- Reported Net Income Increased to $89.9 Million
- Adjusted Net Income Grew to $72.2 Million
- Adjusted EBITDA rose to $181.3 Million
- Strong 2Q21 Outlook
Atlas Air Worldwide Holdings, Inc. has announced a first-quarter 2021 net income of $89.9 million, or $3.05 per diluted share, compared with $23.4 million, or $0.90 per diluted share, in the first quarter of 2020.
On an adjusted basis, EBITDA rose to $181.3 million in the first quarter of 2021 compared with $121.2 million in the prior-year period. Adjusted net income grew to $72.2 million, or $2.45 per diluted share, in the first quarter of 2021 compared with $29.9 million, or $1.15 per diluted share, in the prior-year period.
“Our performance was driven by the strength and flexibility of our global business model and our team continuing to capitalize on the current airfreight environment, with demand and yields that are well above typical seasonal levels,” said Atlas Air Worldwide President and Chief Executive Officer John W. Dietrich.
“Our results also benefited from flying four 747 freighters and one 777 freighters that we reintroduced to our fleet throughout 2020 to serve customer demand.
“I would like to thank our team for continuing to deliver safe, high-quality service for our customers in this very challenging operating environment. We flexed our global network and increased aircraft utilization to match airfreight demand. We also positioned ourselves for the future by entering into and extending numerous long-term charter agreements with strategic customers.”
Mr. Dietrich added: “We are off to a very good start in 2021 and are seeing continued business momentum in the second quarter. We are closely monitoring the market and leveraging the diversity of our business model. This includes being prepared to capitalize on global market conditions as well as being able to successfully adjust to any changes.
“With the strong global demand for airfreight outpacing air cargo supply, we anticipate airfreight demand and yields to remain strong, with capacity on long-haul trade lanes remaining tight. An international passenger flying on widebody aircraft has been slow to recover, and will likely be last to return as countries continue to struggle with COVID-19 and many borders remain closed. Recent passenger air traffic has largely been driven by pent-up demand for domestic and regional leisure travel with smaller-gauge aircraft, which is less impactful to international airfreight.
“In the second quarter of 2021, we expect to fly approximately 90,000 block hours, with revenue of approximately $950 million, and adjusted EBITDA of about $210 million. In addition, we anticipate adjusted net income to grow approximately 30% compared with adjusted net income of $72.2 million in the first quarter of 2021.*
“Given ongoing economic and market-related uncertainties, including COVID-19, new variants of the virus, surges in cases globally, travel restrictions, low international passenger travel, and other factors, we are providing a second-quarter outlook, but not issuing a full-year 2021 earnings outlook at this time.”
Segment Reporting Change
Beginning with our first-quarter 2021 results, we have changed our operating and reportable segments to reflect the evolution of our business. As the ACMI and Charter services have become more similar, we view and manage them as one segment.
We now have two operating and reportable segments: Airline Operations and Dry Leasing. Previously, our operating and reportable segments were ACMI, Charter, and Dry Leasing. Our Airline Operations segment provides outsourced aircraft operating services to customers on an ACMI, CMI and Charter basis. No changes have been made to our Dry Leasing segment.
First-Quarter Results
Volumes in the first quarter of 2021 increased to 88,523 block hours compared with 73,247 in the first quarter of 2020, with revenue growing to $861.3 million versus $643.5 million in the prior-year period.
Higher Airline Operations revenue primarily reflected a significant increase in flying and a higher average rate per block hour. Block-hour growth during the period was driven by increased demand for our commercial cargo Charter and CMI services, reflecting higher airfreight volumes and a reduction of available cargo capacity in the market, the disruption of global supply chains due to the pandemic, and our ability to increase aircraft utilization. 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. Partially offsetting these improvements was lower AMC passenger Charter flying as the U.S. military has taken precautionary measures to limit the movement of military personnel. The increase in the average rate per block hour was primarily due to an increase in higher-yielding commercial cargo Charter flying, partially offset by lower fuel costs and an increase in CMI flying.
Higher Airline Operations segment contribution in the first quarter of 2021 was primarily driven by the positive factors benefiting segment revenue mentioned above. These improvements were partially offset by: higher pilot costs related to premium pay for pilots operating in certain areas significantly impacted by COVID-19; increased pay rates we provided to our pilots in May 2020; and higher heavy maintenance.
In Dry Leasing, segment revenue and contribution in the first quarter of 2021 were relatively unchanged compared with the prior-year period.
Lower unallocated income and expenses, net, during the quarter primarily reflected CARES Act grant income of $40.9 million, which has been excluded from our adjusted results.
Reported earnings in the first quarter of 2021 also included an effective income tax rate of 23.7%. On an adjusted basis, our results reflected an effective income tax rate of 21.9%.
Cash
On March 31, 2021, our cash, including cash equivalents and restricted cash, totaled $714.0 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 quarter 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.
Labor
We remain committed to reaching a new Joint Collective Bargaining Agreement (JCBA) with our Atlas Air and Southern Air pilots and have moved closer to completion. Scheduled arbitration hearings concluded on April 1, 2021, and the union has now provided the company with the integrated seniority list, which is a critical item for implementing the new JCBA. The next step is for both parties to submit post-hearing briefs. The arbitrator will then consider all of the information presented and render a binding decision, which we expect in the second half of this year.
Outlook*
We expect to fly approximately 90,000 block hours in the second quarter of 2021, with revenue of approximately $950 million, and an adjusted EBITDA of about $210 million. In addition, we expect second-quarter 2021 adjusted net income to grow approximately 30% compared with adjusted net income of $72.2 million in the first quarter of 2021.*
Our outlook anticipates commercial cargo charter yields in the second quarter of 2021 to remain above typical seasonal levels, but below the historically high yields experienced during the second quarter of 2020.
We expect second-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. We also expect higher pilot costs related to the increased pay rates we provided to our pilots in May 2020.
For the full year in 2021, we continue to expect aircraft maintenance expense to be lower than 2020, and depreciation and amortization to total about $270 million. In addition, core capital expenditures, which exclude aircraft and engine purchases, are projected to total approximately $110 to $120 million, mainly for parts and components for our fleet.
Given ongoing economic and market-related uncertainties, including COVID-19, new variants of the virus, surges in cases globally, travel restrictions, low international passenger travel, and other factors, we are providing a second-quarter outlook, but not issuing a full-year 2021 earnings 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
