4 2023 Air Transport Services Group, Inc. Earnings Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded.

I would now like to hand the conference over to your speaker today, Joe Payne, Chief Legal Officer.

Joe Payne;Chief Legal Officer

to call. quarter welcome XXXX full and conference earnings morning, our and fourth year Good our release issued We earnings market closed. yesterday after the on atsginc.com. It's at website our

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

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

the SEC, both labor supply be longer constraints, factors the agreements level operating lenders airline's market control customers and may of perform current and loss customers, These or chain able persist routes with respect and with changes government other geopolitical share of costs; U.S., to our key not our in impact timing market; impact this and of unplanned may scheduled for a the cost customers; currently including to: customers; in human than crises; with ability the of in interest compliance competitive demand instruments; Form to expect; severe ATSG's charges our in reduction current file certain service in services for aircraft remain the health outside or the but or rates, and configuration; impact more and the agencies; that to we which within on-time result price and the deployments the we general, the include assets in from with are ability economic limited for in XXXX and maintain to XX-K and/or changes contained financial as conflicts, purchase inflation to to timing, the will number, traded and conditions, filings on including our which tensions factors our we we are a cargo mark-to-market time fluctuations week. in time including of to regulatory modify which the aircraft changes; of industry-specific and services,

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

the CEO, turn over for to opening comments. I'll call now his Joe And Hete,

Joe Hete;President & Chief Executive Officer

everyone. Good Thank morning, you, Joe.

you to our our the market impact results our recall half include resulting These the may in fourth in quarter segment multiple year, in leasing quarter. from block call, airline of changes environment reduced significant financial As in our lower some we our and that operations. saw third demand headwinds hours second in continue to the

XXX-XXX freighters, our reduced approximately CAM pandemic factor our million acceleration which $XX were originally planned. built in during than starting longer kept in so XXXX, Amazon service network when own in even high express air aircraft more its demand as the the and of customers XXXX. aircraft in in in significant segment lease EBITDA most The adjusted an These returns was by leasing

While has softness the from the we to process. accelerated market the XXXs, envision XXX-XXXs the that transitioning always market

AXXX-XXX results the weighing removed including XX freighters. as aircraft half in lower the also to and operating first X aircraft, leased addition on Airbus in service from year, and XXXs the macroeconomic second fewer engine remaining the we service power-by-cycle are the of fly the lose In our cycles. lease challenges revenue, our revenue we Despite

our earnings Many seen will By for you now, the results are of I'm a Quint the describe financial review challenges release sure guidance to XXXX in we've XXXX. expected moment. our given and in have XXXX. he will of most continue

As we our expectations. has this our the guidance future taking providing of approach included signed EBITDA expected only are we how approach upside a potential EBITDA provide we believe more year. this returns. leases additional Traditionally, of a net $XXX existing million ACMI year, gives to of adjusted signings adjusted conservative better are in result, from this and flying. indicator expected includes Today, of guidance a lease and leases, We forecast which our for a future

We will that. to also outline we upside provide could believe drivers

for XXXX, generating positive challenges discuss for capital capital this Mike I'm our our year. million, outlook, flow cash spending on budgeting Given in our some market the outlook, the expectations of our but and $XXX we specifics free we is reducing aggressively EBITDA are $XXX you XXXX after key the adjusted details to down plan nearly continued of committed levels. XXXX that are gives half million, I'll

Quint will to I to results for that, Quint? fourth Turner financial over the call our turn now the With quarter. discuss

Quint Turner;Chief Financial Officer

Thanks, down quarter, everyone by results was or from Joe, fourth summarizes on by lower welcome million, a year In loss versus pretax million. segment. segment, our saw revenue X% for $XX revenue the $XX X, the financial down year to million to GAAP ACMI million and which in of higher in offset driven earnings Slide the we period. quarter. $XXX us Services the ago in start $XX this I'll a prior morning. pretax of partially leasing This our joining Revenues were

diluted from $X.XX $X.XX. XX $X.XX of XXXX quarter reflecting basis, pretax $XX plan. in additional revenues year and expense settlement six of XX% diluted of in of leased our increased the X% The fourth a aircraft the revenues In XXXs freighters On XXXX. of XXXX share full versus adjusted EPS in an as X from XXX-XXX leased $XX was share termination million, and the fell well to results $X.XX the a frozen XXXs for Airbus with segment, full resulted leasing of million partial pension million earnings down noncash we a year previously per during partial XXXX. to for quarter the and fourth per revenues earnings year, benefit $XX GAAP associated as loss include This a

