- Reported Net Income of $107.1 Million
- Adjusted EBITDA of $243.7 Million
- Adjusted Net Income of $121.8 Million
- Robust 3Q21 Outlook
Atlas Air Worldwide Holdings, Inc. has announced second-quarter 2021 net income of $107.1 million, or $3.53 per diluted share, compared with net income of $78.9 million, or $3.01 per diluted share, in the second quarter of 2020.
On an adjusted basis, EBITDA totaled $243.7 million in the second quarter this year compared with $247.0 million in the second quarter of 2020. Adjusted net income in the second quarter of 2021 totaled $121.8 million, or $4.10 per diluted share, compared with $123.2 million, or $4.71 per diluted share, in the second quarter of 2020.
Second-quarter 2021 Airline Operations segment performance improved significantly compared with the prior year that included exceptionally high commercial cargo Charter yields in April and May 2020.
“Our strong performance continued in the second quarter, with revenue and earnings exceeding our already high expectations,” said Atlas Air Worldwide President and Chief Executive Officer John W. Dietrich. “These positive results were driven by our team executing our strategy, increasing the utilization of our aircraft, and delivering safe, high-quality service for our customers.
“Our performance continued to benefit from operating the four 747 freighters and one 777 freighters we reintroduced to our fleet throughout 2020. This capacity, along with a tremendous team effort, contributed to our ability to enter into and extend long-term agreements with strategic customers, as well as to capitalize on lucrative short-term opportunities in the strong global air freight market.
“Economic and supply chain conditions remain favorable for air cargo and our dedicated freighters. These include global airfreight volumes exceeding pre-pandemic levels, an acceleration of e-commerce and express growth, low inventory levels, positive Purchasing Managers’ Index readings, as well as congestion, long lead times, and elevated pricing for ocean freight. Demand also continues to exceed available supply, particularly on long-haul international routes, as belly capacity on a significant number of widebody passenger aircraft remains out of the market.”
Mr. Dietrich added: “I would like to thank all our employees for safely supporting our customers and the global supply chain during this time of continued need. While the operating environment remains challenging due to the ongoing pandemic, the market dynamics we are seeing in the third quarter remain strong.
“As a result, we expect revenue of nearly $1.0 billion and adjusted EBITDA of about $250 million from flying more than 90,000 block hours in the third quarter of 2021. In addition, we anticipate adjusted net income to grow approximately 50% compared with adjusted net income of $82.7 million in the third quarter of 2020.*
“Given ongoing economic and market-related uncertainties, including COVID-19 and the Delta variant, as well as travel restrictions, low international passenger travel, and other factors, we are providing a third-quarter outlook, but not issuing a further outlook at this time.”
Second-Quarter Results
Volumes in the second quarter of 2021 increased to 93,190 block hours compared with 84,966 in the second quarter of 2020, with revenue growing to $990.4 million versus $825.3 million in the prior year period.
Higher Airline Operations revenue primarily reflected an increase in flying and a higher average rate per block hour. Block-hour volume growth during the period was driven by our ability to increase aircraft utilization as demand for our commercial cargo Charter and CMI services increased. This demand reflected growth in airfreight volumes from pre-pandemic levels, the ongoing reduction of available cargo capacity in the market, and the continued disruption of global supply chains due to the pandemic.
In addition, segment revenue benefited from the operation of four 747-400 freighters we reactivated throughout 2020 and a 777-200 freighter that was previously in our Dry Leasing business, as well as improved AMC passenger Charter flying compared with the prior-year period. The increase in the average rate per block hour was primarily due to higher fuel costs, partially offset by lower yields (excluding fuel) compared with the higher market yields during the early months of the COVID-19 pandemic, specifically in April and May 2020.
Higher Airline Operations segment contribution in the second quarter of 2021 was primarily driven by the positive factors benefiting segment revenue mentioned above as well as lower heavy maintenance expense. These improvements were partially offset by lower yields (excluding fuel) as described above.
In Dry Leasing, segment revenue in the second quarter of 2021 was relatively unchanged compared with the prior year period. Higher segment contribution was primarily due to lower interest expense related to the scheduled repayment of debt.
