Atlas Air Worldwide Holdings swung to an $87 million net profit during the second quarter ending 30 June despite drags on earnings, including trade tensions, higher heavy maintenance and lower cargo and passenger flight demand from its military customers.

The Purchase, New York-based parent company of Atlas Air and Polar Air Cargo reported a loss of $21 million during the second quarter of 2018.

Revenue during the second quarter was nearly flat compared with 2018 but "earnings in the second quarter were below our expectations" in part because of broader impacts on global air cargo markets, says William Flynn, chief executive of Atlas Air Worldwide Holdings during an earnings call on 1 August.

Operating revenue for the period was down about 1% year-on-year, from $666 million to $664 million. Operating expenses rose 8% from $605 million to $655 million.

Despite several "near-term headwinds for our industry, we are well-positioned and managing through them", Flynn says. These market conditions still prompted the company to forecast adjusted annual net income for 2019 to be 80% of last year's $204 million.

Aircraft maintenance expense during 2019 is forecast to be $395 million.

The company says it will wait to see how the market performs in the fourth quarter to update investor guidance for 2020.

Flynn will step down from his position in January to become chairman of the board. John Dietrich is the board's appointed successor to be chief executive and has already begun work as the company's president. Both were optimistic about the growth of e-commerce markets and air freight contracts with companies including Amazon.

Global air cargo capacity grew faster than demand in 2018, rising 5.2%, while the freight load factor fell by nearly 1% to 49, according to an annual industry report published on 31 July by the International Air Transport Association. Freight and mail tonne kilometers expanded by 3.4% during 2018, slower than a 9.7% expansion for the full year of 2017.


The quarterly report highlighted "labor disruptions" as a factor limiting revenue. Flynn says there was a negative impact from disruptions during labor disputes, but in response to questions for more detail he says "we're not going to quantify" negative impact from labor disputes.

Contract negotiations between pilots and airlines under the Atlas umbrella are in their third-and-a-half year.

Amazon has said it may consider revising its air cargo contracts if there is no eventual compromise between management and unions. The cargo pilots are represented by Teamsters Local 1224.

"Our recent bargaining sessions have made progress," Flynn says of the dispute with pilots.

The US Court of Appeals in Washington, DC, on 5 July ordered pilots for Atlas Air and Polar Air Cargo to halt what it ruled was a deliberate attempt by the union to slow down work to gain leverage for contract negotiations. The airlines argued to the court that the pilots were increasingly calling in sick on short notice and choosing not to work overtime.

In response to questions about the court's injunction to maintain a productivity benchmark, Flynn says "behavior has improved" although the company has notified the union about some ongoing "disruptive behavior".

Source: Cirium Dashboard