About Air Transport Services Group

Air Transport Services Group, Inc. provides aircraft leasing and air cargo transportation and related services. The company leases converted freighter aircraft to customers throughout North America, Europe, Asia, and Africa. The company’s total in service fleet consisted of 128 Boeing aircraft as of December 31, 2022. To support the needs of its leasing customers, and the aviation and logistics industries at large, the company offers a broad array of complementary solutions ranging from flight and ground operations to aircraft maintenance and overhaul services. The company provides a combination of aircraft, crews, maintenance and insurance services for a customer's transportation network through customer CMI and ACMI agreements and through charter contracts in which aircraft fuel is also included. The company’s total in service fleet consisted of 128 freighter and passenger aircraft as of December 31, 2022. To support the needs of its leasing customers, and the aviation and logistics industries at large, the company offers a broad array of complementary solutions ranging from flight and ground operations to aircraft maintenance and overhaul services. Strategy The company’s primary business segment is aircraft leasing. The company acquires used medium wide-body and narrow-body passenger aircraft, manage their conversion into a freighter configuration leveraging its experience as an airline then lease the converted freighters to customers under long-term contracts. The aircraft the company targets for conversion are ideal for express and e-commerce driven regional air networks. As a result, its aircraft can be deployed into regional markets more economically than larger capacity aircraft, newly built aircraft or other competing alternatives. The company’s business development and marketing efforts leverage the entire portfolio of its capabilities to create a customized bundled solution to meet its customers' needs. The company’s ability to offer its customers differentiated services, including aircraft leasing, airline express operations, line and heavy maintenance, and ground handling services makes it unique from other providers in its industry. Services The company operates through two segments, Cargo Aircraft Management Inc. (CAM), which includes the leasing of aircraft and aircraft engines; and ACMI Services, which includes the cargo and passenger aircraft flight operations of its three airlines. CAM This segment owns and leases aircraft through the company’s subsidiary, CAM. The company acquires used passenger aircraft, typically 15-20 years old, and cause them to be converted to a freighter aircraft configuration. Following conversion, the company leases those aircraft externally under long-term contracts to a customer base that includes Amazon.com Services, LLC (ASI), DHL Network Operations (USA), Inc. and its affiliates (DHL), and other airlines, as well as internally to its own airline subsidiaries. As of December 31, 2022, the company owned 111 Boeing aircraft that were in revenue service. The company also owned 15 Boeing 767-300 aircraft and seven Airbus 321-200 aircraft either undergoing or awaiting induction into the freighter conversion process. The company has agreements to expand the fleet through the modification of additional Boeing 767-300 and Airbus A321 and A330 aircraft over the next few years. The company is the world's largest owner of converted Boeing 767 freighter aircraft. The company’s freighter fleet consists primarily of Boeing 767 aircraft, which are desirable in regional air networks because of their reliability, cubic cargo capacity and durable performance. Each of the Boeing 767 aircraft the company acquires and converts to freighter configurationis expected to have an economic life of at least 20 years. The company has agreements with two aircraft conversion providers, Israel Aerospace Industries (IAI) and The Boeing Company (Boeing), to convert additional Boeing aircraft over the next three years. Through a joint venture with Precision Aircraft Solutions, LLC the company has developed a design for the conversion of Airbus A321 passenger aircraft into a freighter configuration and in 2021 were granted a Supplemental Type Certificate (STC) for such design (An STC is granted by the Federal Aviation Administration (FAA) and represents an ownership right, similar to an intellectual property right, which authorizes the alteration of an airframe, engine or component.). The converted Airbus A321 freighter is well suited for air-express service and e-commerce fulfillment over shorter routes with smaller payloads than the Boeing 767. The Airbus A321 can operate with more fuel efficiency than the comparable freighter aircraft variants of the Boeing 737 and Boeing 757. The company has begun acquiring Airbus A321 aircraft for conversion to grow its fleet and further support its ability to meet the growing demand worldwide for narrow-body freighter aircraft. The company has also entered into an agreement with Elbe Flugzeugwerke (EFW) to secure the right to convert 29 Airbus A330 passenger aircraft to a freighter configuration with EFW. The first aircraft induction is expected to occur in 2023. The Airbus A330 aircraft can provide capabilities similar to the Boeing 767 for medium wide-body airlift. The pending addition of this aircraft type to its fleet has already began to open new streams of customer interest and demand internationally. Under a typical lease arrangement, the customer maintains the aircraft in serviceable condition at its own cost. At the end of the lease term, the customer is typically required to return the aircraft in approximately the same maintenance condition that existed at the inception of the lease, as measured by airframe and engine time and cycles since the last scheduled maintenance event. CAM examines the credit worthiness of potential customers, their short and long-term growth prospects, their financial condition and backing, the experience of their management, and the impact of governmental regulations when determining the lease rate that is offered to the customer. In addition, CAM monitors the customer’s business and financial status throughout the term of the lease. ACMI Services This segment consists of the operations of the company’s three airline subsidiaries: ABX Air, Inc. (ABX), Air Transport International, Inc. (ATI), and Omni Air International, LLC (OAI). Each of these airlines is independently certificated by the United States Department of Transportation (DOT) and the FAA. A typical operating agreement for airline services requires the company to supply a combination of aircraft, crew, maintenance and/or insurance for specified transportation operations. These services are commonly referred to as ACMI, CMI or charter services depending on the