Air Transport Services Group (NASDAQ: ATSG) reported Q2 EPS of $0.35, $0.08 better than the analyst estimate of $0.27. Revenue for the quarter came in at $410 million versus the consensus estimate of $401.76 million.

Outlook:

ATSG continues to expect its Adjusted EBITDA for 2021 to be at least $525 million, or six percent more than 2020 Adjusted EBITDA of $497 million. The forecast projects new leases for sixteen or more 767-300 freighter aircraft in 2021 and CMI flight operations for at least thirteen more 767 freighters for Amazon in 2021. It also assumes no incremental restrictions on passenger air travel or on combi operations stemming from a recent resurgence in Covid-19 infections globally.

Corrado noted that “E-commerce merchandising continues to drive strong demand for freighter aircraft capacity worldwide, and our Boeing 767s are at the center of that global trend. We have orders from companies such as DHL, Star Air, and Amerijet to lease at least ten more Boeing 767-300 freighters next year, and demand from multiple customers for others starting as late as 2025."

ATSG is also accelerating plans to extend its position as the world’s leading lessor of midsize freighters into new freighter types. Toward that objective, ATSG has secured rights for 67 freighter conversion slots with induction dates starting in 2022 through the end of 2025. These slots include Boeing 767-300s, Airbus A321s, and an additional type, the Airbus A330 aircraft.

“The A330 converted freighter, like our 767-300s will be a popular midsized option for our leasing customers,” Corrado said. “The addition of an A330 option will provide our leasing business with a third platform for growth, and complements the A321 freighter we will also introduce next year. Twenty of the 67 conversion slots, beginning in mid-2023 through the end of 2025, are designated for the A330.

"Our airlines continue to see sharp increases in flight operations for our CMI and other air cargo customers. We are optimistic about overall solid gains in the performance of our airlines this year, especially in the second half, as we anticipate further improvement in passenger and combi operations impacted by the pandemic. We will revisit our full-year guidance when we report our third-quarter results in early November."

ATSG's Adjusted EBITDA guidance for 2021 continues to include costs to maintain Omni Air's staffing levels, rates of pay, and benefits as required under its PSP agreements. Adjusted EBITDA, Adjusted Pretax Earnings and Adjusted EPS exclude the recognition of pandemic relief grants Omni Air received in 2021.

ATSG’s capital expenditures are now projected to be approximately $550 million in 2021, up $50 million from our previous guidance. The increase is primarily due to commitments to acquire five more passenger aircraft for conversion, including four Boeing 767-300s and one Airbus A321-200.

"We now expect our capital spending for growth to continue to reflect the unprecedented demand for midsized converted freighters, fueled by e-commerce shopping,” Corrado said. “The cash returns that we achieve from our investments, combined with our balance-sheet liquidity, will allow us to further extend our market leadership in midsize freighter leasing and, when permitted, also allocate capital toward share repurchases and/or cash dividends. Our focus continues to be on maximizing total long-term returns to shareholders.”

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