Q2 2022 Air Transport Services Group Inc Earnings Call

August 5, 2022

All participants are in a listen on remote. After this speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 1-1 on your telephone. Please be advised that today's conference is being recorded. I would now like to hand the conference over to Joe Payne, Chief Legal Officer. Please go ahead.

Good morning and welcome to our second quarter 2022 earnings conference call.

We issued our earnings release yesterday after the market closed. It's on our website atsginc.com.

Let me begin by advising you that during the course of this call, we will make projections and other forward-looking statements that involve risks and uncertainties. Let me begin by advising you that during the course of this call, we will make projections and other forward-looking statements Let me begin by advising you that during the course of this call, we will make projections and other forward-looking statements

Our actual results and other future events may differ materially from those we describe here.

These forward-looking statements are based on information, plans, and estimates as of the date of this call. Air Transport Services Group undertakes no obligation to update any forward-looking statements to reflect changes in underlying assumptions, factors, new information, or other changes.

These factors include but are not limited to.

The extent to which changes in market conditions impact the number, timing, and successful drafts of aircraft deployments to new and existing customers. The extent to which changes in market conditions impact the number of customers.

The cost and timing with respect to which we were able to purchase and modify aircraft to a cargo configuration.

which may be impacted by global supply change disruptions.

Our operating airlines ability to maintain on-time service and control costs.

Our ability to remain in compliance with key agreements, with customers, lenders, and government agencies.

Persistent elevated rates of inflation and changes in general economic and or industry-specific conditions, such as higher labor costs, increases in interest rates, an economic recession, and downturns and customer business cycles. Failure project to balance the valuation portion, etcetera proposal for coil free business cycles.

The impact arising from COVID-19 outbreaks, including the emergence of COVID-19 variants. The impact of COVID-19 outbreak is also a significant increase in the COVID-19 outbreak, including the outbreak.

Mark-to-market changes on certain financial instruments.

and other factors as contained from time to time in our filings with ESEC, including the Form 10Q we will file next week.

We will also refer to non- GAAP financial measures from continuing operations, including adjusted earnings, adjusted earnings per share, adjusted pre-tax earnings, adjusted EBITDA, and adjusted free cash flow.

Management believes these metrics are useful to investors and assessing ATSG's financial position and results. and assessing ATSG's financial position and results.

These non- GAAP measures are not meant to be a substitute for our GAAP financial s.

We advise you to refer to the reconciliations to GAT measures.

which are included in our earnings release and on our website.

And now I'll turn the call over to Rich Carrado, our president and CEO for his opening comments.

Thanks Joe and good morning everyone.

I'm pleased to tell you that ATSG remains solidly in growth mode.

The second quarter was our fourth and a row of double digit quarterly increases in revenue and adjusted EBITDA over the prior year. The second quarter was our fourth and a row of double digit quarterly increases in revenue and adjusted EBITDA over the prior year. The second quarter was our fourth and a row of double digit quarterly increases in revenue and adjusted EBITDA over the prior year.

Our growth directly reflects that of the principal markets we serve. Dedicated mid-sized freighter aircraft that we lease and fly for major transport integrators and e-commerce merchandisers. For major transport integrators and e-commerce merchandisers.

Our customers are eager to lease all of the cargo aircraft we can deliver.

And the fleets of our cargo airlines are growing even faster than our least portfolio. As our two principal air cargo customers prefer that our airlines fly their own freighters and dedicated networks.

Others are coming to us for the first time, seeking both wide and narrow body freighters for expanding express networks throughout the world.

The comments remain the principal driver of our growth. Consumers still prefer buying online and not just for convenience.

They are also looking for the lower prices they often find online to stretch their own budgets to cover inflation.

We remain direct beneficiaries of the rapid delivery that online shopping requires.

and we'll keep reinvesting the majority of our strong cash flow to meet this demand.

At the same time, we benefited from increased passenger flying.

We fully expect to meet our $640 million captured in May or $1 billion. The report isored to be?? Michael Johnson took the chance to set up his diplomatic commitment to America ahead of an unexpected event toogue the pandemic by each other. The dialogue would reach the big percentage in manufacturing local employment and insurance services of the 22.

We'll deploy 10 lease freighters in 2022, including four 767s and two Airbus A321s in the second half.

That's one Boeing 767 fewer than our prior target, primarily due to the delays at our conversion vendor related to parts and supply chain challenges.

Quinn is ready to review the details of our second quarter results. I'll be back to share more about our very bright long outlook after that.

Thanks Rich and welcome to everyone on the call this morning.

The next slide in our deck hits some of the second quarter operating highlights that Rich mentioned.

Overall, our year-over-year growth in the second quarter was similar to the pace we were on in the first quarter.

Our consolidated revenues for the second quarter grew $100 million to $510 million, and totaling nearly $1 billion for the first half.

As they did in the first quarter, each of our principal businesses, freighter leasing and airline operations delivered strong revenue growth exceeding 20%.

Our adjusted pre-tax earnings again rose sharply of 80% from the prior period to 67 million.

Our adjusted EPS increased 24 cents to 59 cents.

And our adjusted EBITDA of 158 million beat the prior year quarter by 23 percent. The new EBITDA of 158 million I don't want you to know if I ended up making myself in bed?

Our segment earnings grew even faster than revenues after adjusting for government grants in 2021 and intended to protect jobs from pandemic effects in the passenger airline business. Whether they with the

Our ACMI services earnings in the second quarter rose to $22 million from $6 million minus $38 million in 2021 grants.

CAMS pre-tax earnings increase 76%.

Inflation is impacting our airline costs, particularly in travel costs to transfer our passenger service crews to and from their assignments and other employee related expense.

Travel in particular was up more than 50% in the second quarter versus the prior year period. And our salaries, wage and benefits line rose 15%. Two minutes 30km away.

Most of the military passenger flights we operate involve longer overseas travel, requiring augmented flight crews, which makes our costs more expensive compared to our shorter cargo flights, which are over mostly domestic two crew member routes.

On the next slide you can see that our $30 million growth in second quarter, adjusted EVA's A, raised our trailing 12 months pace to 623 million.

Our plan currently calls for more adjusted EBITDA in the second half versus the first.

with a third quarter that is similar to our second quarter and a stronger fourth quarter.

DataSynms lease deployments in line with our revised outlook and Ford Quarter gains from ACMI services that include expanded copy operations and six additional customer provided cargo aircraft. and six additional customer provided cargo aircraft.

On the next slide, you'll see that our capital spending for aircraft purchases and conversions in 2022 so far is $5 million ahead of our 2021 pace.

Most of that spending is for conversion costs, which are growing at a rate consistent with the slower pace of deliveries from our conversion vendor.

Our 19 total aircraft in line for conversion at June 30, includes all of the six we expected to deliver in the second half this year, plus more than half of the 18 on our delivery schedule for next year.

We said last quarter that we would remain in the market for feedstock aircraft after acquiring several of the first half.

We will purchase two more passenger aircraft and place more deposits on 2023 aircraft acquisitions than were in our original 2022 growth budget.

We have increased our growth cat-back's guidance for this year by 30 million to 420 million to cover those purchases and hire conversion costs.

The next slide updates you on our adjusted pre-cash flow. The metric we began providing last year.

Represented by the bottom portion of each bar, it's our operating cash flow, net of our sustaining capex shown on the top.

Once again, the trailing 12 month totals for Gap operating cash flow, shown above the bars, include $83 million in cash we received in federal pandemic relief grants last year. S

Our adjusted pre-cash flow year today is 161 million, down from 207 million a year ago.

operating cash flow declined principally due to an increase in receivables.

The trail in 12 months total of 355 million was also down from 1st quarter's 406 million.

As I mentioned a moment ago, this year's growth CAPX plan is now at 420 million, most of which will come from our adjusted pre-cash flow.

The next slide represents our value proposition over time. Our business model generates significant recurring cash flow while at the same time strong demand for our freighter aircraft provides us with very profitable ways to reinvest it.

Our overall debt to adjusted EBITDA leverage ratio as measured under our bank credit agreements is below two times.

Our credit revolver balance increased to $515 million during the second quarter.

In addition to draws for growth cap expending, we took advantage of an opportunity to repurchase 120 million in face value of the 700 million in 4.75% unsecured notes outstanding. In 4.75% unsecured notes outstanding.

Note repurchases were at an average discount of 5.5% and funded from our variable rate credit revolver now at 2.7%.

The repartures which were funded from the revolver reduced our outstanding debt by nearly $7 million, with an ongoing interest expense benefit based on the difference between the bond coupons and our revolver rate.

In June , Moody's Investor Service recognized the quality of our balance sheet and growth prospects by upgrading our ratings on debt at the corporate level to BA1 just below investment grade. Dr exciting. Thank you.

Moody cited our reduced debt to evadelleverage and strong earnings and cash flow as reasons for the upgrade.

With that summary of the quarter's operating and financial development, I'll turn it back to Rich for some comments on our business drivers, and Outlook. Rich.

Thanks Quinn.

Before I begin sharing some comments on our 2022 performance and outlook, I want to commend, as I always do, the efforts of our employees across all of our businesses.

Derek creates the results that I get to share with investors each quarter. I appreciate the resourcefulness and working towards goals that I know seem challenging at first, knowing they usually find a way to meet or exceed them. I appreciate the resourcefulness and working towards the goals that I get to share with investors each quarter.

They make ATSG a great diverse place to work and make me proud to be one of them.