CAM's and pretax $X for the were XX% earnings million expense XX% higher in respectively. Interest $X million quarter and and fourth down of depreciation full the for were down XXXX, year. the quarter

to related For of CAM's over in versus the decline engine results annual was CAM's due XXX-XXX reduction the primarily and That earnings earnings the year, pretax XX% was in year. in lease million freighters. aircraft pretax less to prior the $XX

CAM-owned external to As leased aircraft X a fewer of XX customers, than were year year-end, ago.

the from removed year. during were freighters XXX-XXX ten Additionally, service

fourth impacts Services a of and of the block unfavorable loss down last flown million, were for lowest quarter, block from the fourth pretax the a In block were the On was $XX million fewer This XXXX. our flown year hours prior segment, X% flown versus military. This $X hours earnings revenue airlines total military represents quarter. the the down by in hours combined X since year. ACMI by driven In for were fourth down the quarter hours quarter military mix XX%. basis, our

slide. next the to Turning

the operations down decline and was driven million year. compared $XXX million, to flown adjusted XXXX million. the lower block a XXX-XXX decline lease remaining EBITDA, resulting declined Our service, lower ACMI engine million and Services ten $X Of by to returns power-by-cycle by million and Services by related airline in block the EBITDA and EBITDA $XX by fewer adjusted to prior XXXs in driven in the revenues. XX% decreased $XX decline our was adjusted CAM EBITDA million. ACMI fourth CAM's in other and hours adjusted $XXX was other lower less down revenue Again, mix. was hours margin quarter in $XX in by

for was growth Total million, and $XXX $XXX our Slide XX spending quarter million CapEx details and capital past million the the $XX X sustaining quarter in for in comprising CapEx. months. CapEx

the months. will increased lower cash the mentioned, $XXX Adjusted million XXXX, we updates cash CapEx. expenditures moment. in and XX% flow, million were up detail Joe capital a was slide our sustaining free in he substantially The to flows by $XXX are next free flow our last Operating of $XX address more net for year. $XXX flow XX As operating cash as adjusted cash for versus trailing measured million projecting which for million, quarter

you available U.S. that end bought X under and year, approximately X.X back credit was shares the quarters. bank past our all first quarter. in million On the $XXX revolver Slide million see the at abroad can over of We X, the the within fourth

Our balance sheet net to ticked X.Xx. up leverage

assumptions turn and discuss slide. discussing Turning outlook spend over I'll the Berger, environment. to Then some President, to to Mike for our the like the XXXX. next I'd market our to time call

approximately For XXXX, XX% of expect the million, $XXX adjusted versus year. prior down we EBITDA

leased income and It and return to $X.XX which XXXX, two XXX-XXX year. when signed we hold adjusted have the XXX-XXXs interest freighters for the also later for EPS this expense only taxes. depreciation, XXX-XXXs in of We reflecting year also others this expire This project this we already assumes and their $X.XX two higher later for year. diluted three Amazon the includes range of from leases leases seven delivery

which forecast any exists We these from currently other believe our commitment. under contribution leases Please note upside contractual excludes opportunities, that this adjusted aircraft or from new EBITDA not additional business million. these materialize, to commercial adjusted teams adjusted basis, are million driving a aggressively opportunities potential in On provide our could $XXX we believe they EBITDA pursuing. combined should $XX additional EBITDA

more to call Joe the discuss and the follow detail. the operating spending up Mike Now in will capital I'll outlook. turn outlook over with environment to Mike? the

Mike Berger;President

Thanks, Quint.