selection of services contracted by the customer. The customer bears the responsibility for capacity utilization and unit pricing in all cases. ACMI - The airline provides the aircraft, flight crews, aircraft maintenance and aircraft hull and liability insurance while the customer is typically responsible for substantially all other aircraft operating expenses, including fuel, landing fees, parking fees and ground and cargo handling expenses. CMI - The customer is responsible for providing the aircraft, in addition to the fuel and other operating expenses. The airline provides the flight crews, aircraft hull and liability insurance and typically aircraft line maintenance as needed between network flights. Charter - The airline is responsible for providing full service, including fuel, aircraft, flight crews, maintenance, aircraft hull and liability insurance, landing fees, parking fees, catering, passenger handling fees, ground and cargo handling expenses and other operating expenses for an all-inclusive price. The majority of the aircraft operated by the company’s airlines are owned by CAM. Those aircraft are either leased directly to CAM's customer or leased to one of its airlines. A summary of the company’s airlines is below: ABX ABX operates Boeing 767 aircraft exclusively in freighter configuration. ABX specializes in providing aircraft operations to customers in the e-commerce and express delivery markets, with DHL as its largest customer. ATI ATI operates Boeing 767 freighter aircraft and Boeing 757 combi aircraft, which are capable of simultaneously carrying passengers and cargo containers on the main flight deck. ATI operates its fleet of Boeing 767 primarily for the express package industry and freight forwarders, with ASI as its largest customer. It operates its fleet of Boeing 757 combi aircraft primarily for the United States Department of Defense (DoD). OAI In November 2018, the company acquired OAI, a passenger airline, along with its related entities. OAI operates Boeing 767 and Boeing 777 passenger aircraft. OAI carries passengers worldwide for a variety of private sector customers and government services agencies. It provides tailored passenger and government charter services, airline startup and route development services. ABX, ATI and OAI are each participants in the Civil Reserve Air Fleet (CRAF), a National Emergency Preparedness Program designed to augment the airlift capability of the DoD and meet the national security interests and contingency requirements of the U.S. Transportation Command (USTC). The combined efforts of the company’s airlines make it the nation’s largest provider of passenger charter service to DoD and other governmental agencies. Support Services The company provides a wide range of air transportation related services to its customers including aircraft maintenance and modification, ground support and crew training. Aircraft Maintenance and Modification The company’s aircraft maintenance and modification services, which are provided primarily by its subsidiaries Airborne Maintenance and Engineering Services, Inc. (AMES) and Pemco World Air Services, Inc. (Pemco), provide airframe modification and heavy maintenance, component repairs, engineering services and aircraft line maintenance. Another subsidiary, AMES Material Services, Inc., resells and brokers aircraft parts. AMES and Pemco are certified by the FAA under Part 145 of the Federal Aviation Regulations (FARs). Pemco performs passenger-to-freighter and passenger-to-combi conversions for certain Boeing series aircraft and has begun performing passenger-to-freighter conversions for Airbus A321 aircraft. Both AMES and Pemco own many STCs and similar approvals issued by the FAA which are marketed to its customers. Ground Support Through the company’s subsidiary, LGSTX Services Inc. (LGSTX), it provides labor and management for cargo load transfer and sorting; the design, installation and maintenance of material handling equipment; the leasing and maintenance of ground support equipment; and general facilities maintenance. LGSTX also resells aviation fuel at the airpark in Wilmington, Ohio. Crew Training The company’s support services also involve the training of flight crews, which it offers through its subsidiary, Airborne Training Services, Inc. (ATS). ATS is certificated under Part 142 of the FARs to offer flight crew training to customers. ATS also offers Boeing 757 and Boeing 767 flight simulators which can be rented by customers for use in conjunction with their flight training programs. Major Customers The company has long-standing, strategic customer relationships with ASI, the DoD, and DHL. Regulation The company’s subsidiaries’ airline operations are primarily regulated by the DOT, the FAA, and the U.S. Transportation Security Administration (TSA). In addition, other laws and regulations to which the company is subject, and the agencies responsible for compliance with such laws and regulations, include the following: The labor relations of the company’s airline subsidiaries are generally regulated under the Railway Labor Act, which vests in the NMB certain regulatory powers with respect to disputes between airlines and labor unions arising under collective bargaining agreements; The Federal Communications Commission regulates the company’s airline subsidiaries’ use of radio facilities pursuant to the Federal Communications Act of 1934, as amended; The U.S. Customs and Border Protection issues landing rights, inspects passengers entering the United States, and inspects cargo imported to the U.S. from the company’s subsidiaries’ international operations, and those operations are subject to similar regulatory requirements in foreign jurisdictions; The U.S. Centers for Disease Control and Prevention has authority to impose requirements related to the mitigation of communicable diseases, such as requiring masking on aircraft, negative test results, collection of passenger data for contact tracing, quarantine requirements; The company and its subsidiaries must comply with the U.S. Citizenship and Immigration Services regulations regarding the eligibility of its employees to work in the U.S., and the entry of passengers to the U.S.; The company and its subsidiaries must comply with wage, work conditions and other regulations of the Department of Labor regarding its employees; and The Office of Foreign Assets Control (OFAC) of the U.S. Department of the Treasury, the Bureau of Industry & Security (BIS) of the U.S. Commerce Department, and other government agencies administer and enforce economic and trade sanctions based on U.S. foreign policy concerns, which may limit its aircraft sale and leasing business activities in and for certain countries. History Air Transport Services Group, Inc. was founded in 1980. The company was incorporated in 2007.