Last quarter, we reviewed some of last year's accomplishments that are delivering benefits now. The 15 767 Freighters we leased last year, 11 of which went to Amazon, are the largest source of our 2022 growth.

including seven more freighters that Amazon has purchased or leased elsewhere but assigned to us to fly our Amazon dedicated fleet will soon total 49.767 freighters. dollars.

We also noted that the map of our aircraft deployments is expanding rapidly.

Eight of the 10, 7, 6, 7 and Airbus A321 freighters we will place this year are going to non-US customers in Asia, Europe and Canada.

Those customers are pushing ahead with their own cargo networks designed to provide the same e-commerce fulfillment missions as the ones we support in the US.

The majority of our 2023 lease deployments will be headed overseas as well.

And finally, as the next slide shows, we are beginning to add new aircraft types from the Airbus family. And finally, as the next slide shows, we are beginning to add new aircraft types from the Airbus family.

Our joint venture designed a narrow-body Airbus A321-200 freighter as a conversion from passenger aircraft.

CAMS First, two of these smaller but highly efficient freighters, will be leased later this year to its newest customer, ASL Aviation Holdings.

Three other passenger A321s we own will be among at least four we convert and lease in 2023.

ASL based in Ireland and with operations throughout the world has also ordered two of the larger wide-body Airbus A330 freighters who will start to lease in 2024.

A330 freighters are somewhat larger than our Boeing 767-300s.

but serve essentially the same missions in express networks throughout the world.

We hold options to buy Feast Dog Passengers A330s, along with more 767-300s and A321s, that will begin to exercise as part of our 2023 Growth CapEx program.

Here is you do forecasted worldwide reductions in capital investment and slower economic growth in the months ahead.

But you won't find any evidence of that in our least freighter order book.

We already hold deposits for most of the 18 freighters we expected to deploy in 2023, including 14 767-300s and at least 4 A321s, and commitments from longstanding customers for the others.

We also stay in touch with those looking forward to some of the freighters we'll deploy after 2023.

None has indicated anything but a strong interest in building the freighter networks with us.

Of the more than 80 passenger to freighter conversion slots CAM holds for induction from 2022 through 2026, more than 50 are already spoken for by customers in our order book.

This year, Cam is already delivered 4 of the 8, 7, 6, 7, 300 freighters. It expects to lease this year. It expects to lease this year.

Supply chain constraints affecting passenger to freighter conversion businesses have limited our number of additional freighters we can lease.

Moving forward, our conversion vendor expansion, along with reduction in those bottlenecks, will increase the conversion pace next year.

One other thing that bears repeating from last quarter's call is the breakdown of our three principal sources of adjusted EBITDA.

Long-term dry leases of freighters, long-term airline operating agreements with Amazon and DHL, and thirdly, passengers are flying mainly for the Department of Defense.

We get lease revenue whether a freighter is fully or partially utilized.

And the freighters we fly in the Amazon and DHL networks are scheduled generally every day, helping them meet time-definite overnight commitments to shoppers throughout the US, no matter how full an aircraft is on any particular day. Though Philly and remains in service and400 arrive at Bugeewoodarta, they areuntil 3.50 per cent in turn. today.

For OMNI, our flying depends on what the Department of Defense or other government agencies need, regardless of the economy. That includes moving people for military exercises, troop rotations, natural disasters,

personnel moves, and other things that protect readiness and maintain a strong presence abroad.

I don't know of any other company in the transport business with more built-in protection from the risk factors most of you are focused on today.

As the next slide shows, we expect 2022 to be another record-setting year for ATSG with adjusted EPS of $2 per share and $640 million and adjusted EBITDA. As the next slide shows, we expect 2022 to be another record-setting year for ATSG

All of you are reading or reporting this quarter about the impact of inflation on the passenger airlines.

And in particular, about how it is pushed beyond their fuel costs, and should look in into their labor and other operating expenses. And should look in into their labor and other operating expenses.

ATSG is largely insulated from higher fuel prices, which are passed on to our customers under our operating agreements.

But like the other airlines, inflation is affecting our employee costs and to a lesser extent other categories, more than we expected when we set our 2022 guidance last February .

When we talked in May.

We were already somewhat ahead of our projected pace to 640 million and adjusted EBITDA.

Today we expect to achieve it via on-schedule lease deployments, resumption of our full schedule of condi flying for the US military.

Cauts controls and price for recovery where we can achieve them and a strong fourth quarter in both cargo and passenger flight. And a strong fourth quarter in both cargo and passenger flight.

Net net. We expect our third quarter adjusted EBITDA to look a lot like our second.

with significant improvement in the fourth quarter.

But I'm also focused beyond 2022. On investments we will make to drive our earnings on the adjusted free cash flow higher in 2023 and beyond. owe us this opportunity for the Smart key users to drive our earnings on the offset and underwent a system with a tailored platform SH645 and a PVA dryer that is being performed through a cooking cables and equipment and satellites. On investment we will make at adjusted free cash flow higher in 2023 and beyond.

We see forecast that still indicate freighter conversion and new freighter production capacity will remain tight.

Those supply limitations plus uncertain cargo space availability on passenger aircraft will keep freighters in strong demand for several years. In strong demand for several years.

Investing our capital into that trend makes great sense to us.

Many of you have asked about our plans for cash returns to shareholders when restrictions expire at the end of September .

The Board of Directors is very focused on this as well, and we look forward to having the ability to allocate cash between growth opportunities and share repurchases.

after the restrictions expire.

As a reminder, the Board's existing authorization for ATSG share repurchases is still in effect, with significant repurchase authority remaining.

In the meantime, the people of HDSG will continue to execute against the aggressive goals we have set out for 2022.

while searching for new ways to expand our cash flow in the years ahead.

That concludes our prepared remarks. Quint and I, along with Mike Berger, our Chief Commercial Officer, are ready to answer questions.

And we have the first question operator. Thank you. And as a reminder to us, a question simply press star 11 on your telephone. One moment please.

Our first question comes from the line of chat at Kings with Stevens. Please go ahead.

Okay, great. Good morning, Quint. Good morning, Rich and Mike. Thanks for taking my question.

four and a half jack uh... so i i guess maybe we can just start uh... rich going back to to your comments on the outlook i just wanted to kind of what level set if you go back to to three months ago you know the the comment around running ahead of plan uh... for for ebada and free p s for the full year you know through the first quarter that language seems to change the bed and i'm just sort of curious is that that the inflationary cost pressures that have kind of corrupt up here over the last uh... the last uh... the last uh...

the last few months, or do you still believe that you're running ahead of your initial outlook? I wanted to make sure we're all on the same page on that.

Thanks for the question. Yeah, we were very positive in our prior comments in regard to being ahead of plan. But as we've seen through this quarter, there has been more cost pressure. This isn't a demand-related issue at all. It's really related to some cost pressure. But we still believe we'll make our $640 million in adjusted EBITDA. But we did not feel comfortable expanding guidance at this time.

okay okay got it um... thank you for for for that and then i i guess as you sort of think about you know to your to your point on on demand remaining remaining very strong you know we've we've certainly seen uh... a little bit of uh... reset in terms of the to see activity when you look at sort of what's been going on with uh... the integrators in what we see out of you know amazon and things like that terms of their public comment you know as you sort of think forward over the course of the next couple years

You know, are you seeing sort of any change in tone in terms of what your customers are telling you, bigger picture about their longer term plans for capacity needs, any sort of maybe reassessment of that, or yeah, just would love to kind of get your thoughts on that as well.

Yeah, just in the short term, I'll turn this over to Mike in a minute, but in the short term, Jack, what I can tell you in regard to the US networks.

We're slated to put four more airplanes into the DHL network this year and two more airplanes into the Amazon network this year that they are providing to us and the four DHL is providing to us. We're seeing the demand for freighters as large as it's been in the past and then as it relates to the ongoing e-commerce demand around the globe, I'll turn that over to Mike he's probably the best person to comment on that.

Thanks Rich. Just to reiterate, we have not seen any weakness in demand really at all. We've talked at length about the order book, not only for this year but the upcoming years. We haven't seen any indication from any of our existing customers that there is any hesitancy at all....

communicated quite clearly that if it's possible to take the new aircraft and new deliveries early, they certainly would. From a broader perspective, e-commerce has certainly still the engine that remains very strong, and as we've said many times, ATSG is really an enabler to e-commerce. But when you think about some of the industry folks, the consultants and AOD and Boeing and Airbus, etc.

you know the freight fleet at twenty year uh... freighter fleet uh... activity is going to increase jack by you know two and a half percent two point four percent over the next twenty years uh... out to twenty forty one uh... you know in two thirds of those freighters are operated uh... by the integrators uh... or on behalf of five companies uh... five major integrators when you think of uh... amazon dh all ups red x nss so

We feel real bullish and we've talked about it at length, either those folks are our direct customers or they're our customers' customers, meaning that they're flying in these guys' regional networks. We don't see it at all. In fact, we're extremely bullish about it and we're certainly poised with feedstock to meet that demand.

okay that's really encouraging to hear and i guess from my last question before turn it over uh... i'd love to hit on the cap allocation question you know uh... rich you talked about by backs in the ability to get back into the market with by backs uh... here in a couple months once the cares acts cares act restrictions uh... expire uh... i guess kind of bigger picture you know any additional that you can share about how uh...

You know, senior management and the board are thinking about capital allocation as we kind of move forward. Obviously, there's a, as Mike was just outlining a lot of demand for your assets. So the growth capital is needed. There are opportunities to pay down debt and then also pursue buybacks. I mean, how do you balance that? And, you know, should we think about you being opportunistic with the buyback moving forward or maybe more consistently in the market? I guess just kind of try to balance all those things.