for just our forecast. XXXX you upside see As we mentioned, in opportunity

The lease return let adjusted effect hours with leasing-related block results I returns versus million key Almost remaining. have years higher remaining in drivers actual results. a $XX of expected forecasted decline a revenues. lower amount $XXX lease the XXXX all by the of number do PBC-related EBITDA XXXX me airlines. are of biggest and due of XXX-XXXs forecast of our to along through in the cost the lower the that, XXXs revenue, and useful of our drivers of $XXX life in table in XXX engine million Before decrease of walking the The the EBITDA million lower set of XXX versus the of

last spoke commentary we lower of impacting we quarter, negatively which results noted and outlook. experiencing some was you demand, from their a our lessees customer to When financial

market demand. more that some improvement in the international midsize in leased the reminder, related primarily CAM Furthermore, AXXX deployments, we've particular, Europe serves. recent to international seen seen Asia. more in AXXX we've then, relates freighter it especially months. demand to leasing seen a as particularly and In markets, some we've As Since was in that

to With received regard aircraft to able the design conversion approval into EASA we are these now market. release the freighter European and AXXXs, recently for our

XXXX. for the recently in XXX seen signs continue like market, the XXX. two the the one XXX-XXX leases encouraging extended see older-generation into our also narrow-body aircraft replacement as as AXXX customers We logical to of We've

operational of the stress to capabilities, cost continue reliability will aircraft types. efficiencies our We and all

only As customer our leases Quint under outlook those said, assumes currently commitment.

normalizes market the positioned these well As opportunities take further, to advantage we of are commitments. beyond

turn Hete the Joe call plan. CapEx Now for our I'll to back

Joe Hete;President & Chief Executive Officer

Thanks, Mike.

expect for than $XXX mentioned, our overhauls versus total Day million The $XXX As call, for and of capital you spend XXXX. last expected sustaining our from by versus reduction in reduction CapEx reflects conversions and purchases now XXXX prior we down, third million Investor forecast freighter XXXX gave in $XXX in million growth. fewer million, of from The down sustaining we plan. now the expectations at XXXX million on the Drilling engine million CapEx we expected growth $XX expect our $XXX driven a $XXX fewer CapEx that's feedstock expected quarter $XX is September. reduction and million

spending of ago. AXXXs XX years that we X Those completion in-process outlook freighter aircraft. conversions purchase includes committed of X include the and to several the feedstock acquisition Airbus gross The additional

a we CapEx decrease see expect XXXX. further in ahead, Looking to in growth

is we spending outlook flow for expected improve the generation, for positive reduced cash meaningfully year. free our Our are targeting XXXX to cash and

market our the confident leasing over us our freighter in conditions will for midsize term freighter leader deploy of assets freighters fleet Despite more these allow the midsize investments long Plus strategy. us strength I am improve. market to in and challenges, demand to as the our remain Furthermore, and Lease position the

remarks. Paul our Commercial Chase, and May questions. our with we concludes are and the Officer, Quint Berger, answer have President; That I, first prepared our Mike along ready Chief question? to

Operator

from comes Financial Susquehanna first Christopher with Instructions] [Operator Group. Stathoulopoulos question Our

Anthony Berni

is on for Anthony This Chris.

EBITDA you should 'XX I takes how flying EBITDA year that, year-over-year of XX% this know the full leasing year? we think this and decline of a EPS should we about some how think Your decline. but adjusted guide your implies puts for the versus for [indiscernible] mentioned about year? or And

Quint Turner;Chief Financial Officer

Thanks, Anthony. It's Quint.

the we $XX 'XX, as guide which In just the our CAM on an on million decline there decline of just XXX-XXX you've about XXX-XXXs, big terms the versus was EBITDA factor is the reduction. roughly And got a the mentioned, talked impact CAM has 'XX year-over-year, piece. the piece, we

to of 'XX. And so a adjusted of EBITDA. we for gave how said going range, year-over-year is the sort that was then decline at range in we down there about $XXX of CAM the top in of And total that be million the million, versus $XX the sort top upside, it's and

of million that we the is $XX that's And million. CAM in between course, of some and upside $XXX cited $XXX the million the that

revenue As removals. our it's was about a pretty ended longer are airlines, the a shy decline, the pandemic, because and ABX And down year-over-year -- operating airlines piece certainly the flat. ABX a the the $XX hours far other again, as block is still about to It's X top again, airlines those and XXX-XXX segment, first right, Air range, it's -- at of the And that are million. year-over-year, quarter. little routes of one in the some the of related down,

Anthony Berni

color. kind great But of then notable for returns on That's can contracts. we of less power-by-the-hour any about speak should you moving buckets your side? Are the how Great. bit think And on Anything inflation expense have some a of revenue the in you you XXX-XXX the So little increases? margin, the plus? expecting year? this expense terms

