Atlas Air Worldwide Holdings, Inc. (NASDAQ:AAWW) on Thursday reported that revenues in the second quarter jumped 24.3% from the same period in 2019 to $825.3 million, significantly pushing up adjusted net income as the all-cargo operator cashed in on the extreme demand for pandemic relief supplies and high freight rates.
A significant shortage of global air cargo capacity resulting from airlines withdrawing passenger flights during the coronavirus crisis resulted in higher utilization of Atlas' fleet by airlines and shippers.
The Purchase, N.Y., company said adjusted pre-tax earnings totaled $247 million compared with $84.1 million a year prior. Adjusted net income was $4.71 per diluted share, compared with 17 cents per diluted share.
The consensus estimate of analysts was for adjusted EBITDA of $166 million, earnings per share of $2.21 and revenue of $758 million.
"Revenue and earnings in the second quarter continued to exceed our expectations," said CEO John W. Dietrich. "These positive results were primarily driven by the team capitalizing on strong demand and higher yields in our commercial charter and South America businesses. We also continued to provide the U.S. military with essential services and our ACMI customers flew well above their minimum guarantees."
ACMI customers bundle the Aircraft lease with an agreement to operate the plane (Crew, Maintenance and Insurance).
Atlas Air likely benefited from its exposure to the spot market and the ability to take advantage of high market rates, compared to competitor Air Transport Services Group, Inc. (NASDAQ:ATSG), which announced results yesterday, and is heavily involved flying under contract for express networks operated by Amazon.com, Inc. (NASDAQ:AMZN) and DHL.
Cargo charter block hours increased 62% year-over-year on 22% higher yields.
During the quarter Atlas reactivated three 747-400 converted freighters and kept a 777 from its pure leasing business for its own use to meet demand for long-term charter programs, including new agreements with manufacturers such as HP Inc., and large freight forwarders like DHL Global Forwarding, APEX Logistics, DB Schenker, Flexport and Geodis that wanted to secure capacity.
Atlas Air Worldwide's operating companies are Atlas Air, Southern Air and Polar Air Cargo.
Atlas offered full-year guidance of more than $3 billion in revenue and adjusted EBITDA of about $750 million. At the halfway point, Atlas produced $1.5 billion in revenue with adjusted EBITDA at $368.2 million.
"Our outlook also expects approximately 50% of our full-year 2020 adjusted net income to occur in the second half of the year. That would result in 2020 adjusted net income being more than double 2019," Dietrich said.
Historically, Atlas generates the vast majority of earnings in the second half of the year.
The contract flying portion of the business made less money than the charter side because several aircraft underwent heavy maintenance, including engine overhauls, to take advantage of repair shop openings and vendor discounts, Atlas said. Unit results were also impacted by a 10% increase in pilot pay rates resulting from a recent interim agreement and premium pay for pilots operating in certain regions of the world significantly impacted by COVID-19.
Atlas improved liquidity to $739 million from $114 million at the start of the year. The improved cash balance included a $20 million grant from the federal government's bailout program for airlines to keep employees on payrolls with existing wages and benefits through the end of September.
Although all-cargo carriers are faring much better than passenger airlines, Atlas has tightened its belt to stay lean in case the novel coronavirus crisis gets worse. It has reduced nonessential employee travel, the use of contractors and ground staff hiring.