Sure, I'll start this up and then Quint May has some other comments. But in general, Jack, we believe that we'll be able to do both. We'll be able to allocate capital to the growth of which the demand is, Mike has talked about is very high. We've got, I think, 50 commitments out of the 80 slots. We have 326 with agreements and or cash down. So the demand is very strong. But if you look, one of the slides showed that although we're increasing our fleet, we've been delivering, delivering over the last three years.

And so, you know, we're likely to lever now under two times and we believe that we'll be able to deal with the growth that we have coming up out through 2026 and still be able to return capital to shareholders. Now we do, you know, we believe October 1st is when we're able to, we're free of the CARES that restrictions as it relates to buying back shares. And from that point forward, you know, we'll look to make smart decisions.

and be in the market opportunistic and potentially on a regular basis to buy back shares. I'll let Quinn maybe fill you in on some of the details. Yeah, I mean, Rich covered it real well, Jack. I, you know, certainly the balance sheet, sheet strength that we have and the sort of growing portfolio of laddered out leases that, you know, Cam is, you know, supposedly marketing.

gives us a lot of visibility to future cash flows and gives us confidence, you know, as to where we're heading with our projections, you know, long term. We all know quarter to quarter, sometimes there's a bump here there, but long term, that gives us a lot of confidence and ability to, you know, use share repurchase to create additional value on top of our growth plan. Yeah, we're left under two times and...

And that also positions us well. So we're really excited about getting that tool back when CARES expires here in a couple of months.

along with our growth value that we've been creating. Okay, absolutely. I know it'll be good to have that arrow back in the quiver. Thanks again for the time. I really appreciate it.

All right, Jack. Thanks, Jack.

One moment for our next question, please.

Next question comes from Helene Baker with a colon. Please go ahead.

Thanks very much operator hi everybody and thank you very much for the time today. I just wanted to follow up on Jack's question. Is there a goal for for um...

For leverage under 2X is pretty impressive. I know the one slide talks about being able to grow without really adding significant leverage. Are you thinking 2 is the upside or are you willing to get up to 2.5 or 3? We've been more levered than that in the past.

Yeah, I think for, it's Quinn, I'll lead off on this, I guess. But the, uh, Helena, it's really dependent on the opportunity that's out there and how we evaluate that. You know, we've certainly, as you point out, you know, for acquisitions that we've done, you know, we've levered up above three times. Um, while we've managed the company, you know, pretty conservatively overall, you know, we spent most of our, the last decade and a half, probably more than two and a half.

range or less, but we've certainly levered up when the opportunity set was attractive. And because of that visibility to cash flow that I mentioned a minute ago, we would do that again if that seemed to us to be the prudent and best, you know, creative way to create value. But we don't have a specific target to answer your question, you know.

We're not, it's one of the things about where the rating agencies have us, which is right under investment grade. I mean, we actually kind of like that because sometimes we do become investment grade, which I believe this company could certainly do if that were the wish to be investment grade. You know, sometimes it sometimes kind of hamper you a bit on taking on more leverage for opportunities. And I kind of like the sweet spot we're in where we did.

good pricing in the credit markets, but we maintain the flexibility to move forward and create value for our shareholders, you know, when the opportunity is attractive. You have a clear participant to claim. And you know, we already are pleased to have yours therefore, his start to be fixed if the to

Thanks, Quentin. That's very helpful. You actually said something in your prepared remarks about the increase in receivables.

Is that something we should worry about? I was sort of, you rarely call things like that out when you talk and so I was kind of surprised to hear that. So what are you not saying?

Well, you know, we called it out just because I think for the last that reporter, you know, you kind of seen that adjust the tree.

cash flow staff, you know, that new non-GAAP staff that points to that capital that the business throws off that we have the ability to grow with or return to shareholders. It's kind of the first time in many quarters that that number actually went down a little. And the reason is real identifiable. It's nothing of concern. You know, it's more timing related than anything else. You know, you have receivables. As you know, we don't take on any significant fuel price risk.

One moment for our next question, please.

Our next question comes from Chris Stadalopoulos with SIG. Please go ahead.

Morning, quinrich morning everyone. Thanks for taking my question. So.

Bill, which appreciate the color and sort of perspective on...

sort of managing the business here through a potential cyclical slowdown but

You know, we haven't really seen the model. I believe you reconfigure the business back in 2010 or so. So we haven't really seen the model.

battle tested if you will during a recession. And I just, if you could, you know, there's obviously a lot of concern here around what cargo and things like that might do into a cyclical slant. So you just want to dig into here around, you know, next year you have 18 freighters out there. You know, next year you have 18 freighters out there.

the assets that you have, lease rates appear to be holding up.

Could you help us get a little bit more sort of confident about your ability to grow, eat it up through a downturn? And also with the placements of the aircraft with overseas costumers.

Should we assume that that would put sort of sustained upward pressure on items such as travel and insurance expense? And then the last part of that...

Just remind us in so far as aircraft that have been locked in and then the aircraft with the L-O-I, what are the sort of protection that you have in place or how does this sort of contracts work if a ship or an airline today decides, okay, we want this capacity next year or 2024, things turn and they, at some point, reach out and say, you know what, we're not gonna be able to take that tail. Thanks.

Okay, there's a lot to unpack there, Chris. First off, as far as operating the company through a cyclical downturn, there have been, if you remember 2013, 2014 was a pretty poor year for air cargo. And then we started to cycle out of it in 2015 and 2016. So we've gone through some pressure points in the past. But I think the discussion in the prepared remarks that I put forth about the resiliency of our business model of the existing business.

which is all the leases that we have and the dry leases that need to be paid whether the aircraft are fully utilized or not. The networks that we provide service for in DHL and UPS, I'm sorry, DHL and Amazon, they provide daily committed time-definite services on those networks. And so it would be very unusual for them to cut back on those networks and not service Billings, Boise, Butte and Buffalo.

on any given day. And then the last part is the military. The military really, or the Department of Defense and other government agencies that we fly for, really don't, their demand is not a function of the global economy or the business cycle. So, the existing business is...

very resilient when it comes to economic downturns now you look forward to the the growth portion of our business and the leases and From the conversions that we'll be doing over the next that we've got scheduled over the next three to four years Those customers majority of them fly in

networks around the globe. So they're flying for similar customers that are performing

e-commerce type deliveries and those types of things and so again there'll be a there'll be a more resilient demand then you will see in like general cargo general air cargo tends to have a much more uh... alignment up and down with global trade and the global economy where the e-commerce business and the network business tends to be a little bit more resilient or a lot more resilient because of the network need that that that those assets provide uh...

When we look at the demand that we have currently for the assets that we have scheduled in 2023, it's, we've got backup. In other words, if, if, if, uh, ABC company doesn't want the airplane, we can turn around and lease it to another company, um, that's farther down or later on the list. We've got that much demand out two to three years, um, in some cases, depending on the aircraft type. So we think we've got robust enough demand that, um, should there be any type of softness on any individual airlines part?

then we've certainly got enough built up demand that we'll be able to step in and take that. I will also say that the way we've structured this model. I will also say that the way we've structured this model. I will also say that the way we've structured this model.

in the way that we deal with slots and conversion houses and deposits for slots and those types of things. At any point in time, if we believe that either the returns on the leasing bases or the demand of the market would change or shift, we can always put our foot in the brake and stop buying feed stock and stop converting airplanes. And then we'll be just be throwing off a lot of cash that we have, that we could look to do other things with, returning to shareholders.

or invest in other things that may be in a more growth mode at that point in time. So again, we're going to very flexible settle levers here to pull should the demand market change. But I want to be real clear on this. The market demand for least freighters is as strong as it's ever been. And when I look at all three aircraft types that we're involved with now, the A321, the A677 and the A330, all three of them have very strong demand.

And we, and the ones that are out two years or three years, we checking with them regularly. A lot of them are the same ones that are taking airplanes next year or this year. And so, and they're all, they're all still, you know, if they could take more airplanes tomorrow, they would take them. So we've got a really strong demand outlook.

I would also just add that we've either, you know, we've got our commitments to source aircraft in the market today, Chris, is extremely tight, meaning feedstock availability is, you know, is never been harder around the 767 specifically. You know, we have secured, or have the ability to secure it through deposits.

and not the aircraft to take us through 2024 in regards to our 767, for example. And we're fielding calls all the time from other folks who are trying to purchase those aircraft from us. So it just goes to the strength of the market, in terms of what we see, what will they across the group go. And I think Rich made a great point, I'll just reiterate it.

You know, the DHL, the FedEx, the UPS, is the world. You know, they've got global day and time commitments to make sure that their packages are being delivered. And to do that, they've got to fly, you know, confirmed schedules. And even if you look at their meeting FedEx, UPS is most recent results. You see strong, you know, double digit growth specifically in their international products, which means...

the cross-border aspect of e-commerce is still not only alive and well but growing really strong. I made comments about the strength of e-commerce as it relates to growth and there's optimism specifically when you look at economies like Brazil, it's only has 5% e-commerce sales compared to total sales in India under 10% Vietnam, you know 6 and a half percent Mexico 11% so

in terms of conversion houses, as well as feedstock to meet that demand from customers.