Quint Turner;Chief Financial Officer

some versus plus labor and decline upon of as actually bigger subsidiary those lower we're flying some in we're on cost forth Well, of wage the with that of naturally a headcount the the and efficiencies, so flat expense, taken be we've sort to to -- buckets, in and the salary costs contract measures increase volumes down some on expecting predicting kind depending company. 'XX,

So at a call looking there, to $XX it. it's million, you're decline, million $XX

got anticipated. expense the again, you've line, a On maintenance decline

the least coming forecast expense out you're for of And is at our a decline on roughly maintenance airplanes, looking at $XX line. course, million service. about Some there, of -- year-over-year

that mind, the goods cost in that of our Now that keep handle MROs in sold line. is also includes the offset some revenue

one, maintenance, to big the million the about the $XX course, $XX and another of Coincidentally, there, decline depreciation see then same so we'll about on million line. increase. D&A And figure as is amortization. a some it's And in increase

Joe Hete;President & Chief Executive Officer

Anthony, this Hete. is Joe

Just what to said. Quint follow up on

with Amazon the the our the responsible for heavy for If XXXs think is way the a you about side. versus contract the XXXs, structured of on XXX Amazon, with is example lot maintenance

relative the operating to aircraft what expense those maintenance with smaller the So we than book see is that you'd XXXs.

see So in of to drop as maintenance related the XXXs come out to of the corresponding lease service, the a on top payments of the partial loss total. and the of cycles you'll in or on aircraft offset that expenses loss the --

the year-over-year of Amazon, overall, As down of XXXs are Quint mentioned, if portion piece P&L $XX business. you which in the for flying look our which the revenue it at is for million that about just

Quint Turner;Chief Financial Officer

course, well. that in line, of of Yes, terms interest Anthony, up I was is in terms to -- too, say, the going as

year-over-year, increase happens going a of depend course, But we 'XX. average $XX north with piece upon of degree to cash forward will anticipate that's of north up of that. interest change $XX of course, of interest rate interest that, the about what through of little of and though, rate function, some Some $XX in is million interest. total -- million or only a million The

Joe Hete;President & Chief Executive Officer

and some just of of targeted already that will at the that cost The take would our be last we've that place within companies. piece one businesses, cutting done

Anthony Berni

Great. Final question here.

SWB for this anticipating to agreements speak next you're this you the if Can year? not year. you're for expecting I'm any labor mentioned the of any being terms In year, signed decline. expense guessing you

Joe Hete;President & Chief Executive Officer

that it's an standpoint, agreements, any we'll with Joe have labor again. is bargaining or no, flight open collective From this pilots we our whether agreement with of don't anticipate This the attendants year.

may would of Board. all difference National under being parts the there's in expectation the afford. They're versus on union of a of the you handled expect, stark can auspices side terms Mediation As the believes company the of it what the be the equation what

of negotiating for this haven't any had the yet with year, We the ATI example, sessions equation. side

Omni so with get had so out we contracts this will and attendants pilots don't year, any those have year. We one settled far will the it the that anticipate with probably into roll of flight Omni one XXXX. But this

Operator

Zaffino comes next Oppenheimer. Ian Our from with question

Ian Zaffino

just know your -- in what year, you and service amount? let many how expected XXXs dollar us Can aircraft are much now how the throughout of number are returns either or

Paul Chase;Chief Commercial Officer

in Yes. Thanks service... for the It's question. here. It's will that Paul be XX aircrafts Chase

Joe Hete;President & Chief Executive Officer

end the year. By of the

Paul Chase;Chief Commercial Officer

budget of the we And year. end year. aircraft this that already the the expect reflects come the to by out Right,

Ian Zaffino

Okay.

the amount us You or giving you're the can amount? provide net just

Quint Turner;Chief Financial Officer

I would removed, XXXs Well, April, in for anticipate what, there's be seven we Amazon. think, that

Paul Chase;Chief Commercial Officer

Correct.

Quint Turner;Chief Financial Officer

Paul quoted, having end anticipate we operating at number the XX And what is of... the Ian, the

Paul Chase;Chief Commercial Officer

XXXX.

