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An upbeat Atlas Air announced record earnings last week – but noted that a scarcity of capacity could curb growth potential and that it was considering Airbus conversions.

Volumes in the fourth quarter grew 18% year on year, while revenues rose 19% to $628m; reported income stood at $209.5m, against $28.7m a year earlier.

For the full year, volumes rose 20% while revenues were up 17% to $2.16bn. Income was $224.3m, up from $42.6m. Cash and cash equivalents more than doubled to $305.5m.

Management said 2018 had started very well, but much of the talk on the earnings call with analysts concerned availability of aircraft. Atlas is trying to source more capacity as the market looks set to hold relatively firm this year and beyond.

“The 747-8 line is booked out through a number of years,” said president Bill Flynn. “I think the majority of those are going directly to UPS. So, it will be into their internal networks and not capacity broadly deployed into the market.

“Our estimate is that there are only about eight 747-400s parked – and I’m not sure what condition they’re in. It will take some investment to bring those back into service.

“So, there’s certainly tight capacity in the market. We’ve identified a number of aircraft and leased them. We think that was prudent, as we think about growing demand over the next couple of years and our ability to service that.”

The carrier said it had taken six 747-400Fs on operating leases. Two entered service in September and October, and the remaining four will start operating this year for both ACMI and charter customers, including the military.

Mr Flynn added: ”Given what was available in the market and the lease rates we were able to obtain for those aircraft, it just made sense for us to lease them on terms that meet our business case, and balance risk of how much we’re buying in financing, versus leasing in where and when it makes sense.

“So, going forward, if there’s the right opportunity to acquire an aircraft, we would. We’d have to have really good visibility on the long-term placement of the asset and the earnings we’d generate. And we will balance that, of course, with leasing where and when appropriate.”

He noted that the carrier was also looking longer-term at the potential of A330 conversions, and said Atlas was “anxious to see how that aircraft performs”.

He added: “We’re continuing to study that as a potential next freighter opportunity for us, but that’s a couple of years out.”

The carrier, which now has 12 767-300s operating for Amazon, with the remaining eight set to deliver monthly through this year, said it had also identified six more in the market and it was “looking at them”.

Atlas had little to say on the continued negotiations with its pilots, except that it was “pleased” that the court had provided a preliminary injunction to force its pilots back to work. The company enjoyed a considerable boost from the US Tax Cut and Jobs Act and will give every employee, of which there are about 2,700, a bonus of $1,000.

The carrier is bullish about its prospects this year, noting lack of capacity combining with solid e-commerce demand. It also said it would boost its focus on the Asian market.

The carrier expects a 19% rise in block hours, with 75% of that in ACMI. Net income, it predicted, would grow by about 25%, which will include the benefits of the tax reform. First-quarter EBITDA should be some $90m, while adjusted net income will double in the first quarter.

It added: ”Aircraft maintenance expense in 2018 is expected to total approximately $315m, mainly reflecting an increase in daily line maintenance due to the anticipated growth in block hours. Depreciation and amortisation is expected to total approximately $220m.

“In addition, core capital expenditures, which exclude aircraft and engine purchases, are expected to total approximately $100-$110m, mainly for parts and components for our fleet.”

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