Atlas Air gives pilots pay increase on heels of Q1 growth
Contract cargo airline and aircraft lessor Atlas Air Worldwide Holdings beat analyst expectations with adjusted net income of $29.9 million, or $1.15 per diluted share, and total revenue of $644 million in the first quarter due to strong demand for its charter service and higher airfreight rates due to transport scarcity caused by the coronavirus.
Atlas’ stock was up 5.37% to $37.42 prior to noon Thursday and is up more than a third since the start of the year.
The parent company also announced a 10% interim pay increase for 2,200 pilots at two of its operating companies, Atlas Air and Southern Air, effective May 1. Atlas is still in the midst of contentious negotiations with the pilots’ union for a new master contract, but said it wanted to reward the pilots for their hard work during the pressure of the pandemic. Atlas wants to merge the Southern Air pilots into a single labor agreement after acquiring the company in 2016.
The company said it expects strong results for the remainder of the year because its freighters are in extremely high demand due to the shutdown of most passenger airline activity, which wiped out nearly half of total cargo capacity in the market. Governments and businesses are scrambling to find airlift to move medical supplies, but also other goods that are starting to be shipped in greater quantities as manufacturing returns to areas previously under quarantine.
Atlas, however, only provided a specific outlook for the second quarter, saying it expects $770 million in revenue and adjusted earnings before interest, taxes, depreciation and amortization of about $165 million, with adjusted net income growing 40% to 50% above the first quarter level. Net income will double if a refund of excess aircraft rent paid in previous years is included.
Business is so strong going forward that the carrier has reactivated three Boeing 747-400 freighters that were in storage and began operating a Boeing 777 that was previously leased out to airlines to fly by its Titan Aviation subsidiary.
But the first quarter was a mixed bag at times. Revenue for dedicated contract carriage declined about $27.5 million to $278.7 million because some customers cancelled flights, but was partially offset by a revenue increase for providing crew and maintenance to airlines with aircraft of their own. At the same time, Atlas experienced a $22.5 million increase in charter revenue, primarily from the extra use of the 747s.
The carrier is also experiencing higher costs associated with premium pay for pilots operating in areas significantly impacted by the virus.
However, executives remain wary of the uncertain economic environment and are significantly reducing discretionary spending, selling non-essential assets, limiting hiring and shoring up reserves.
“With an exceptionally talented team of employees, a strong balance sheet, and a diversified portfolio of assets and services, Atlas continues to be well-positioned to adjust to market conditions, navigate through the current pandemic, and leverage the scale of our operations to further capitalize on business opportunities,” CEO John Dietrich said in the earnings report.
Second quarter revenue growth will be partially offset by higher heavy maintenance expense, lower contract passenger flying for the U.S. military after it stopped troop movements to limit potential infections, higher pay for pilots and expenses to sterilize planes and other work areas.
In addition, Atlas said, the availability of hotels and restaurants, evolving COVID-19-related travel restrictions and health screenings, and cancellations of passenger flights by other airlines, or airport closures, could further impact its ability to position pilots to operate aircraft.
https://www.freightwaves.com/news/atlas-air-gives-pilots-pay-increase-on-heels-of-q1-growth