Yeah, another metric on that, Chris, this is, you know, just, for example, our cargo block hours that we, you know, are two primary airlines that serve the cargo customers, the A.S. and the A.S. and the A.S. and the A.S.

flu, or you know, we're up about 13% for the first half, compared to the first half last year. And for the quarter, up about 7%. And of course the PAX flying, you know, and the COMBI flying, we sort of lumped those together, you know, on me and the guys.

flying with their Combi 7.5's, those are up twenty-two percent year over year in the first half.

and up about 13 percent in the second quarter over the prior year quarter. So the big customers that fly these airplanes you can see are expanding. And that's kind of the differentiator between some of the long haul routes where you may be more sensitive, right, to – And that's kind of the differentiator between some of the long haul routes where you may

you know, recession and demand. You know, the e-commerce driven networks are still, you know, need the asset and have to serve those geographies in their network. The last last couple comments, because we've kind of made a lot of comments in this section, is you would ask about travel costs and these aircraft that we're leasing outside the country, which is the majority of the, if not all the Airbus products going forward.

that we have on the in the order book. They're just dry leases so we're not operating them. We're just tendering to the operator and the operator is going to fly them in the network that they fly. The last common all make is there's two sources of demand for freighters. There's a growth demand and there's a replacement demand just like an operator or an all-air plane.

And so when you look at the growth demand, we've kind of dressed that going forward. When you look at the replacement demand, it's one of the key reasons we got involved with the A321 freighter. When you look at the replacement demand, it's one of the key reasons we got involved with the A321 freighter.

The A321 is a direct replacement for the 75. They stopped building 75s in I think 2005. And so there hasn't been one built in 17 years. And there's a, I think it's somewhere around a 15 to 20 percent fuel burn advantage in the A321 versus the 757. So when you look at all the ESG goals and all the ESG, the carbon footprint and greenhouse gas emissions.

goals and that airlines are looking forward to in terms of reduction. That aircraft is going to play a great role in replacement and being a greener airplane for the segment of the business that it serves.

Okay, thank you, Rich. I'll throw one more your way. So Air Finance Journal just put out their annual report. It looks like Cam made it into the the top 25 in terms of number of aircraft under management. Are you comfortable growing the fleet 1015 tails per year and kind of steady grinding up the ladder there, would you consider

Potentially accelerating this as you look to grow that fleet number for 200 units and and beyond Yeah, no, it's a great question that we're I'll tell you what we're we're really proud of the fact here that we're the largest Lessor of freighter aircraft in the world and and we're only adding to that leadership position Prior it was is all 767s going forward is gonna be a blend of the three aircraft types And if you look at our growth plan going forward. I mean we're going

I think we did it in the mid-teens last year. We dropped down to 10 this year just in terms of the schedule, of the conversions. Next year we've got 18 on the schedule. The year after that in 2024 we've got 25 on the schedule. And so we're ramping up as we get into, and we start to get into the A330 which will start putting aircraft in in September of 2023. And we've got 29 slots going out through 2026.

And then you look at the 767 slots we have in the A321s. Of course, we do our own conversions with our own MRO PEMCO down in Tampa. We will be ramping up and we will be delivering more freighters to meet the goals of the customers that we serve. So we're the leader now and we're proud of that. And we're looking forward to maintaining that leadership position and adding more value to our customers and more returns to our shareholders.

we have in the A321s. Of course, we do our own conversions with our own MRO PEMCO down in Tampa. We will be ramping up, and we will be delivering more freighters to meet the goals of the customers that we serve. So we're the leader now, and we're proud of that, and we're looking forward to maintaining that leadership position and adding more value to our customers and more returns to our shareholders. Great. Thank you.

One moment for our next question, please.

Our next question is from a Mr. Galanty with Diffle. Please go ahead.

Yeah, hi, thanks for taking my question. I want to start off with pilot availability. And so you sort of called out a little bit to just higher cost pressures in general and given sort of headlines around lack of pilots but more so on the passenger side. But if you talk about sort of changes in pilot availability for APSG and if there's sort of any concerns given the desire for the growth mode that you're currently in, is there any concerns over having that being a limited factor going?

a little higher than the plan. For example, ATI planned on treating five pilots per month last month, they treated eight.

And so what that means is we're having to run larger training classes. We're not having any problem attracting pilots. You've probably read in some...

trading five pilots per month and I think last month they traded eight. And so what that means is we're having to run larger training classes. We're not having any problem attracting pilots. You've probably read in some segments of the market there is a problem attracting pilots. We haven't seen that yet based on where we are. We've got midsize airlines. It's a good career to come to ATI, ABX or Omni and be able to grow.

and go from a first officer to a captain quicker than if you went to a major. And so, you know, you can fly your own very large jet and be making higher income as a captain. So, we've got a good opportunity for people. So, we, you know, it has raised our cost a little bit. We are keeping up with the training and putting the air, a good example, we're growing the aircraft we talked about at ATI for Amazon and at APX for DHL. And we'll have no problem getting the pilots in place.

for those growth assets that we're going to see at the end of the third quarter and into the fourth quarter. So it has affected us. We are keeping up with it and it's factored into our costs and our guidance for the rest of the year.

That's helpful. Thanks. And I sort of wanted to go back to the growth question. Maybe from a little bit of different angle.

So looking sort of at the current growth that ATSG is experiencing, I guess, broader industry, the question is, is that what you're experiencing, is that through a kind of just industry increased demand for air freight? Or is there a component of sort of taking share from other lessors or even within businesses, is there more of a desire to lease rather than own on the margin?

Yeah, I think it's a good question. A couple of things. One is that the e-commerce growth engine started pre-pandemic. And so the pandemic did accelerate that growth over the two and a half year period. And so it and what it did is it brought a lot of new adopters to that buying platform that probably never would have gotten involved in that buying platform and, you know, juice the demand up. And I've got people who buy online that never would have bought online.

and anybody with a, anybody that, people are pulling freighters out of the desert.

Seet checking them, getting them ready and putting them up to fly. They were taking passenger seats out of larger jets and loading them up with cargo to fly to make up for the derrathan and freighters that was out there. What you see now is part of the demand is kind of a right sizing or a right allocation of what asset do I need on that lane? Is it a narrow body? Is it a medium-wide body? Is it larger aircraft? So there's that level of demand that I think is kind of...

going on, you've got your 733 and your 734s that are now being replaced by 738s and A321s as an example. So you've got those, that type of demand profile picking up. But I think one of the other trends that we've seen and we've actually been the beneficiary of is

Passengers carriers that are now becoming combination carriers that are getting into the cargo business We announced last year an opportunity with air air Canada where we acquired to 767s from air Canada we converted them and we lease them back to air Canada And then we're doing the same exact deal on the a321 basis with Vietnam airways We are acquiring two a321 from them. We're converting the freighters and releasing them back to them

So I think that's an interesting opportunity where some of these passenger carriers have seen the situation where they faced the pandemic where they had to pull down a number of resources, but they could have stayed engaged on the cargo side more efficiently if they had freighters. And so they wanna now get into the freighter market and we've been the beneficiary of that and we hope to be continued to be the beneficiary of that new demand segment that we see in the market. I don't know Mike, if you've got any other comments. Yeah, I just had a couple of things and those Vietnam aircraft.

confident that we're getting our customers can kind of form these things and make sure we're going to receive our receivables, which are in great shape, our receivables, and they've been better from a canned perspective. So it's really important to us. We get calls all the time inquiries, so to speak, about leasing folks' freighters. So we're very careful if we get into younger airlines or startup situations. We really flush them out. We ask them to.

presented not only their financials, but their business cases that they go to market. And when you're in a leadership position that we are in this rich mention for the world's largest lesser of cargo freighters, we get a lot of inquiries from folks that we wanna make sure we're doing business with the right folks around the world. It's really important to us. Great, that's all the help. Thank you very much.

Thank you one moment for our next question.

Our next question comes from Eric with Freight Waves. Please go ahead.

Yes, hi, first time on one of these calls. Thanks for the opportunity. I had a couple questions. You talked a little bit about the, you know, the ecommerce being very strong for you. But, you know, I think ecommerce sales have dipped globally and in the US this year and naturally. Are you seeing any change in the mix of your freight?

So your comments for you? Yeah, so we don't, Eric, we don't get visibility to necessarily what's in the boxes and the mix of the freight. The only thing I could tell you is during the pandemic, the packages got, and the airplanes got a lot heavier because there was, you know, hand sanitizer and cleaners and everything else, fluid's going on. The airplanes in as much as, you know, iPhones and stuff package and styrofoam. So we don't get visibility really to the mix of freight that goes on there, but...

Part of, I think our discussion here has really been the distinction of a demand for packages and the demand for freighters. So, in one it's derived certainly from the other, but there are certainly other factors involved in the demand for freighters. One is replacement versus growth, and the other one may be a right sizing of the network. I mean, one of the questions Frank asked in regard to...

in regard to about leasing versus buying freighters, one of the things that's inherent in what we do is Availability. So if you have the availability of a freighter when someone wants it Or when they're looking out in their fleet plan for two or three years They can't get it. They can't get a manufactured freighter from Boeing as an example. There are no available in that line.

And then we've always been proactive about getting slots for airplanes because for us that's something that's a lower risk proposition and we exercise our acquisition of Feets Doctor Underman. So from that standpoint, I think one of the things that we've been able to do is have a bit of the ability of assets on going.

Let me ask you briefly, the Atlas Air yesterday had a big acquisition. They were going to be taken private and bought by investors. Wondering how you see that impacting any competition for you guys and do you have any interest in expanding through any acquisitions?

Yeah, I mean, we, Eric, this is quite, we typically, you know, don't comment on, you know, things like that. I mean, obviously we're a public company and, you know, we do. Yeah.

It's easy to see where we trade and so forth. We saw the news on Atlas and I understand their shareholders will consider the merits of that and they'll be looking at closing that deal. We have on many calls pointed out that while there are some areas where we've competed with Atlas, the companies are quite different and there are differences in equipment type and where the focus is.

