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Amazon start-up costs drag down ATSG's 2016 profit to US$21m

ATSG, a Wilmington-based aircraft lessor, saw its profits decline from US$39 million in 2015 to $21 million last year owing to the start-up of its Amazon contract and pilot strikes despite 2016 revenues rising 24 per cent year on year to $768.9 million.

ATSG president and chief executive Joe Hete was quoted as saying in a report by London's Air Cargo News: "In 2016, we completed a major set of long-term agreements with Amazon in support of its new dedicated air network, and by year-end began leasing 14 of the contracted 20 Boeing 767s for that network.

"A 15th Boeing 767 was leased to Amazon in early January 2017. Our aircraft leasing, maintenance, and logistics businesses met aggressive targets from Amazon and other customers while generating good margins.

"However, our airline operations, particularly those at ABX Air, incurred significant pilot training and premium pay related to expanded CMI operations, along with lower revenues due to a November ABX pilot work stoppage.

"Taken together, these factors reduced our second-half 2016 pre-tax earnings by approximately $20 million.

"After first quarter 2017, we anticipate costs at our airlines to be normalised. That, along with minimal non-cash pension expense in 2017, is projected to result in a profitable year for our ACMI Services segment."

2016 was an important year for ATSG as it expanded its freighter fleet as five Boeing 767-300s commenced service, entered into agreements with Amazon, and acquired conversion and MRO firm Pemco.

Looking ahead, Mr Hete said: "With the majority of our 2017 growth already under contract, we are well positioned to continue benefiting from the powerful trends driving e-commerce investments for faster connections between manufacturers, distributors, and end users."