Quint Turner;Chief Financial Officer

And that's of aircraft associated this came think the have... with removals future anticipated in those -- lot and based XXXs, X But XX, we the cycle and, I out Amazon XXXX. of course, by large, on terms this of early had the the year. that of year of last and sort of age aircraft

Paul Chase;Chief Commercial Officer

Have plenty value. of life

Quint Turner;Chief Financial Officer

cycle We of few life of of next be more removal Plenty in age. to anticipate the the than... terms their rate over years don't

Paul Chase;Chief Commercial Officer

X or X.

Quint Turner;Chief Financial Officer

X time or out X spread during frame. that

Ian Zaffino

Okay. of stock's philosophical question a follow-up, below Great. more just here, but maybe then $XX. And at as a

is value book $XX. Your

you got think that value you or $XX thinking question. doing a you depreciation an so. on are to probably adjustments as about XXXs, you're kind it leave do I way or gap? What at maybe if to the of how some I've are close open

Joe Hete;President & Chief Executive Officer

silver over guidance Certainly, in an giving I'm stock. to Obviously, XX in ] of had of Like I revising hasn't the price months, in of XX there's performance a times. question. it impact been should regard. on it, answer been of you that's the downward what said, our [ terms call have good couple not last bullet a a the that terms It's sure an

the care sector, FedEx, about down forecast everybody talking at trucking on on companies, for overall forecast, companies, for actuals and 'XX is UPS, look you I transportation if then If down shipping don't you're their XXXX.

So it's is of in terms to market and or made see have, finally quickly respect. react the assets come be the positioned able think not we've to that with start that's when to we to forward lot I well in the back. key starting already to whether in near that market terms we investments the 'XX a point rebound if of the turns term, we're the But 'XX a where going around, that to

perspective, but the market our So two to other obviously, operating execution terms of being the better the it's is on we performance the significant I CapEx of better the a one in a things, since That's key, from about by in and spending, the focus mine have talked on November, call on execution in came back from part our a been all as overall. approach of earlier more evidenced terms conservative of standpoint. units part capital reduction

all better cash forward So I a those moving back think be. to position where generating some us a going allocation things capital should start flow more it strategy after balanced the combined, puts up in stock free

Operator

comes Cowen. question Helane TD Becker with from next Our

Helane Becker

quarter and my accruals of question, just an one X pilot anticipation it be will Or So any a reflected follow-up agreement? in taking an Are there after in negotiations the all conclude negotiations. there's you're that agreement? on

Joe Hete;President & Chief Executive Officer

think noted ways a I what coming Helane, think final off I agreement. from earlier, I we're to

$XX example, land it's about you pilot can if ATI at between. salaries in terms for tell side, anybody's I for million year. that in guess is of you, look will finally where the best In the

be, the So using settlement want would is, to depending can expected calculate number standpoint. that the a think target upon from as what negotiation baseline what you a you you

we to negative regard. prepared to not if going that line agreement. So get I'm any obviously and at it's impact when the an point finally comment in bottom this to further just a have

Helane Becker

fewer Okay. doing that fiscal That's then anyway. on you think I helpful said hours the How base for 'XX? And military. about Omni, we think you're should for

Joe Hete;President & Chief Executive Officer

about in over XXXX, if year-over-year at the -- XXXX Helane, perspective. from last was XX% down look starting the you hours military Omni

our basically give military that what hours in flatlined doesn't notice from plan. to you an are, we advanced lot XXXX terms expectations Looking XXXX, a because the of forward for perspective of

for normal as would if the numbers we've if be Quint look But levels, or rebounds what the fourth So at in past business. levels XXXX. the it as for quarter potential to obviously, seen said, that example, we upside numbers, normal a seen that haven't low significant you since

turmoil tells the things kind kind it So all everybody on that position. the military across you the where of is in with are globe, of keeping going

Helane Becker

kind And Right, got on then this it. you lease my of and final question, expirations. answered

a big X last I we versus this is like about 'XX being a or beyond lease a XX feel year 'XX, a X to year for and like X So and lease expirations also should for Because year the was like peak or XX year? expirations. think year

Mike Berger;President

it's Yes. Helane, Mike.

had that the the As Then group we X year. the stated, the of service, years mentioned on have the over next on mentioned, we We'll couple as remaining of in X. XXXs, the we on we by or XX Amazon we the X the XXX side. end anticipate

on the We X returns, not year, come say the lease of should are year, and year one. as well. the Two back late will already the returns, in this had half we've expecting expirations, XXXs very I

an the you're abundance that had So we or of last year lease expired correct in so.