Okay, that's good color. And then the last question, can you go in a little more detail on some of these supply chain issues that are impacting conversions? Is it labor shortages at the, either the suppliers or the assembly lines or is it products or actually materials and so forth that are being impacted or is it the shipping of congestion?

It's a combination of really everything. We're seeing, you know, shores of demand in terms of parts and kits, materials, precious metals, et cetera. A lot of these kits are from China. So as China's gone through some of the COVID lockdowns, that's called delay from that perspective, which obviously is labor related, et cetera. But, uh,

I will tell you that some of the things that we've worked on to mitigate that is, for example, to have additional conversion slots with Boeing, which will start soon, later this year and well into the next few years. So we're diversifying ourselves in terms of, well, we'll do our 767 conversions. We've got multiple MROs where we're doing the 321 conversions as well, as the 330s will be done at multiple locations.

We're mitigating that by having multiple locations for the conversions in the upcoming year. We're already seeing some easing in regards to part supplies, materials, etc. like conversions. And like I said, it's like we've said all along. It's not demand that's driving, and it's really just the timing of it.

Gotcha. Thank you.

Got you. Thank you. You're welcome.

Thank you. And with that, I'll turn the call back to Rich Corrado for any final remarks. Thank you, Carmen.

Thank you again to all of our employees.

who work hard every day to take care of our customers. Their efforts make it possible for us to deliver excellent returns for our shareholders.

I hope you have a better understanding of what makes ATSG a unique investment in the transport space.

Midsize freighter aircraft will remain in strong demand over the next several years because ecommerce customers expect fulfillment that only a dedicated transport network can provide.

Our released aircraft assets, order book, and airlines will generate plenty of cash flow to fund our growth and share with our investors.

aircraft assets, order book, and airlines will generate plenty of cash flow to fund our growth and share with our investors. Thank you all for your interest in ATSG.

And with that, we conclude today's conference call. Thank you for participating, and you may now disconnect.

The conference will begin shortly. The raise your hand during Q&A.

I have you.

The.

Good day and thank you for standing by. Welcome to the second quarter 2022 Air Transport Services Group conference call. At this time all participants are in a listen on the mode. After this speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 1-1 on your telephone. Please be advised at today's conference being recorded.

I would now like to hand the conference over to Joe Payne, Chief Legal Officer. Please go ahead. Good morning and welcome to our second quarter 2022 earnings conference call.

We issued our earnings release yesterday after the market closed. It's on our website atsginc.com.

Let me begin by advising you that during the course of this call, we will make projections and other forward-looking statements that involve risks and uncertainties.

Our actual results and other future events may differ materially from those we describe here.

These factors include but are not limited to.

The extent to which changes in market conditions impact the number, timing, and scheduled routes of aircraft deployments to new and existing customers. The cost and timing with respect to which we were able to purchase and modify aircraft to a cargo configuration.

which may be impacted by global supply chain disruptions.

Our operating airlines ability to maintain on-time service and control costs.

Our ability to remain in compliance with key agreements with customers, lenders, and government agencies.

Persistent elevated rates of inflation and changes in general economic and or industry specific conditions, such as higher labor costs, increases in interest rates, an economic recession, and downturns in customer business cycles. Blood print moment is a symbol of income value. customer business cycles.

The impact arising from COVID-19 outbreaks, including the emergence of COVID-19 variants. The outbreak of COVID-19 outbreak, in the outbreak of COVID-19 outbreak, the outbreak of COVID-19 outbreak,

Mark to market changes on certain financial instruments

and other factors as contained from time to time in our filings with ESEC, including the Form 10Q we will file next week.

Management believes these metrics are useful to investors in assessing ATSG's financial position and results.

These non- GAAP measures are not meant to be a substitute for our GAAP financial s.

We advise you to refer to the reconciliations to GAAP measures which are included in our earnings release and on our website.

And now I'll turn the call over to Rich Carrado, our president and CEO for his opening comments. Thanks.

Thanks, Joe, and good morning everyone. I'm pleased to tell you that ATSG remains solidly in growth mode.

The second quarter was our fourth in a row of double-digit quarterly increases in revenue and adjusted EBITDA over the prior year.

Our growth directly reflects that of the principal markets we serve, dedicated midsize freighter aircraft that we lease and fly for major transport integrators and e-commerce merchandisers.

Our customers are eager to lease all of the cargo aircraft we can deliver.

And the fleets of our cargo airlines are growing even faster than our lease portfolio, as our two principal air cargo customers prefer that our airlines fly their own freighters and dedicated networks. For all that matters, welcome to our shuttle solutions series.

Others are coming to us for the first time, seeking both wide and narrow-body freighters for expanding express networks throughout the world.

The comments remain the principal driver of our growth. Consumers still prefer buying online and not just for convenience. and not just for convenience.

They are also looking for the lower prices they often find online to stretch their own budgets to cover inflation.

We remain direct beneficiaries of the rapid delivery that online shopping requires.

and we'll keep reinvesting the majority of our strong cash flow to meet this demand. At the same time, we benefited from increased passenger flying.

We fully expect to meet our $640 million just the day of autogrid for 2022.

We'll deploy 10 leased freighters in 2022, including four 767s and two Airbus A321s in the second half.

That's one Boeing 767 fewer than our prior target, primarily due to the delays at our conversion vendor related to parts and supply chain challenges.

Quinn is ready to review the details of our second quarter results. I'll be back to share more about our very bright long outlook after that.

Thanks Rich and welcome to everyone on the call this morning. The next slide and our deck hits some of the second quarter operating highlights that Rich mentioned. The next slide and our deck hits some of the second quarter operating highlights that Rich mentioned.

Overall, our year-over-year growth in the second quarter was similar to the pace we were on in the first quarter. The first quarter was similar to the pace we were on in the first quarter.

Our consolidated revenues for the second quarter grew $100 million to 510 million, and totaling nearly $1 billion for the first half. $1 billion for the first half.

As they did in the first quarter, each of our principal businesses, freighter leasing and airline operations delivered strong revenue growth exceeding 20%.

Our adjusted pre-tax earnings again rose sharply of 80% from the prior period to 67 million.

Our adjusted EPS increased 24 cents to 59 cents, and our adjusted EBITDA of 158 million EBITDA prior year quarter by 23 percent. EBITDA prior year quarter by 23 percent.

Our segment earnings grew even faster than revenues after adjusting for government grants in 2021 and tentative protect jobs from pandemic effects in the passenger airline business. ?

Our ACMI services earnings in the second quarter rose to 22 million from 6 million, and mine is 38 million in 2021 grants. Some battery and power Technology?? Ecker? deixar k dr?? Service Gun Louise Leia AC runway The regular land Air The movie terminal ank G R R R R R R R R R R R R R R R R R R R R R R R R R R R R 4 R R R R R R R R R R R R R R R R R R Rar R Thanks.

CAMS pre-tax earnings increase 76%.

Inflation is impacting our airline costs, particularly in travel costs to transfer our passenger service crews to and from their assignments and at other employee related expense.

Travel, in particular, was up more than 50% in the second quarter versus the prior year period and our salaries, wages, and benefits line rose 15%.

Most of the military passenger flights we operate involve longer overseas travel requiring augmented flight crews, which makes our costs more expensive compared to our shorter cargo flights, which are over mostly domestic two crew member routes.

On the next slide, you can see that our $30 million growth in second quarter adjusted Ibadah raised our trailing 12 months pace to $623 million.

Our plan currently calls for more adjusted eva dot in the second half versus the first.

with a third quarter that is similar to our second quarter and a stronger fourth quarter. That assumes lease deployments in line with our revised outlook and fourth quarter gains from ACMI services that include expanded copy operations and six additional customer provided cargo aircraft. And six additional customer provided cargo aircraft.

On the next slide, you'll see that our capital spending for aircraft purchases and conversions in 2022, so far, is 5 million dollars ahead of our 2021 pace. So far, is 5 million dollars ahead of our 2021 pace.

Most of that spending is for conversion costs, which are growing at a rate consistent with the slower pace of deliveries from our conversion vendor.

We said last quarter that we would remain in the market for feedstock aircraft after acquiring several in the first half.

We will purchase two more passenger aircraft and place more deposits on 2023 aircraft acquisitions. Then we're in our original 2022 growth budget. Then we're in our original 2022 growth budget.

We have increased our growth cat-back's guidance for this year by 30 million to 420 million to cover those purchases and hire conversion costs.

The next slide updates you on our adjusted free cash flow. The metric we began providing last year.

Represented by the bottom portion of each bar, it's our operating cash flow net of our sustaining capex shown on the top. Net of our sustaining capex shown on the top.

Once again, the trailing 12 month totals for Gap operating cash flow, shown above the bars, including $83 million in cash we received in federal pandemic relief grants last year.

Our adjusted pre-cash flow year-to-date is 161 million down from 207 million a year ago. Operating cash flow declined, principally due to an increase in receivables. Presibly due to an increase in receivables.

The trail in 12 months total of 355 million was also down from first quarters 406 million.

As I mentioned a moment ago, this year's growth CAPEX plan is now at $420 million, most of which will come from our adjusted pre-cash flow. The next slide represents our value proposition over time. Our business model generates significant recurring cash flow, while at the same time, strong demand for our freighter aircraft provides us with very profitable ways to reinvest it.

Our overall debt to adjusted EBITDA leverage ratio as measured under our bank credit agreements is below two times.

Our credit revolver balance increased to $515 million during the second quarter.

