News / Atlas Air celebrates Southern takeover – but rivals claim less competition 'may harm customers'

Atlas Air, which last week announced it is to buy rival Southern Air, is remaining tight-lipped about plans for aircraft acquisitions, but commented that Southern’s “operating platform” was its best asset.

Southern Air operates five 737-400Fs and five 777Fs on behalf of DHL, while its Florida West subsidiary operates three 767Fs for Latam.

The all-cash deal would be for $110m, and the buy is expected to add approximately $100m to Atlas Air’s annual revenues, which were $1.69bn in 2014.

“The most attractive part of Southern Air is its highly complementary 777 and 737 operating platforms,” said Bill Flynn, president and CEO of Atlas in an emailed interview.

“We are eager to capitalise on the opportunities they will provide: the potential for developing additional business with existing and new customers of both companies.”

He added that the takeover was “strategically compelling”.

“It [Southern Air] will be immediately accretive to Atlas Air Worldwide, and the result will be a more diversified and profitable company. Also very attractive to us is the fact Atlas and Southern Air have highly complementary corporate cultures,” he said.

The deal will tie Atlas closer to DHL, its main customer and a co-owner of Polar Air Cargo. One senior air cargo source suggested that while the deal was good for Atlas, it would cut competition in the ACMI market, with the potential to harm customers . “And DHL now has an awful lot of their eggs in Atlas’s basket,” added the source.

Mr Flynn declined to be drawn on competition issues, or on DHL, but said the deal would “drive significant value for all of our customers and shareholders”. And he pointed out that “we have to remember that it is pending customary closing conditions and approval by the US Department of Transportation”.

He also declined to comment on potential redundancies, but said the aim of the company was to grow, which would “provide greater professional opportunities for employees”.

The acquisition will give Atlas more than 75 aircraft across its divisions. The company is thought to be keen to supply Amazon with aircraft if it were to start its own air cargo network, for which it is eyeing 767s. Amazon is thought to have been working with Atlas ACMI rival ATSG.

Atlas’s dry leasing subsidiary, Titan, recently took on two 767s, taking its fleet to more than 10, but Mr Flynn said little about the company’s fleet plans for this year.

“We are committed to discipline in managing our fleet and assessing our growth opportunities, whether organically – such as the two 767s we recently added to Titan’s dry leasing portfolio and that we will also fly on a CMI basis – or through the selective pursuit of business combinations and alliances.

“Ultimately, the size of our fleet … or any decision to buy, acquire or access additional aircraft this year or in the future is going to be driven by the needs of our customers.

“Should a customer have a demand for more 747s, 777s, 767s, 757s or 737s – all of which will now be elements of our aircraft portfolio – we will focus on finding the right aircraft for their needs. Similarly, should a customer require someone who can operate an aircraft of the type that we operate, we will work with them to provide that service.”

The deal is expected to take a few months to complete. He added: “We have tremendous respect for the management team at Southern Air and what they have accomplished, and will continue to rely on them during this period.”

Daniel McHugh, CEO of Southern Air, said in a statement that the airline would “have a strong and viable parent to enable us to continue to grow”.

Earlier this month Atlas hit the headlines over its agreement to settle an antitrust class action lawsuit for $100m, over the allegation of unlawfully fixing prices along with more than 20 other airlines. The cash payments will be made in annual installments over the next three years.

The company admitted no wrongdoing or liability.