Helane Becker

it historic returns then to level? more But Okay. a

Mike Berger;President

Correct.

Operator

with Stifel. Our question Galanti Frank comes from next

Frank Galanti

to sort And the on other that you flying and less to operators an those Is number wanted ATSG? obviously role experience been Omni's specifically or of block of pure business, the the cargo upside? strategically is a the that the thinking fly down decision? I from on ACMI of words, taking would in from strategic hours perspective, does government? follow indication couple quarters, other through So given planes talk of Can a margin and through negative sense the X downside it make hours, for of block that demand protect have X in because that up to to there's is less of sort -- maybe sort went that. that DoD Or there's

Joe Hete;President & Chief Executive Officer

side, a military is Joe. the piece of business. overall the it Yes. piece of our From remember, small such Frank, this is cargo

X the the We the the month of trips or does airplane from it's what Asia. to It's X demand side that have we've over about seen, down of a of potentially standpoint passenger really military X equation. overall. From

participates keep large the player there. of everybody don't that it not we we're cargo don't tabs aircraft We craft in For the to wide-body participate side have big on program, on since the cargo piece business. But the maintaining terms expense of carrying down, don't of need, a aircraft standpoint attached from in obviously, there's to that the aircraft military an significant you aircraft. the just a putting of

at the So overall fleet our of the we're looking allocation on Omni business. side

class one for said Omni we acquired the that military XXX their to we point XXXX, that we you the As U.S. military the feedstock asset the they types military. way to in looked on time. But respond calls, the need in we accordingly. business. when back key bulk was at be for when a the view our for being as that of in did opportunity to when fact provider the is some use always And cargo prepared #X prided converting of things the We've at that ourselves

to so And to to feel we're cost. at have there's be to composition able the fleet assured, to if sufficient rest overall an able reduce obligation constantly to it's see respond. the But we looking assets opportunity be our

Mike Berger;President

is the that entitlement flying, traditionally overall Yes. it down. But well. important I to provided just not is demand over which its think understand the Omni entitlement, only it's has but also it's as

Frank Galanti

million a and wanted on you lease? of planes sort for those would been release to and from customers' would assume XX. with from messaging messaging changed guidance, leased? planes with would sort are now and press what's on most that ask a from perspective? of Like Are it's historical think with perspective. sort a would of have calls Okay. I have you The assuming not changed available available going And come those of guidance I what out have conversation then be planes for million ATSG's been to $XX on lease, perspective that -- you to some lease $XX out those Like of sort

Paul Chase;Chief Commercial Officer

here. Sure. It's Paul

softer. stronger leases I past, in probability XXXX, think methodology has in we certain would market. include as been the the a the market in saw And the of

and So Joe what more leases we approach customers that up locked comments. with wanted to upside in and then deposits conservative take use going a forward, his were earlier do as and already mentioned have is

Quint Turner;Chief Financial Officer

Yes.

been and Frank, a as four could example, is assumes quarter, two $XXX that in in I leases, place probably already which XXX-XXX this the put likely think first maybe for third So of have million, said, we March.

other in that, $XXX we pursue contribution to good a so says, number, mentioned. returns we particularly on we And to have as than that included that we good believe that we and some the million normalizes, haven't, leases those, -- of make there's we though even continue additional Paul from chance, if also those. And market

starting point $XXX haven't potential what, aircraft. those But ends that have, just of I XX-XXXs, We to three million, we coming think, to leases. And there's in assumed the natural of that. their re-lease current

that $XX certainly spoke that So potential we million that's upside of that of part of.