No repurchases were at an average discount of 5.5%, and funded from our variable rate credit revolver, and now at 2.7%.

The repartises which were funded from the revolver reduced our outstanding debt by nearly $7 million, with an ongoing interest expense benefit based on the difference between the bond coupon and our revolver rate.

In June , Moody's Investor Service recognized the quality of our balance sheet and growth prospects by upgrading our ratings on debt at the corporate level to BA1, just below investment grade.

Moody cited our reduced debt to EBITDA leverage and strong earnings and cash flow as reasons for the upgrade.

With that summary of the quarters operating and financial developments, I'll turn it back to Rich for some comments on our business drivers and outlook. Thanks, Rich.

Thanks, Quint. Before I begin sharing some comments on our 2022 performance and outlook, I want to commend, as I always do, the efforts of our employees across all of our businesses that create the results that I get to share with investors each quarter. I appreciate the resourcefulness and working towards goals that I know seem challenging at first, knowing they usually find ways to meet or exceed them. They make ATSG a great, diverse place to work, and make me proud to be one of them.

Including seven more freighters that Amazon has purchased or leased elsewhere, but assigned to us to fly, our Amazon dedicated fleet will soon total 49 767 freighters.

We also noted that the map of our aircraft deployment is expanding rapidly.

Eight of the 10 767 and Airbus A321 Freighters we will place this year are going to non-US customers in Asia, Europe , and Canada. Those customers are pushing ahead with their own cargo networks designed to provide the same e-commerce fulfillment missions as the ones we support in the US. The majority of our 2023 lease deployments will be headed overseas as well. And finally, as the next slide shows...

We are beginning to add new aircraft types from the Airbus family. Our joint venture designed a narrow body Airbus A321200 freighter as a conversion from passenger aircraft.

CAMS First, two of these smaller but highly efficient freighters, will be leased later this year to its newest customer, ASL Aviation Holdings. Three other passenger A321s we own will be among at least four we convert and lease in 2023.

ASL, Bayton Ireland, and with operations throughout the world, has also ordered two of the larger wide-body Airbus A330 freighters who will start to lease in 2024.

A330 freighters are somewhat larger than our Boeing 767-300s.

but serve essentially the same missions and express networks throughout the world. and express networks throughout the world.

We hold options to buy feedstock passenger A330s along with more 767-300s and A321s that will begin to exercise as part of our 2023 Growth CAPEX program.

We here as you do forecast the worldwide reductions in capital investment and slower economic growth in the months ahead.

But you won't find any evidence of that in our leased freighter order book. We already hold deposits for most of the 18 freighters we expected to deploy in 2023, including 14 767-300s and at least 4 A321s, and commitments from longstanding customers for the others.

We also stay in touch with those looking forward to some of the freighters we'll deploy after 2023.

None has indicated anything but a strong interest in building the freighter networks with us. Of the more than 80 passenger-defrater conversion slots, cam holds for induction from 2022 through 2026, more than 50 are already spoken for by customers in our order book. And by customers in our order book. The

This year, Cam is already delivered 4 of the 8, 7, 6, 7, 300 freighters. I expect to leave this year.

Supply chain constraints affecting passenger to freighter conversion businesses have limited our number of additional freighters we can lease.

Moving forward, our conversion vendor expansion, along with reduction in those bottlenecks, will increase the conversion pace next year. One other thing that bears repeating from last quarter's call is the breakdown of our three principal sources of adjusted EBITDA.

Long-term dry leases of freighters, long-term airline operating agreements with Amazon and DHL, and thirdly, passengers are flying mainly for the Department of Defense.

Those three sources are more than 90% of our total adjusted EBITDA. Looking at the duration of those contracts, the size of the customers, and our strong relationships with each one of them, our adjusted EBITDA stream looks to be very resilient to disruption from recession or trade and balances. We get least revenue, whether a freighter is fully or partially utilized. And the freighters we fly in the Amazon and DHL networks are scheduled generally every day, helping them meet time-definite, overnight commitments to shoppers throughout the US.

No matter how full an aircraft is on any particular day. For Omni, our flying depends on what the Department of Defense or other government agencies need, regardless of the economy. That includes moving people for military exercises, troop rotations, natural disasters,

Personnel moves and other things to protect readiness and maintain a strong presence abroad.

I don't know of any other company in the transport business with more built-in protection from the risk factors most of you are focused on today. As the next slide shows, we expect 2022 to be another record-setting year for ATSG, with adjusted EPS of $2 per share and $640 million in adjusted EBITDA. All of you are reading or reporting this quarter about the impact of inflation on the passenger airlines, and in particular about how it has pushed beyond their fuel costs.

and into their labor and other operating expenses. ATSG is largely insulated from higher fuel prices, which are passed on to our customers under our operating agreements. But like the other airlines, inflation is affecting our employee costs and to a lesser extent other categories. More than we expected when we set our 2022 guidance last February . When we talked in May.

We were already somewhat ahead of our projected pace to 640 million in adjusted EBITDA.

Today we expect to achieve at the on-schedule lease deployments resumption of our full schedule of convivying for the US military, cost controls and price for recovery, where we can achieve them, and a strong fourth quarter in both cargo and passenger flight. And a strong fourth quarter in both cargo and passenger flight.

Net-net, we expect our third quarter adjusted EBITDA to look a lot like our second.

with significant improvement in the four quarter. But I'm also focused beyond 2022. On investments we will make to drive our earnings and adjust the free cash flow higher in 2023 and beyond. We see fourth cast that still indicate freighter conversion and new freighter production capacity will remain tight. And new freighter production capacity will remain tight.

Those supply limitations plus uncertain cargo space availability on passenger aircraft will keep freighters in strong demand for several years. In strong demand for several years.

Investing our capital into that trend makes great sense to us.

Many of you have asked about our plans for cash returns to shareholders when restrictions expire at the end of September . The Board of Directors is very focused on this as well, and we look forward to having the ability to allocate cash between growth opportunities and share repurchases.

after the restrictions expire. As a reminder, the Board's existing authorization for ATSG share repurchases is still in effect with significant repurchase authority remain.

In the meantime, the people of HDSG will continue to execute against the aggressive goals we have set out for 2022.

while searching for new ways to expand our cash flow in the years ahead. That concludes our prepared remarks. Quint and I, along with Mike Berger, our Chief Commercial Officer, are ready to answer questions. May we have the first question, operator? Thank you. And as a reminder to ask a question, simply press star 1-1 on your telephone. One moment, please.

Our first question comes from the line of chat at King's defense. Please go ahead. OK, great. Good morning, Quint. Good morning, Rich and Mike. Thanks for taking my question.

for the air. Jack. Uh, so I guess maybe if we can just start, um, Rich, going back to your comments on the outlook, I just wanted to kind of level set. If you go back to the three months ago, you know, the, the comment around running ahead of plan for, for EBITDA and for EPS for the full year, um, you know, through the first quarter, that language seems to have changed a bit. And I'm just sort of curious is that, is that the inflationary cost pressures that have kind of crept up here over the last, um,

the last few months or do you still believe that you're running ahead of your initial outlook? Just kind of wanted to make sure we're all on the same page on that. Yeah, Jack, thanks for the question. Yeah, we were very positive in our prior comments in regard to being ahead of plan. But as we've seen through this quarter, there has been more cost pressure. This isn't a demand-related issue at all. It's really related to some cost pressure, but we still believe we'll make our $640 million in adjusted EBITDA. But we did not feel comfortable expanding guidance at this time.

okay okay got it uh... thank you for for for that and then i guess as you sort of think about you know to your to your point on on demand remaining remaining very strong you know we've we've certainly seen uh... a little bit of uh... reset in terms of the to see activity when you look at sort of what's been going on with uh... the integrators in what we see out of you know amazon things like that in terms of their public comment uh... you know as you sort of think forward over the course of the next couple years uh... you know are you seeing sort of any change in tone in terms of what your customer telling you

is providing to us. So we're seeing the demand for freighters as large as it's been in the past. And then as it relates to the ongoing e-commerce demand around the globe, I'll turn that over to Mike. He's probably the best person to comment on that.

Thanks, Rich. Just to reiterate, we have not seen any weakness in demand really at all. We've talked at length about the order book, not only for this year, but the upcoming years. We haven't seen any indication from any of our existing customers that any hesitancy has communicated quite clearly that if it's possible to take

the new aircraft, new deliveries early, they certainly would. From a broader perspective, e-commerce is certainly still the engine and it remains very strong and as we've said many times, ATSG is really an enabler to e-commerce. But when you think about some of the industry folks, the consultants in IATA and Boeing and Airbus, etc., the freight fleet, that 20 year...

freighter fleet activity is going to increase, Jack, by 2.5%, 2.4% over the next 20 years out to 2041. And two-thirds of those freighters are operated by the integrators or on behalf of five companies, the five major integrators when you think of Amazon, DHL, UPS, FedEx, and SF. We feel real bullish and we've talked about it at length. Those folks are direct.

So Rich, you talked about buybacks and the ability to kind of get back into the market with buybacks here in a couple of months, once the CARES Act restrictions expire. I guess kind of bigger picture, you know, any additional insight you can share about how, you know, senior management and the board are thinking about capital allocation as we kind of move forward. Obviously, there's a, as Mike was just outlining a lot of demand.

for your assets so the growth capital is needed. Their opportunities to pay down debt and then also pursue buybacks. I mean, how do you balance that? And, you know, should we think about you being opportunistic with the buyback moving forward or maybe more consistently in the market? I guess just kind of trying to balance all those things. I guess just kind of trying to balance all those things.

