During its earnings call today, Atlas Air Worldwide Holdings CEO William Flynn revealed that “revenue and earnings in the second quarter were below our expectations, as air cargo volumes and yields were affected in the near term by the widely reported impact of tariffs and trade tensions.”
The situation is unlikely to improve in the near-term, as earlier today U.S. President Donald Trump announced via Twitter that he would impose an additional 10% tariff on $300 billion in Chinese imports, beginning Sept. 1.
Atlas reported a 0.3% year-over-year decline in operating revenue to US$663.9 million for the second quarter. Operating income also declined, by 85.3% to $9.0 million. However, net income was $86.9 million for the quarter, thanks primarily to income tax benefits.
According to the company’s statement, higher overall volumes during Q2 were contributed by an increase in ACMI flying that was somewhat offset by a decrease in charter flying. The ACMI increase did not positively impact Atlas’ income, as the increased flying was “more than offset by higher crew costs” and increased maintenance expenses. During a call with analysts to discuss the Q2 results, CFO Spencer Schwartz said maintenance costs would be lower in H2.
Labor disputes between Atlas and its pilots’ unions also had a negative impact on its Q2 earnings, as Flynn added, “our results during the period were impacted by labor-related service disruptions.” In a separate statement, Robert Kirchner, the executive council chairman for Teamsters Local 1224 – the union representing Atlas Air pilots – said, “The lack of pilots and overpromising of services to customers like Amazon Air are resulting in operational chaos.” Kirchner added that the “poor planning” and disorganization “led to more than 400 flights without an assigned crew in July.” However, Atlas ultimately managed to crew most of these flights.
A U.S. Court of Appeals decision early in June found in favor of Atlas Air and another Atlas subsidiary, Polar Air Cargo Worldwide, in a dispute with their pilot unions. Atlas had argued that a work slowdown encouraged by the Atlas Air pilot union was affecting its operations.
Looking ahead to the rest of 2019, Flynn said Atlas expects “full-year adjusted net income will total approximately 80% of our 2018 adjusted net income.”Like This Post