Change of dynamic: air freight demand now 'the reverse of three weeks ago'
Air freight demand is expected to plummet as consumers in Europe and the US are ...
Atlas Air is reducing its fleet owing to the soft market, as well as cutting other costs.
Announcing a $293.1m loss for 2019, management said the carrier had parked four 747-400 converted freighters, would return a 747-400 to its lessor, and had sold a 757F, with a further 777F and 737 also being sold.
“Demand has been soft,” said chief executive John Dietrich, in his first earnings call in the role. “In that environment, the last efficient aircraft get parked first. The demand has not been there.”
He added that they could be returned to service relatively quickly, with two available within 45 days. As for the “non-essential aircraft” being sold, he said: “We believe the market is right to monetise those.”
Chief financial officer Spencer Schwartz said the proceeds would be used to “shore up the balance sheet”.
Other costs cuts, he said, would include optimising the crew schedule, leveraging technology and streamlining maintenance, as well as “other things [you do] in a soft market”. This would include, “appropriately managing our headcount” and “limiting” services from sub-contractors.
Investors were also keen to understand if there had been improvement in union relations. Mr Dietrich said the carrier had “taken all steps to move the process forward”, but the “union had refused to honour” terms in the agreement.
The frustration of Atlas management is clear in the court documents submitted last week. It asked the court to order the union to provide the integrated seniority list, which it has so far failed to do, thereby holding up the process. Once the list is received, there will be nine months of bargaining – unless issues are resolved more quickly – and an arbitrator will then adjudicate on any remaining elements.
“We truly believe that we are pressing ahead as quickly as we can,” said Mr Dietrich.
Some pilots, however, responding on social media to the news of Atlas’ results, continued to protest against management, and suggested that the recent retirement on the same day, of the pilot training director and a fleet captain, was indicative of poor relations between the two.
The other key question from investors was about the impact of coronavirus. Atlas expects a likely surge in demand soon, it said, and was already fielding calls from shippers.
Noting that the impact had so far been negative, Mr Scwartz said the market was starting to change “quite dramatically”.
“We are starting to see tremendous demand and a rise in yields,” he said, as factories return to full production over the next 10 days or so.
“We anticipate a surge – but our view is evolving.”
Mr Dietrich added that Atlas was “really well-positioned to take advantage”.
“Even when the bellies are back there will be an enormous amount of demand, given the setbacks experienced.”
Noting that many carriers would not re-launch passenger operations to China until April, he said that “pent-up demand” would build, which favoured maindeck freighters.
“The passenger bellies won’t move the needle that much,” he said.
Mr Dietrich, who in general sounded less sure-footed on the call than his predecessor Bill Flynn, also paid homage to pilots who had volunteered for charter flights to China, and said they had agreed premium pay for them.
But he added: “We are being careful not to take on too much risk on the upside, until things are clearer.”
Atlas made a fourth quarter net loss of $410.2m, while adjusted ebitda was $204.7m, and adjusted net income was $98.2m. The full year adjusted ebitda was $504m, with adjusted net income of $139.6m. You can see the full results here.