Sure, I'll start this up and then Quint May has some other comments. But in general, Jack, we believe that we'll be able to do both. We'll be able to allocate capital to the growth with which the demand is, Mike has talked about is very high. We've got, I think, 50 commitments out of the 80 spots. We have 326 with agreements and or cash down. So the demand is very strong. But if you look, one of the slides showed that although we're increasing our fleet, we've been delivering over the last three years. And so we're likely to be able to deliver now under two times. And we believe that we'll be able to do both. And we believe that we'll be able to do both.

to buy back shares. I'll let Quint maybe fill you in on some of the details. Yeah, I mean Rich covered it real well, Jack. Certainly the balance sheet strength that we have and the sort of growing portfolio of laddered out leases that CAM is so successfully marketing gives us a lot of visibility to future cash flows gives us confidence, you know.

as to where we're heading with our projections long term. We all know quarter to quarter, sometimes there's a bump here or there, but long term, that gives us a lot of confidence and ability to use share repurchase to create additional value on top of our growth plan. We're levered under two times and that also positions us well, so we're really excited about getting that tool back when it cares...................

expires here in a couple of months to go along with our growth value that we've been creating. Okay, absolutely. I know it'll be good to have that arrow back in the quiver. Thanks again for the time. Really appreciate it.

All right, Jack. Thanks, Jack. One moment for our next question, please. Next question comes from Helene Baker with Cowan. Please go ahead.

Thanks very much, operator. Hi, everybody, and thank you very much for the time today. I just wanted to follow up on Jack's question. Is there a goal for

For leverage under 2X is pretty impressive and I know the one slide talks about being able to grow without really adding significant leverage. Are you thinking 2 is the upside or are you willing to get up to 2.5 or 3? You've been more levered than that in the past. Yeah, I think for, I'll lead off on this, but the, Helene, it's really dependent on the opportunity.

that's out there and how we evaluate that. You know, we've certainly, as you point out, you know, or acquisitions that we've done, you know, we've levered up above three times. While we've managed the company, you know, pretty conservatively overall, you know, we spent most of our, the last decade and a half, probably more than the two and a half range or less, but we've certainly levered up when the opportunity set was attracted.

And because of that, the ability to cash flow that I mentioned a minute ago, we would do that again. If that seemed to us to be the prudent, invest a creative way to create value. But we don't have a specific target to answer your question. We're not, it's one of the things about where the rating agencies have us, which is right under investment grade. But we actually kind of like that because...

Sometimes we need to become investment grade, which I believe this company could certainly do if that were the wish to be investment grade. You know, sometimes it sometimes kind of hamper you a bit on taking on more leverage for opportunities. And I kind of like the sweet spot we're in and where we get good pricing in the credit markets, but we maintain the flexibility to move forward and create value for our shareholders. You know, when the opportunity is attractive.

Thanks, Quintet. It's very helpful. You actually said something in your prepared remarks about the increase in receivables.

Is that something we should worry about? I was sort of, you rarely call things like that out when you talk, and so I was kind of surprised to hear that. What are you not saying?

Well, you know, we called it out just because I think for the last That reporter, you know, you kind of seen that adjust the tree.

cash flow staff, you know, that new non-gash staff that points to that capital that the business throws off that we have the ability to grow with or return shareholder. It's kind of the first time in many quarters that that number actually even went down a little and the reason is real identifiable. It's nothing of concern, you know, it's more timing related than anything else, you know, you have receivables. As you know, we don't take on any significant fuel price risk.

But, you know, we do buy fuel for customers, and in this particular quarter-end, I think that's a big piece of those receivables, it's just the timing of settling the reimbursement of fuel with some of our CMI customers. So absolutely nothing to worry about in terms of collectability or anything like that. That's great. Thanks, Clint. I appreciate it. One moment for our next question, please.

Our next question comes from Chris Stadalopolos with SIG. Please go ahead.

Morning, Quint Rich. My morning everyone, thanks for taking my question. So.

So, which I appreciate the the color and the sort of a perspective on

sort of managing the business here through a potential cyclical slowdown but

You know, we haven't really seen the model. I believe you reconfigure the business back in 2010 or so. So we haven't seen the model. Battle tested, if you will, during a recession. And I just, if you could, you know, there's obviously a lot of concern here. Around what cargo and. Things like that might do into a cyclical slouch. Just want to dig into here around. You know, next year you have 18 freighters out there.

The assets that you have, the lease rates, here to be holding up, you know, could you help us get a little bit more sort of confident about your ability to grow, ebbed up, through a downturn, and also with the placements of the aircraft with overseas customers, should we assume then that that would put sort of sustained upward pressure on items such as travel, and insurance expense, and then the last part of that.

Just remind us in so far as aircraft that had been locked in and then the aircraft with the yellow eyes. What are the sort of protection that you have in place or how the sort of contracts work? If a ship or an airline today decides, okay, we want this capacity next year or 2024. Things turn and they at some point reach out and say, you know what? We're not going to be able to take that. That tail. Thanks.

Okay, a lot to unpack the Acryst. First off, as far as operating the company through a cyclical downturn, there have been, if you remember 2013, 2014, it was a pretty poor year for air cargo. And then we started to cycle out of it in 2015 and 2016. So we've gone through some pressure points in the past. But I think the discussion that in the prepared remarks that I put forth about the resiliency of our business model of the existing business,

which is all the leases that we have and the dry leases that are, you know, need to be paid whether the aircraft are fully utilized or not. The networks that we provide service for in DHL and UPS, ISR DHL and Amazon, that, you know, they need, they provide daily committed time-definite services on those networks. And so it's, it would be very unusual for them to cut back on those networks and not service billings, poisey, butane buffalo on any given day.

And then the last part is the military, the military really, or the Department of Defense and other government agencies that we fly up for really don't. Their demand is not a function of the global economy or the business cycle. So the existing business is very resilient when it comes to economic downturns. Now you look forward to the growth portion of our business and the leases and from the conversions that we'll be doing over the next, we've got scheduled over the next three to four years. Those customers, the majority of them fly in.

networks around the globe. So they're flying for similar customers that are performing at...

e-commerce type deliveries and those types of things. And so again, there'll be a more resilient demand. Then you will see in like general cargo, general air cargo tends to have a much more alignment up and down with global trade and the global economy where the e-commerce business and the network business tends to be a little bit more resilient or a lot more resilient because of the network need that those assets provide. When we look at the demand that we have currently for the assets that we have scheduled in 2023,

We've got backup. In other words, if ABC company doesn't want the airplane, we can turn around and lease it to another company that's farther down or later on the list. We've got that much demand out two to three years, in some cases depending on the aircraft type. So we think we've got robust enough demand that should there be any type of softness on any individual airlines part, then we've certainly got enough built up demand that will be able to step in and.

and take that. I will also say that the way we've structured this model and the way that we deal with slots and conversion houses and deposits for slots and those types of things, at any point in time, if we believe that either the returns on the leasing basis or the demand of the market would change or shift, we can always put our foot in the brake and stop by and feed stock and stop converting airplanes. And then we'll just be throwing off a lot of cash.

that we could look to do other things with, return it to shareholders, or invest in other things that may be in a more growth mode at that point in time. So again, we've got a very flexible set of levers here to pull should the demand market change. But I wanna be real clear on this. The market demand for leased freighters is as strong as it's ever been. And when I look at all three aircraft types that we're involved with now, the A321, the 767.

and the A330, all three of them have very strong demand. And the ones that are out two years or three years, we checking with them regularly, a lot of them are the same ones that are taking airplanes next year or this year. And so, and they're all, they're all still, if they could take more airplanes tomorrow, they would take them. So we've got a really strong demand outlook.

I would also just say that we either, you know, we've got our commitments to source aircraft in the market today. Chris is extremely tight, meaning feed stock availability is, you know, is never been harder around this 7-6-7 specifically. You know, and we have secured or happy ability to secure it through deposits.

enough aircraft to take us through 2024 in regards to our 767, for example. And we're fielding calls all the time from other folks who are trying to purchase those aircraft from us. So it just goes to the strength of the market in terms of what we see, what will they across the group go. I think Rich made a great point. I'll just reiterate it.

The DHLs, the FedExes, the UPSs of the world, they've got global day and time commitments to make sure that their packages are being delivered. And to do that, they've gotta fly confirmed schedules. And even if you look at their, meeting FedEx and UPS's most recent results, you see strong double digit growth, specifically in their international products, which means the cross border aspect of e-commerce is.

is still not only alive and well but growing really strong. I made comments about the strength of e-commerce as it relates to growth and there's optimism specifically when you look at economies like Brazil, it's only has 5% e-commerce sales compared to total sales in India under 10% Vietnam, 6% and a half percent, next to 11%. So e-commerce has relates to overall retail sales, it's still very much.

in the early days. So, you know, and when you look at the growth estimates out to 2025, it's still 24, 25% of total retail. So the engine is still great, you know, as we look out over the next few years. Then again, you know, we've got everything in place with diversification in terms of conversion houses, as well as feedstock to meet that demand from customers.

Yeah, another metric on that, Chris, this is Quinn. Just for example, our cargo block hours that we, you know, our two primary airlines that serve the cargo customers, AVX and ATI. For those who aren't on maintenance, this TJ Sport or an protesters

and up about 13 percent in the second quarter over the prior year quarter. So the big customers that fly these airplanes, you can see, are expanding. And that's kind of the differentiator between some of the long haul routes, where you may be more sensitive, right, to recession and demand. The e-commerce driven networks still need the asset and have to serve those geographies in their network.

