ATSG revises guidance due to deployment delays

Washington DC
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Air Transport Services Group says its aircraft, crew, maintenance and insurance (ACMI) services unit are being affected by customers delaying deliveries of its aircraft due the soft economy.

"The aircraft deployment delays we reviewed with you in early August became progressively worse from that point forward and not better, as we expected back then," said Quint Turner, ATSG's chief financial officer.

By the end of the year, ATSG will have seven aircraft it needs to find homes for due to delays in redeployments and modifications, says Jon Hete, president and chief executive of ATSG. He says that the medium widebody freighter market for ACMI agreements is the most short-term focused it has been in his nine years with the company, with shorter contracts and longer time between aircraft returns and redeployments.

In August, the airline had four of six Boeing 767-300s in full ACMI service, and the remaining two were scheduled to be deployed at the end of August to two different customers. Both of those transactions were delayed to October.

Furthermore, one of the Boeing 767-300s aircraft in service was returned in September along with a Boeing 767-200 that came back in October from Asia because of regulatory issues. Two other Boeing 767-200s headed for Asia in October were delayed for deployment in the quarter and another customer will return two more in early 2013 from a dry lease.

As a result, Hete says the delays have caused the company to adjust its EBITDA (earnings before interest, tax, depreciation and amortisation) goal for 2012 to $160 million, down from $170 million in August. About $40 million will come from the fourth quarter.

The ACMI unit's third quarter revenues dipped to $102.9 million in the third quarter of 2012 from $118.9 million in the previous year, excluding fuel and reimbursed expenses. Revenues from the third quarter of 2011 in the unit included $24.2 in airline services revenues from D.B. Schenker, which ended its contract prematurely in 2011 after shedding its US freight network.

Third quarter block ACMI block hours decreased 16% from the third quarter of 2011. When excluding those operated for Schenker in the third quarter of 2011, block hours increase by 6%.