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Growing volumes and rising yields saw Atlas Air yesterday announce an increase in first quarter revenues to $590m. Reported operating income grew from a mere $40,000 to $9.6m, while adjusted EBITDA increased $29.9m to $93.8m.

“We’re off to a strong start in 2018 and we expect this to be an exciting year for Atlas,” CEO Bill Flynn told analysts in an earnings call. “We reported significant first quarter earnings growth this morning and we are increasing our full-year 2018 outlook.”

Start-up costs and investment hit cashflow, with cash halving since December to $147.5m. The cash was “primarily related to capital expenditures and payments for flight equipment and modifications, including the acquisition of 777-200 aircraft, 767-300 aircraft to be converted to freighter configuration, spare engines and … engine performance upgrade kits,” said the company.

Atlas admitted that rising interest rates could impact future financing, but Mr Flynn said: “We’ve done really well with our financing … overall on a weighted average basis we’re really in a very good position.”

While block hours were steady, yields grew strongly.

CFO Spencer Schwartz said: “We saw stronger yields. We’re seeing stronger yields in our charter business … every month of the first quarter were greater than the prior year. So we’re seeing strong yields in charter in particular and our ACMI revenue per block hour is higher than the prior period, and higher than our previous expectations.

“So we’re seeing increased revenue and that flows through to the bottom line … greater yields leading to greater earnings.”

Atlas also announced that it had placed a second 747 with DHL Global Forwarding, on an ACMI basis, and had “expanded our relationship with DHL Express” after acquiring two 777Fs.

The company was bullish on the prospects for this year.

“We now expect volumes to raise approximately 19% to around 300,000 block hours, revenue to exceed $2.5bn and adjusted EBITDA to exceed $500m,” said Mr Flynn. ”We expect that our full-year adjusted net income will increase more than the mid-20% level we previously shared. We now anticipate our adjusted net income to grow by a low-to-mid 30% rate this year.”

Analysts raised concerns over IATA’s recent release heralding the end of the burst of demand that air freight has seen recently. But Mr Flynn said IATA’s data didn’t fully cover the market.

“[How IATA looks at the market] is a bit unfortunate, because from our view, they only capture about 75% of what’s moving in international air freight.

“They’re not really capturing express and by extension they’re not capturing charter, and they’re not capturing e-commerce if they’re separate dedicated e-commerce flows.

“So we think that IATA is only reporting on about 75% of the market. But the segments they’re not capturing, I would argue could well be the higher growth rate segments of the market.”

He added that it was perhaps more relevant to follow customers such as DHL Global Forwarding, and operators such as FedEx and UPS.

“Express carriers …are seeing higher rates of growth. So I’m not saying IATA is wrong, but they’re not capturing the full market … We’ve encouraged IATA to think about that, and a more fulsome view might provide all of us a better picture of where growth is.”

Atlas said it was in continued negotiations with its pilots, and was expecting increased costs associated with a growing fleet.

“We need to hire crews, train crews and there’s a cost to all of that as you saw in last year in particular,” said Mr Flynn. “2019 will be the first full-year for flying all 20 Amazon 767s for them without any start-up costs… So yes, we will enjoy more efficient and more profitable business going forward.”

DHL Global Forwarding said yesterday that its new freighter would operate a network which includes the US, South Korea, China and Germany.

“Demand is currently exceeding supply, mainly due to the large economies performing strongly. On major trade lanes volumes are high, but capacities are low – a trend that will continue. To increase our operational efficiency and to offer our customers the best-possible solution, we thus decided to create further capacities we have direct control over,” said Tim Scharwath, CEO DHL Global Forwarding.

You can see Atlas Air’s full results on Seeking Alpha.

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