Air cargo craft operator Atlas Air Worldwide Holdings, which saw net income and revenues plummet year-over-year in the first quarter of 2016, said it expects earnings and cash flow to grow over time thanks to new agreements with e-commerce behemoth Amazon.
Air cargo craft operator Atlas Air Worldwide Holdings will provide airfreight services to e-commerce giant Amazon, Atlas Air Worldwide said today.
Under the agreements, Atlas Air Worldwide’s subsidiary Atlas Air, Inc. will operate 20 B767-300 converted freighters for Amazon on a crew, maintenance and insurance (CMI) basis. In addition, Atlas Air Worldwide will provide dry leasing through its Titan Aviation leasing unit.
“We expect this service to begin in the second half of this year, become accretive starting in 2017, and scale up to full service and full accretive benefits through 2018,” Atlas Air Worldwide CEO William J. Flynn said in a statement.
Dry leases will be for 10 years, while the CMI operations will have a term of seven years, with extension provisions for a total term of 10 years.
In connection with the agreements, Morgan Stanley & Co. LLC is serving as financial advisor to Atlas Air Worldwide. In addition, Cravath, Swaine & Moore LLP is serving as legal advisor to the air cargo craft operator.
Amazon was also granted warrants to purchase up to 20 percent (after the issuance) of Atlas Air Worldwide’s common shares for $37.50 per share over a period of five years. The e-commerce giant was also granted warrants to purchase up to an additional 10 percent (after the issuance) of Atlas Air Worldwide’s common shares over seven years at the same exercise price.
“Our agreements with Amazon to provide and to operate 20 Boeing 767-300 converted freighters, in support of the continuing expansion of Amazon’s e-commerce business and to enhance its customer-delivery capabilities, are expected to be meaningfully accretive to our future earnings and cash flows,” Flynn said.
Atlas Air Worldwide’s net income totaled $471,000 for the first quarter of 2016, compared to $29.2 million for the first quarter of 2015. Revenues for the quarter fell to $418.6 million, compared to $444.8 million for the same period in 2015.
Although during the first half of last year, airfreight benefited from increased demand driven by U.S. West Coast port congestion, Atlas Air Worldwide anticipates the majority of its earnings in 2016 will be generated in the second half of the year, given the inherent seasonality of airfreight demand.
Looking into the second quarter of 2016, Atlas Air Worldwide Holdings said it completed its $110 million acquisition of Southern Air Holdings April 7.
Amazon taps Atlas Air for airfreight services
