After securing one of the most noteworthy e-commerce deals of the year, it was expected that Atlas Air would report a loss for the third quarter, related to expenses incurred for the agreement to operate freighters for online retailer Amazon. But the immediate future appears rosy for parent company Atlas Air Worldwide Holdings (AAWW) as the carrier heads into what is expected to be a strong peak season.
For Q3 2016, AAWW reported a loss of US$7.5 million, which was a 40 percent improvement over the $12.5 million loss recorded in the same quarter in 2015. In both cases, the losses came as a result of “non-deductible expenses” caused by the Amazon deal. Adjusted after-tax income from operations for the quarter fell 10.7 percent, year-over-year, to $27.4 million.
Under the deal, AAWW has agreed to purchase and operate a fleet twenty converted 767-300Fs, providing “Prime Air” service for Amazon across the United States. AAWW is also hiring and training flight crews and securing freighter conversion spots. In addition, Amazon is acquiring up to 30 percent of AAWW’s common shares, which led to “accelerated compensation expenses” that were greater that the revenue generated during the quarter, a situation that is expected to continue into 2017, the carrier said.
AAWW president and CEO Bill Flynn, however, said that Atlas’ non-Amazon-related business – including ACMI, CMI, and charter service – performed well in Q3, and is anticipating a strong peak season across its entire customer base in the latter part of the fourth quarter.
“During the third quarter, we continued to focus on increasing our alignment with the faster growing express and e-commerce markets,” Flynn said, “We placed our first aircraft into service for Amazon in August, and we moved forward with preparations to ramp up to 20 by the end of 2018.”
Atlas also “made significant progress” toward integrating Southern Air into AAWW’s operations. “Thus far, the contributions and synergies from Southern Air and its express-focused Boeing 777 and Boeing 737 crew, maintenance and insurance services have exceeded our expectations,” Flynn said.
So far, AAWW had acquired 18 of the remaining 19 aircraft for the Amazon agreement, and has locked in conversion slots for all of the passenger-to-freighter conversions. No specific schedule, however, was revealed for the delivery of the converted aircraft.