Atlas Air Worldwide Holdings today announced second-quarter 2019 income from continuing operations, net of taxes, of $86.9 million, or $1.61 per diluted share, compared with a reported loss of $21.1 million, or $0.83 per diluted share, in the second quarter of 2018.
Reported results in the second quarter of 2019 included $59.8 million of tax benefits related to the favorable completion of an Internal Revenue Service examination of the company’s 2015 income tax return and an unrealized gain on outstanding warrants of $42.3 million. Reported results for the second quarter of 2018 included an unrealized loss on outstanding warrants of $50.0 million.
On an adjusted basis, EBITDA totaled $86.4 million in the second quarter this year compared with $125.5 million in the year-ago second quarter. Adjusted income from continuing operations, net of taxes, in the second quarter of 2019 totaled $4.5 million, or $0.17 per diluted share, compared with $49.7 million, or $1.75 per diluted share, in the year-ago quarter.
“Revenue and earnings in the second quarter were below our expectations, as air cargo volumes and yields were affected in the near term by the widely reported impact of tariffs and trade tensions,” said Chief Executive Officer William J. Flynn. “In addition, our results during the period were impacted by labo
“With manufacturers and shippers taking a wait-and-see approach regarding tariffs and trade issues during the course of the quarter, we experienced a softening in anticipated commercial cargo block hours and yields in our Charter segment. On the military side of Charter, our cargo hours were in line with our expectations for the quarter and were up from the first quarter of this year as we anticipated they would be, but passenger demand for the military was less than expected.”
Mr. Flynn added: “Although these factors are near-term headwinds for our industry, we are well-positioned and managing through them, and are maintaining our focus on our longer-term strategies and growth drivers.
“Our actions include ongoing continuous improvement initiatives designed to increase productivity, enhance efficiency, and grow the business. Additionally, we remain committed to negotiating a competitive collective bargaining agreement for our pilots. Our recent bargaining sessions have made progress, and we look forward to the upcoming scheduled sessions to continue that progress toward an agreement that all parties want.”
He continued: “Based on current conditions, we now anticipate that our full-year adjusted net income will total approximately 80% of our 2018 adjusted net income.* Despite the present trade tensions and the resulting impacts on global airfreight, we have the right building blocks for the future, including our world-class employees; the modern, efficient, diversified aircraft and services that customers want; our focus on express, e-commerce and fast-growing markets; the scale and scope of our enterprise; and our leadership position in global aviation outsourcing.”
Revenue in the second-quarter of 2019 was relatively in line with revenue in the second quarter of 2018. Higher volumes during the period reflected an increase in ACMI flying that was partially offset by a decrease in Charter flying.
Higher ACMI segment revenue during the period reflected an increase in 767 and 737 flying, the start-up of 747-400 flying for new customers, and incremental 777 flying, partially offset by a decrease in the average rate per block hour primarily related to the growth in smaller-gauge 767 and 737 CMI flying.
ACMI segment contribution decreased during the quarter as increased levels of flying were more than offset by higher crew costs, including enhanced wages and work rules resulting from the interim agreement with pilots at Southern Air; additional heavy maintenance expense; and increased amortization of deferred maintenance costs. In addition, segment contribution was impacted by start-up costs for customer-growth initiatives as well as labor-related service disruptions.
Lower Charter segment revenue during the period was primarily driven by lower levels of flying and a decrease in average rate per block hour. Block-hour volumes primarily reflected a year-over-year decline in cargo and passenger demand from the military, and lower cargo demand from commercial customers reflecting the impact of tariffs and global trade tensions. The decrease in average rate primarily reflected lower commercial cargo yields (excluding fuel), partially offset by an increase in rates for the military.
Lower Charter segment contribution was driven by the decrease in commercial cargo yields and volumes related to the impact of tariffs and global trade tensions; a decrease in military cargo and passenger flying; and additional heavy maintenance expense. Results were also affected by labor-related service disruptions.
In Dry Leasing, higher segment revenue during the quarter primarily reflected the placement of additional 767-300 converted freighter aircraft throughout 2018, as well as the placement of one 777-200 freighter in July 2018, partially offset by the scheduled return of a 777-200 freighter in March 2019 that is awaiting placement with a customer. Lower segment contribution was primarily due to the scheduled return of that 777-200 freighter in March 2019, partially offset by the placement of additional aircraft.
Higher unallocated income and expenses, net, during the quarter primarily reflected the recognition in the second quarter of 2018 of a refund of aircraft rent paid in previous years; fleet growth initiatives; and increased amortization of a customer incentive asset.