Air Transport Services Group, Inc.

Q2 2024 revenue was $488 million, down $41 million or 8% year over year. GAAP pretax earnings were $10.7 million versus $49.7 million a year ago, and diluted EPS was $0.11 versus $0.49. Adjusted pretax earnings were $17 million, down $41 million, and adjusted EPS was $0.19, down $0.38 year over year; adjusted EPS improved $0.03 sequentially from Q1. Adjusted EBITDA was $130 million, down $27 million year over year. Free cash flow was $92 million in the quarter, with $107 million year to date; operating cash flow was $137 million and adjusted free cash flow was $110 million. For 2024, ATSG raised adjusted EBITDA guidance to approximately $526 million, cut capital spending guidance to $390 million from $410 million, and said third-quarter adjusted EBITDA should be similar to Q2 with a marked improvement in Q4. Management also expects ACMI Services to be profitable for the full year and said full-year CapEx will decline by more than $400 million versus 2023.

Mike Berger framed the quarter as proof that ATSG’s Lease Plus strategy is working, emphasizing the company’s in-demand midsized freighter fleet and continued demand for 767s and A330s. He said the expanded Amazon flying agreement remains on track, with 10 additional aircraft expected to be fully ramped by peak season, and noted the company has already leased 4 more 767 freighters to external customers since the end of June. His tone was confident but disciplined, repeatedly stressing safety, customer satisfaction, cost control, and the need to “do what we say we are going to do, no excuses.”

Quint Turner focused on the financial bridge from lower revenue to stronger cash generation. He said the Q2 revenue decline came from both CAM and ACMI, while CAM pretax earnings fell $16 million due to $9 million more depreciation, a $6 million revenue decline from fewer 767-200 engine cycles, and $4 million more interest expense; ACMI posted a $7 million pretax loss versus a $24 million gain a year ago, hurt by 10% fewer total block hours, a $3 million Amazon warrant amortization hit, and higher maintenance, travel, and ground-service costs. On capital allocation, he highlighted $70 million of Q2 CapEx, down 64% year over year, $25 million of asset-sale proceeds, $489 million of revolver availability, $131 million of debt reduction since the start of the year, and a targeted leverage ratio of about 2.9x by year-end.

Analysts pressed on the supply-demand balance for midsized freighters, and management said demand remains solid, with expectations to deliver double-digit aircraft by year-end and into 2025. Questions also focused on ACMI profitability and timing; management said third quarter will still carry transition costs, but Q4 should benefit from all 10 additional Amazon aircraft flying, seasonal peak opportunities, and scheduled contract price increases, with ACMI profitable for the full year. Other topics included pilot attrition, where management said turnover is down about 50% from last year and there are no crew disruptions, and 2025 labor agreements, which management does not expect to settle until sometime in 2025.