Joe Hete;President & Chief Executive Officer

the comes assets. be obviously, there in EBITDA on along, company. be of in nothing depreciation revenue if improve overall some And numbers our But factored already, the but will EBITDA but will it the the

Frank Galanti

cash And to ability spend so you. one year. generate you this if question, plan want cash I could free it incremental talk doesn't assets? free about can to flow But appreciate the in. into think I last will Got that, The -- to it sounds you that flow where as squeeze be this like use sort then of investors

Joe Hete;President & Chief Executive Officer

Yes.

will talking a what We're of flow terms bit. significant priority not amount. cash the it expect be a we nominal But year, generation. start about this free generate is to delevering first In going to

X.X debt. our of the in end turns about we're of release, at the our in saw You terms year

down, into at that to able build will but additional flexibility, CapEx we to be give so want as down spend XX% is then roll probably an we the more on here look XXXX. Preliminary pay as we we that we'll significantly a So or us little XXXX sit come have today.

will As XXXX. looking we've be driven by for conversion market course, to be of procured of that's terms in biggest part the the feedstock. a and that the From a already going into And was lot we mentioned conditions large demand what driver standpoint, in assets. see earlier, of

Operator

comes question next Our from Capital [ ]. with Adam LL Ritzer

Adam Ritzer

questions was think in Omni's said did I you. EBITDA they of But generate? how couple A actually 'XX? it much Omni, for you down what XX%. was

Joe Hete;President & Chief Executive Officer

from you've is know airline the significantly the you of an for positive. about we side roughly XXXX to can the the million individually. long Omni as each particular release, I was from down to EBITDA Well, from in is, services equation going overall $XXX been million around $XXX you that tell talk overall earnings Adam, airline don't was overall. What saw still enough

We level in from expect XXXX a of the with basis the of be piece XXX-XXXs contribution the about of going year-over-year number on into of XXXX Omni business. Actually, the because decline ABX largest the they were on same as is to they're biggest and going regard. took be say year. the where the in Amazon -- biggest anticipating this they about hit of behalf contribution the that level same But we're of operating will Omni,

Adam Ritzer

Okay. Understood.

One conversion. XX of the awaiting it in or planes slides you mentioned in there, have

So beyond XX all how much guys million upside $XX this you you there if awaiting, leased I you up, have guess those if is mentioned?

Joe Hete;President & Chief Executive Officer

some is XXXX. in answered, going that all to service And as those those we be not get Well, of the into available of are service. will into Paul expectation already again,

their through think order various the as when additional $XX of at able lease there's conversion EBITDA year. as to to million they magnitude in They're the But because for if came They're out we in lease. were of, one complete of to and are today. available going aircraft the XX in it it's process probably it, call of total. the timing every million in I conversion out, $XX time actually coming points

Adam Ritzer

Okay.

So...

Quint Turner;Chief Financial Officer

a year basis, full but... on Not

Joe Hete;President & Chief Executive Officer

for fiscal just That's 'XX. Right.

Quint Turner;Chief Financial Officer

'XX.

Adam Ritzer

the 'XX Of sitting I ordered. already think how much you it. all for growth of do AXXXs get down? But that of Like -- you you spend, there? these spend were that's I said with that that to you break some Right, need can can of actually Right. planes

Joe Hete;President & Chief Executive Officer

sustaining at about for it's XXXX. number and spending talked million the if perspective it earlier Well, from $XXX from pure CapEx look in then of of balance growth the you of standpoint, terms call about, it is I the that growth in it,

Adam Ritzer

$XXX the so we sitting as of is down putting how possible? are But No, unleased. there growth not little that? that many as that million, mean planes to are I many realize I CapEx Why you that. have

Joe Hete;President & Chief Executive Officer

or where I that we back could certain contracts in a conversion to can as we that acquire year. targeted this XXXX. play point a that if have of all ear market fixed by regard. go depending reduction in commitments if from or we said there to earlier, market are we going demand it upon isn't of the Adam, at to XX% avoid at said But time. we're could avoid we're There's a is respond mentioned is. initially think what feedstock what there it's It lower, it can't again, higher, we it this have I market in aircraft Well, terms what that whether goes we But in the the purchase. couple a we can to go

Adam Ritzer

it. Got

Okay.