Two sources of demand for freighters. There's a growth demand and there's a replacement demand, just like the one for all airplanes. Just like the one for all airplanes.

And so when you look at the growth demand, we've kind of addressed that going forward. When you look at the replacement demand, it's one of the key reasons we got involved with the A321 freighter. The A321 is a direct replacement for the 75. They stopped building 75s in, I think, 2005. And so there hasn't been one built in 17 years. And there's a, I think it's somewhere around 15 to 20% fuel burn advantage in the A321 versus the 757. So when you look at all the ESG goals and all the ESG,

of the carbon footprint and greenhouse gas emissions, goals and that airlines are looking forward to in terms of reduction. That aircraft is gonna play a great role in replacement and being a greener airplane for the segment of the business that it serves. Okay, thank you. Rich, I'll throw one more your way. So air finance, journal, just put out their annual report, it looks like CAM made it into the top 25 in terms of the number of aircraft.

Undermanitant are you comfortable growing the fleet 1015 Tales per year and kind of steady grinding up the ladder there would you consider Potentially accelerating this as you look to grow that fleet number for 200 units and Beyond yeah, no, it's a great question that we're I'll say what we're we're really proud of the fact here

that we're the largest less or of freighter aircraft in the world. And we're only adding to that leadership position. Prior, it was all 767s going forward. It's going to be a blend of the three aircraft types. And if you look at our growth plan going forward, I mean, we're going, I think we did it in the mid teens last year. We dropped down to 10 this year just in terms of the schedule, of the conversions. Next year, we've got 18 on the schedule. So the year after that in 2024, we've got 25 on the schedule. And so we're ramping up as we get into, and we start to get into the A330, which we'll start to.

and more returns to our shareholders.

Great, thank you. One moment for our next question, please.

Our next question is from Mr. Galanti with CIFIL. Please go ahead. Hi. Thanks for taking my question. I want to start off with pilot availability. You called out a little bit the higher cost pressures in general and given the headlines around the lack of pilots.

more so on the passenger side. But if you talk about sort of changes in availability for a PSG, and if there's sort of any concerns given the desire that the growth mode that you're currently in, are there any concerns over having that being in the manufacturer going forward? Let me know in the comments.

That's a great question, Frank. Thank you. Yeah, we're not immune from the attrition that's going on in the pilot force these days. It's one of the things we refer to when we talk about cost pressures on the employee side. We planned on some attrition this year in the pilot ranks for all three airlines, so there was some in the plan. And so what that means is you plan on training people and bringing them in, and so the training cost is factored into your cost. We have seen it be a little higher than the plan.

For example, ATI planned on trading five pilots per month, and I think last month they traded eight. And so what that means is we're having to run larger training classes. We're not having any problem attracting pilots. You probably read in some...

trading five pilots per month and I think last month they traded eight and so what that means is we're having to run larger training classes we're not having any problem attracting pilots you've read you've probably read in some segments of the market there is a problem attracting pilots we haven't seen that yet based on where we are we're we've got mid-sized airlines it's a good career to come to ATI, ABX or Omni and be able to grow

for DHL and we'll have no problem getting the pilots in place for those growth assets that we're going to see at the end of the third quarter and into the fourth quarter. So it has affected us. We are keeping up with it and we're, it's factored into our into our cost and our guidance for the rest of the year. That's helpful. Thanks. And I sort of wanted to go back to the growth question and maybe from a little bit of different angle.

So looking at the current growth that ATG is experiencing, Ag has broader industry. The question is, is that what you're experiencing is that through kind of this industry increased demand for air freight? Or is there a component of sort of taking share from other lessores or even within businesses that there are more of a desire to lead rather than own on the margin?

Yeah, I think it's a good question. A couple of things. One is that the E-commerce growth engine has started pre-pandemic. And so the pandemic did accelerate that growth over the two and a half year period. And so what it did is it brought a lot of new adopters to that buying platform that probably never would have gotten involved in that buying platform and juiced the demand up. And I have got people who buy online and never would have bought online. So there's that demand that's.

desert.

seat checking them, getting them ready, and putting them up to fly, right? They were taking passenger seats out of larger jets and loading them up with cargo to fly to make up for the Dureth and freighters that was out there. So what you see now is part of the demand is kind of a right sizing or a right allocation of what asset do I need on that lane? And is it a narrow body, is it a medium wide body, is it larger aircraft? So there's that level of demand.

that I think is kind of going on. You've got your 733 and your 734s that are now being replaced by 738s and A321s as an example. So you've got that type of demand profile picking up. But I think one of the other trends that we've seen and we've actually been the beneficiary of is...

Passengers are carriers that are now becoming combination carriers that are getting into the cargo business We announced last year an opportunity with air air Canada Will we acquired to 767 from air Canada? We converted them and we lease them back to air Canada And then we're doing the same exact deal on the a321 basis with Vietnam airways We are acquiring 2 a321 from them. We're converting the freighters and we're leasing them back to them

So I think that's kind of an interesting opportunity where some of these passenger carriers have seen the situation where they face the pandemic, where they had to pull down a number of resources, but they could have stayed engaged on the cargo side more efficiently if they had freighters. And so they want to now get into the freighter market and within the beneficiary of that, and we hope to be continued to be the beneficiary of that kind of new demand segment that we see in the market. I don't know if you've got any other. I've just got a couple of things. And those Vietnam aircraft will be 2023 deliveries for us. And those Vietnam aircraft will be 2023 deliveries for us.

and never been better from a CAM perspective. So, you know, it's really important to us. We get calls all the time, inquiries, so to speak, about leasing folks' freighters. So, you know, we're very careful. If we get into younger airlines or startup situations, we really flush them out. We ask them to present us not only their financials, but their business cases as they go to market. And, you know, when you're in a leadership position that we are, and as Rich mentioned, the world's largest lessor of cargo freighters.

We get a lot of inquiries from folks and we want to make sure we're doing business with the right folks around the world. It's really important to us. Great. That's really helpful. Thanks very much. Thank you one moment for our next question.

Our next question comes from Eric with freight waves. Please go ahead. Hi. First time on one of these calls. Thanks for the opportunity. I had a couple questions. You talked a little bit about the e-commerce being very strong for you, but I think e-commerce sales have dipped globally in the US this year, naturally.

Are you seeing any change in the mix of your freight? So your comments, Fred? Yeah, so we don't, Eric, we don't get visibility to necessarily what's in the boxes in the mix of the freight. The only thing I could tell you is during the pandemic, the packages got and the airplane got a lot heavier because there was, you know, hand sanitizer and cleaners and everything else. Fluids going on, the airplanes in as much as, you know, iPhones and stuff package and styrofoam. So we don't get visibility really to the mix of freight that goes on there, but...

So if you have the availability of a freighter when someone wants it, or when they're looking out in their fleet plan for two or three years, they can't get a manufactured freighter from Boeing as an example. There are no available in that line. And then we've always been proactive about getting slots for airplanes because for us that's something that's a lower risk proposition.

And we exercise our acquisition of FeetsDoc are under men. So from that standpoint, I think, you know, one of the things that we've been able to do is have a availability of assets ongoing. Let me ask you.

Briefly, the Atlas Air yesterday had a big acquisition. They were going to be taken private and bought by investors. Wondering how you see that impacting any competition for you guys and do you have any interest in expanding through any acquisitions? Yeah. I mean, Eric, we typically don't comment on things like that. I mean, obviously we're a public company.

And you know, it's easy to see where we trade and so forth. At we saw the news on Atlas and you know, I understand their shareholders will consider the merits of that and they'll be looking at closing that deal. You know, we have on many calls, you know, pointed out that there, while there are some areas where we've competed with Atlas, their companies are quite different and there are, you know, differences in the equipment type and where the focus is, you know, we've been.

more detail on some of these supply chain issues that are impacting conversions? Is it labor shortages at either the suppliers or the assembly lines? Or is it products or actual materials and so forth that are being impacted? Or is it the shipping of congestion? You mean packing of items a gym serving products?

It's a combination of really of everything. We're seeing, you know, shortage of demand in terms of parts and kits, materials, precious metals, etc. A lot of these kits are from China, so as China has gone through some of the COVID lockdowns, that's caused a delay from that perspective, which obviously is labor related, etc. But I will tell you that, you know, some of the things that we've worked on to mitigate that is, for example, to, you know, to

have additional conversion slots with Boeing, which will start soon later this year, and well into the next few years. So we're diversifying ourselves in terms of, well, we'll do our 7.6-7 conversions. We've got multiple MROs where we're doing the 321 conversions as well, as well as the three theories will be done at multiple locations. So we're mitigating that by having multiple locations for the conversions in the upcoming year. And we're already seeing some easing in regards to part supply materials, etc. like conversions. Like I said, it's...

Like we've said all over, it's not the man that's driving and that it's really just the timing of it. Gotcha, thank you. You're welcome. Thank you. And with that, I'll turn the call back to Rich Corrado for any final remarks. Thank you, Carmen. Thank you again to all of our employees who work hard every day to take care of our customers. Their efforts make it possible for us to deliver excellent returns for our shareholders.

I hope you have a better understanding of what makes ATSG a unique investment in the transport space. Midsize creator aircraft will remain in strong demand over the next several years because e-commerce customers expect fulfillment that only a dedicated transport network can provide. Our released aircraft assets, order book, and airlines will generate plenty of cash flow to fund our growth and share with our investors. Thank you all for your interest in ATSG.

And with that, we conclude today's conference call. Thank you for participating and you're may now disconnect.

Q2 2022 Air Transport Services Group Inc Earnings Call

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