(Natural News) The Air Transport Services Group (ATSG) announced earlier this week that two of its major partners – technology and retail giant Amazon and logistics firm DHL Express – are reducing flight schedules for their contracted fleets in response to weaker e-commerce demand.
ATSG provides aircraft leasing and outsourced transportation services for cargo customers. While it issued an outlook for slower growth in 2023, it said demand for leased aircraft still remains strong and that lower levels of aircraft utilization will moderate profit growth. The consensus estimate on Wall Street was for a nine percent growth in adjusted operating profit.
“Clearly, 2023 will be a transition year for us, due to both a changing mix of leased freighters in service and changes in flight schedules from customers of our U.S. airlines,” ATSG President and CEO Rich Corrado said.
ATSG’s third-quarter revenues grew 11 percent year over year to $517 million. Through the first nine months of 2022, the contractor-adjusted operating profit grew 24 percent to $478 million compared to the same period in 2021 and was on track to reach $640 million for the year.
As Amazon is unlikely to renew leases for eight of 12 Boeing 767-200 converted freighters due to expire between May and September, ATSG said it it will deactivate three of the 767 freighters because the airframes are hitting age limitations. The other five planes will be leased to other customers or sold if the Seattle-based tech company would not extend the leases.
Amazon is ATSG’s largest customer, representing about one-third of its revenue, and owns just under 20 percent of its stock. The second-largest customer is the Department of Defense and next is DHL, which holds 13 percent of the aviation holding company’s annual revenue. (Related: Freight companies expect “muted peak season” due to waning retailer demand.)
Amazon shifts business with new partner Hawaiian Airlines
A FreightWaves article stated that the announcement seemed to exclude Amazon’s agreement with Hawaiian Airlines back in October last year to provide them with necessary aircraft and operators to advance its air cargo ambitions, including 10 Airbus A330-300 converted freighters, which the retail company is leasing through Altavair.
According to an Amazon official at that time, the A330s are replacement aircraft for older Boeing 767s that will exit the fleet in the next two years as their leases expire.
“These A330s will not only be the first of their kind in our fleet, but they’ll also be the newest, largest aircraft for Amazon Air, allowing us to deliver more customer packages with each flight,” Sarah Rhoads, vice president of Amazon Global Air, said in a company blog post.
Rhoads added that Amazon has been expanding its fleet since its first aircraft took flight in 2016, using them to move inventory quickly between warehouses. “Today, Amazon Air has more than 110 aircraft in its global network. The new aircraft will be introduced as the company phases out older planes in its fleet,” she added.
According to a Hawaiian Airlines securities filing, the airlines will provide the online retail giant with air cargo transportation services for an initial term of eight years under the agreement, which can be extended further. As per the document, the commercial airline will supply flight crews, perform maintenance and certain administrative functions and procure aircraft insurance.
“Amazon will pay the company a fixed monthly fee per aircraft, a per flight hour fee and a per flight cycle fee for each cycle operated. It will also reimburse Hawaiian Airlines for certain operating expenses, such as fuel,” the filing also included.
The airline issued Amazon warrants to acquire up to 15 percent of its common shares in the next nine years. The e-commerce company entered into similar warrant agreements with Atlas Air and ATSG in 2019.
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