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ATSG Q3 fraught with challenges, growth

By control on November 9, 2011

The third quarter of 2011 brought mixed results for Air Transport Services Group, which reported a 17 percent, year-over-year, revenue hike despite a net loss of $4.8 million. Considering the challenging economic landscape and the departure of one key client, it’s a loss that could have been much more pronounced, ATSG officials asserted.

“Our business model, which emphasizes balanced, market-sensitive assignments of converted freighter aircraft between long-term dry leases and shorter-term wet lease or ACMI agreements, continues to generate strong cash flows even in uncertain economic conditions,” ATSG CEO Joe Hete said in a statement. So much so, in fact, that the airfreight service provider saw a 34-percent, year-over-year, surge in adjusted pre-tax earnings.

Not that the third quarter was without adversity, Hete explained. ATSG’s longtime client DB Schenker continued to phase out its dedicated U.S. airfreight network in favor of an outsourcing relationship with DHL, he said, and ATSG contented with weakened freight volumes worldwide.

Fortunately, Hete said, ATSG was able to improvise. “We are responding to those changes by reducing our costs, removing DC-8 and 727 freighter aircraft from service, and offering DHL access to additional 767 and 757 aircraft to meet their requirements related to their outsourcing relationship with DB Schenker,” he said in a statement.

In fact, ATSG is working with DHL to add North American freight routes to its network, including cargo previously handled in the Schenker network.

The popularity of dry leases is also helping ATSG stay afloat, Hete told company stakeholders during a conference call. Since March 2010, Hete said his company has “placed greater emphasis” on utilizing its extensive freighter fleet to increase profitability.

“Those six quarters have produced more growth and more consistency on our cash-flow progress than any similar period, thanks in large part to the 21 [Boeing] 767 freighters we have deployed with external customers under long-term dry leases,” Hete remarked.

Quint Turner, ATSG's CFO, similarly praised the company’s ability to stay profitable despite an onslaught of challenges. “We continue the trend of solid operating results in the third quarter, generating strong operating and cash-flow returns,” he stated.

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