$XXX contractually So million? of the much of $XXX million this how for year, that obligated is

Quint Turner;Chief Financial Officer

in 'XX, as that ago. much feedstock years because all those X as almost airplanes of that, made of were to commitments -- -- Adam, we there's X that, actually the Well, buy that some aircraft

just and extent AXXX that four production, that interrupt of we've that we baked that to to process pause to that conversion in And the last quarter, aircraft told midway the sense giving as into you we that can But conversions because the we already. we're -- feedstock not budget those that then in have makes are through. purchased five XXs that aircraft be you got complete So got you've XXXX. will

Adam Ritzer

last think And is contractual have that about be get I contractually of XX%. million, for that it question, much it. earlier, of? Got growth would do how that, obligated $XXX Joe of not you But can how down out let's CapEx? say, you much for said 'XX,

Joe Hete;President & Chief Executive Officer

respond answer to. good part you we are think I a a have will can't Like don't we overall, obligations the But is as it where I them for what number, part obviously right Adam. XXXX. avoid, related it's and this we're that some we it now, of is in from of at pegged the said, market of reduction to

Operator

Stathoulopoulos Group. Christopher with comes question next Susquehanna Our from Financial

Anthony Berni

peak Anthony And of or additional for what airlines or entails? kind opportunistic opportunities on of flying? this that shippers EASA is what you Chris. would Could again types Is expand short-term season This involve? flying related the for

Paul Chase;Chief Commercial Officer

still the opportunities in passenger exist sure. Yes, flying. Most question, of Anthony. the charter Thanks for the

Asia, EU be Omni parts, or and lift, So what in the for come say, additional typically summer help. happens where in in that's will in for carriers the and looking different could

have done fact, they In past. that many in times the

predominantly, exists short from the to month on those that anywhere months. So term, X I passenger short-term side for By X opportunities. define

extended, exist. where primarily but opportunities get the that's those Sometimes

Mike Berger;President

flying as Omni charter that on had around we in stuff. of side. that, -- well around see to holidays, bowl well peak We the seasons, space the to that type do very college tend Additionally

Paul Chase;Chief Commercial Officer

shorter customers Mother's And on cargo for season peak the December, side, see ask Yes. of larger you'll some during integrated additional in Day. course, some us that of lift. the And versions then, of for

Anthony Berni

Great. you're macro globally? In kind us at the slowdown, year, States much, a United a all, anticipating in -- the Kind final of if are guidance you this of And magnitude can that either ballpark for or kind I question. your thinking more of give about? guess a in how or you

Quint Turner;Chief Financial Officer

hope rate talked it. guess, back for second how to DoD has to seen you about to XXXX. already the we've like have passenger go compared flying trended our, the customer, We I of largest XXXX, We

said, the terms about talked Joe as in we've we've those of a -- for flattish we executed of assumed haven't growth. pretty effect that flying. XXX-XXXs on side we contracts in leasing four ACMI outlook already the assumed So where piece only And

in we've -- that I to respect. been conservative So certainly be tried think pretty

significant a So the degradation macro further we beyond that, on haven't assumed side.

Joe Hete;President & Chief Executive Officer

most which do, where be say, think or so we you network, going basically the of downside, Amazon the there about DHL the primary area the should to the most operations relegated some might is be I are assets flying or is which If network upside networks, on airline and of speak. side, time-definite to to the those

don't of from sometime, be will baked the lot there back quarter, later than quarter, So this Amazon we volatility we the add adding the fleet. other of network. At of same beginning what into is we've in, that I maybe will time, a anticipate tail ATI the guess, XXX-XXXs the the there's removal already second which we one additional Amazon-owned

stable the of side from be our cargo So it operations. pretty should

Operator

Joe would final like now comments. over I call Hete for back the to turn to

Joe Hete;President & Chief Executive Officer

direct fleet, since If back such enough, returning occurred Thank discussed competition in shift last company the cargo as I've expansion in changes company, have we entire decision left demand. during U.S. and this free Except growth you. do never to being career for our customer without ATSG XXXX. Since spending on optimist. the business to business flow XXXX. became that's customer DHL's nearly generator scale us the to has a rapid express we'll for November, a rightsize when the independent our us to in airlines CEO market demand also decades reduce to and be. But with used match air to faced public XXXX, spent I an taken have shift we my entire that more including own environment the to we in steps X of that isn't drives our today an fleet cash I'm their from

I back on great cargo intend and as every you, aircraft will long-term work demand of has with I Thank that quality fulfill track shopping around online only ATSG to require and increased. orders for possible. know to the day. people us have day During to career, of their aircraft world, my the a lift put as quickly more appeal

Operator

Thank your you participation. for

may You now disconnect.

Air Transport Services (ATSG) 27 Feb 242023 Q4 Earnings call transcript