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Atlas Air Worldwide said shareholders voted Tuesday to approve the company’s sale to a group of private investors, led by Apollo Global Management (NYSE: APO).

The provider of aircraft leasing and outsourced air cargo and passenger operating services said shareholder approval for the buyout was “overwhelming,” with 99.3% votes in favor representing 81% of the outstanding shares of stock. 

The private equity consortium, which includes J.F. Lehman & Co. and Hill City Capital, agreed to acquire Atlas Air (NASDAQ: AAWW) in early August for $3 billion plus about $2.2 billion in debt. Atlas Air said it expects the deal to be finalized in the first quarter of 2023, at which point it will be delisted from the Nasdaq exchange. The stock is up nearly 19% since the acquisition was announced.

Atlas Air has 45 Boeing 747 freighters in its fleet, more than any airline in the world. It operates 20 Boeing 767-300 aircraft for Amazon Air under a crewing arrangement in which the retailer provides the aircraft. Other customers include express delivery providers such as FedEx, the U.S. military, charter brokers, freight forwarders, airlines, manufacturers, sports teams and private charter customers.

The company will continue to be led by CEO John Dietrich and the current executive team.

Difficult third quarter

Atlas Air disappointed investors in the third quarter with net income cut in half to $60 million, primarily because of operational disruptions associated with a steep increase in COVID-19 cases and the effects of Hurricane Ian that slammed into Florida in late October.

Cargo revenue of $1.1 billion was 16.8% higher than in 2021 on 10% fewer block hours, the time interval between an aircraft closing its doors until arrival at the destination terminal. Passenger revenue fell nearly 40% on a 44% drop in utilization. Revenue increased despite lower aircraft utilization because of higher rates and fuel surcharges.

Operating expenses of $1 billion were far higher than the company or analysts expected. The outbreak of COVID cases reduced crew availability, and Hurricane Ian increased travel costs and made it difficult to reposition crews because many commercial passenger flights were canceled. The company also attributed elevated costs to increased pilot pay resulting from a new collective bargaining agreement, higher overtime pay due to sick calls and increased heavy maintenance.

The reduction in aircraft utilization brings into question whether Atlas Air has adequate flexibility in its system to withstand operational surprises, Cowen analyst Helane Becker noted.

Atlas continues to hold on to capacity by purchasing 747s when their leases expire. The air transport services company expects to complete the remaining two of five purchases for 2022 during the fourth quarter.

The third quarter may be the last time Atlas publishes quarter results.

In late November, Atlas Air took delivery of the third of four 747-8 freighters ordered from Boeing in January 2021. The second-to-last 747 produced before Boeing shuts the production line will be operated full time for global freight forwarder Kuehne+Nagel.

Mediterranean Shipping Co. also recently turned to Atlas Air to operate its startup airline with four Boeing 777s. MSC Air Cargo is scheduled to launch service in December once Boeing delivers the first 777 to Atlas.

The U.S. Air Force also renewed its agreement with Atlas Air to train pilots and flight engineers for Air Force One, a modified version of the Boeing 747-200. Under the five-year agreement, which Atlas Air has held since 2007, Air Force crews will receive ground and flight-simulator instruction at Atlas Air’s training center in Miami.

Click here for more stories by Eric Kulisch.


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