Air Transport Services Group provided outlook guidance for changes in its operating fleet of cargo aircraft. The guidance was made in anticipation of meetings that ATSG executives held with investors on Feb. 7 at the Stifel Transportation and Logistics Conference in Amelia Island, FL.
ATSG will maintain guidance provided on Nov. 3, 2022, for full-year 2022 adjusted earnings before interest, taxes and depreciation. Q4/22 and full year 2022 results will be announced later this month.
Regarding its outlook for cargo aircraft leases and subsidiary airline operations in 2023 and beyond, ATSG expects to:
- Through its cargo aircraft management subsidiary, complete the passenger-to-freighter conversion and deliver fourteen Boeing 767-300 freighter aircraft in 2023 and sixteen in 2024, most of which will be leased to customers based outside the U.S.
- Complete the passenger-to-freighter conversion and deliver at least six Airbus A321-200 cargo aircraft to fulfill lease orders from customers based in Europe and Asia. A similar number of Airbus A321-200 cargo conversions and deliveries are anticipated in 2024. Deliveries and dry leases, however, are pending regulatory review by the European Union Aviation Safety Agency. ATSG anticipates EASA approvals for the A321-200 design it developed via a joint venture before mid-year 2023.
- Begin the passenger-to-freighter conversion of what it expects to become a leased fleet of thirty Airbus A330-300s, equal to the number for conversion slots it holds. CAM expects to begin leasing A330 freighters in 2024 and continuing into 2028. It has already received customer commitments to lease more than two thirds of those A330 freighters, which are medium widebody aircraft that perform regional missions, but with greater payload and range than Boeing 767-300 freighters.
- Continue to lease into 2024 four of twelve Boeing 767-200 freighters currently leased to Amazon and operated by ATSG’s cargo airlines. Leases for the other eight are due to expire between May and September 2023. CAM expects to retire at least three of the eight due to airframe cycle limitations and utilize the engines removed to support other 767-200 lease customers. CAM expects to re-lease and/or sell the remaining five 767-200 freighters which Amazon may not extend.
- Operate 767 freighters dedicated to principal customers DHL and Amazon for reduced schedules and fewer block hours per aircraft across the U.S. in the first half of 2023 versus 2022. Both companies are adjusting their ground and air distribution and fulfillment networks in the United States to conform to reduced U.S. economic growth and consumer spending levels in the first half of 2023. ATSG’s passenger aircraft operations are likely to face similar effects.
“Despite the macroeconomic headwinds, we expect moderate Adjusted EBITDA growth for ATSG in 2023, reflecting the resilience of our business model. Demand to lease the newly converted freighter types we offer remains as strong as ever,” Rich Corrado, president and CEO of ATSG, said. “The entry into new Airbus platforms along with the significant increase in leasing deliveries will increase our capital expenditures above 2022 levels. But clearly, 2023 will be a transition year for us, due to both a changing mix of leased freighters in service, and changes in flight schedules from customers of our U.S. airlines. I look forward to sharing our outlook for 2023 in more detail when we report our fourth-quarter 2022 earnings results in late February.”