Higher unallocated income and expenses, net, during the quarter primarily reflected a $26.9 million reduction in refunds of aircraft rent paid in previous years, a $20.2 million reduction in CARES Act grant income (which was excluded from our adjusted results), and increased professional fees.
Reported earnings in the second quarter of 2021 also included an effective income tax rate of 23.5%. On an adjusted basis, our results reflected an effective income tax rate of 22.4%.
Cash
At June 30, 2021, our cash, including cash equivalents and restricted cash, totaled $760.5 million compared with $856.3 million on December 31, 2020.
The change in position resulted from cash used for investing and financing activities, partially offset by cash provided by operating activities.
Net cash used for investing activities during the first six months of 2021 primarily related to capital expenditures and payments for flight equipment and modifications, including pre-delivery payments for 747-8F aircraft, spare engines, GEnx engine overhauls, and performance upgrade kits.
Net cash used for financing activities during the period primarily related to payments on debt obligations, partially offset by proceeds from debt issuance.
Half-Year Results
Reported results for the six months ended June 30, 2021, reflected net income of $197.0 million, or $6.59 per diluted share. Results for the first half of 2021 compared with net income of $102.3 million, or $3.92 per diluted share, which included an unrealized loss on financial instruments of $29.7 million, for the six months ended June 30, 2020.
On an adjusted basis, EBITDA totaled $425.0 million in the first half of 2021 compared with $368.2 million in the first half of 2020. The first-half 2021 adjusted net income totaled $194.0 million, or $6.55 per diluted share, compared with $153.1 million, or $5.87 per diluted share, in the first half of 2020.
Fleet Management
We actively manage our fleet to profitably serve our customers with modern, efficient aircraft. Between May and August 2021, we acquired three of our existing 747-400 freighters that were previously on lease to us. In May and June 2021, we also reached an agreement with lessors to purchase five of our other 747-400 freighters at the end of their existing lease terms, which range from March to December 2022. Acquiring these eight freighters underscores our confidence in these assets and the global air freight market. Keeping these aircraft in our fleet ensures the committed capacity to our customers and strong returns for Atlas in the years ahead.
Labor
We have moved closer to completing a new Joint Collective Bargaining Agreement (JCBA) with our Atlas Air and Southern Air pilots. The union has provided the company with the integrated seniority list, the scheduled arbitration hearings concluded in April and both parties submitted post-hearing briefs in early June. We now expect to receive the arbitrator’s binding decision late in the third quarter.
Outlook*
We expect market conditions to remain favorable in the third quarter and for our initiatives to continue driving strong performance. We are also closely monitoring developments related to COVID-19 and the Delta variant, and any associated impact on global airfreight, operations, demand, and economic activity.
For the third quarter of 2021, we expect revenue of nearly $1.0 billion and adjusted EBITDA of about $250 million from flying more than 90,000 block hours. In addition, we expect third-quarter 2021 adjusted net income to grow approximately 50% compared with adjusted net income of $82.7 million in the third quarter of 2020.*
This outlook reflects the contribution of long-term customer agreements with favorable rates and guaranteed levels of flying; high levels of aircraft utilization driven by strong customer demand; and commercial cargo Charter yields to remain above typical seasonal levels.
We also expect third-quarter results to continue to be impacted by ongoing pandemic-related expenses, including pilot premium pay and operational costs for providing a safe working environment for our employees.
For the full year in 2021, we expect aircraft maintenance expense to be lower than 2020, and depreciation and amortization to total about $275 million. In addition, core capital expenditures, which exclude aircraft and engine purchases, are projected to total approximately $105 to $115 million, mainly for parts and components for our fleet.
Given ongoing economic and market-related uncertainties, including COVID-19 and the Delta variant, as well as travel restrictions, low international passenger travel, and other factors, we are providing a third-quarter outlook, but not issuing a further outlook at this time.
Other than with regard to revenue, we provide guidance only on an adjusted basis because we are unable to predict, with reasonable certainty and without unreasonable effort, the effects of future gains and losses on asset sales, special charges and other unanticipated items that could be material to our reported results.*
