Q2 2023 Air Transport Services Group Inc Earnings Call
[music].
Good morning, ladies and gentlemen, thank you for standing by.
Our services group second quarter 2023 earnings conference call.
At this time all participants are in a listen only mode. After the speaker's presentation. There will be a question and answer session to ask a question. During the session you will need to press star one one on your telephone you will get.
In automotive message advising Johan has raised.
Please note that today's conference maybe recorded.
Now I'll hand the conference.
Your host today, So Joe Payne Chief Legal officer, Sir you may begin.
Good morning, and welcome to our second quarter 2023 earnings Conference call. We issued our earnings release yesterday. After the market closed its on our website H T. S. G I N C dot 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.
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 unplanned changes in the market demand for assets and services.
Our operating airline's ability to maintain on time service and control costs.
The cost and timing with respect to which we were able to purchase and modify aircraft to a cargo configuration.
Fluctuations in Atsg's traded share price and in interest rates, which may result in mark to market charges on certain financial instruments.
The number timing and scheduled routes of our aircraft deployments to customers.
Our ability to remain in compliance with key agreements with customers lenders and government agencies.
The impact of current supply chain constraints, both within and outside the U S, which may be more severe or persist longer than we currently expect.
The impact of the current competitive labor market changes in general economic <unk> industry specific conditions, including inflation and other factors as contained from time to time in our filings with the SEC, including the Form 10-Q, 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 pretax earnings adjusted EBITDA and adjusted free cash flow.
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 financials. 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 Corrado, our president and CEO for his opening comments.
Thank you Joe and good morning, everyone.
Our second quarter results highlight a sequential rebound in our passenger airline operations and continued topline growth across our principal businesses.
Additional military and commercial flying as well as operating efficiencies led our <unk> services segment to report a 10% year over year gain to $24 million in pre tax earnings for the second quarter that was a $26 million improvement from the first quarter.
Cam our aircraft leasing business grew revenues, 2% versus the prior year, but pre tax earnings were down.
It is at least more Boeing 767, 300 freighters and accepted schedule returns of several 767, two hundreds over the prior 12 months.
We expect a record pace of new freighter lease deployments in the second half, including six already delivered this quarter.
Accordingly, we're maintaining our full year adjusted EBITDA guidance and have raised our adjusted EPS guidance range by <unk> 10 cents from the targets we set in May.
At the same time, we're lowering our capex guidance for this year by 65 billion to reflect fewer aircraft purchases for 2020 for conversion.
And fewer than planned overhauls for our engines for 767 200 freighters.
These reductions will have a positive impact on this year's cash flows now I'd like to turn the call over to Quint Turner to review our financial results for the second quarter.
Quint.
Thank you rich and welcome to everyone on the call. This morning.
As rich just mentioned our second quarter results reflect sharp improvement from the first quarter and our <unk> services segment stemming from both improved revenues and cost efficiencies.
And our leasing segment, we benefited from five more leases of 767, three hundreds from a year ago offset in part by higher interest expense and the effects of 10 767 200 lease returns over the last 12 months.
The next slide summarizes our financial results for the quarter.
Our revenues grew $20 million or 4% versus a year ago to $529 million for the second quarter.
Both of our principal segments as well as our other businesses in total contributed to that increase.
Our GAAP pre tax earnings were down $20 million and basic earnings per share were <unk> 54 versus 73 in the second quarter of 2022.
On an adjusted basis pretax earnings fell $9 million to $58 million and EPS was down <unk> to 57.
And our aircraft leasing segment Cam pretax earnings were down $9 million compared to a year ago at $31 million.
That was primarily due to the scheduled return of 10 767 200 freighters since June 2022, including seven during the second quarter.
Cam's allocated interest expense rose $5 million and depreciation rose $2 million.
Cam leased five more 767, three hundreds externally over that same period.
And our CMI services segment pre tax earnings were $24 million up $2 million. The increase in earnings at <unk> services was primarily attributable to significantly improved performance in our passenger airline operations driven by both military and commercial charter flights as well.
Its greater operating efficiencies.
Airline block hours were up 1% versus the prior year quarter as increased cargo hours more than offset a slight drop in passenger hours.
Cargo hours increased 1% for the quarter, primarily on more hours flown for our customers Express networks passenger block hours were down 2% for the quarter versus a year ago that.
That included more block hours for our 757, Combi operations, which resumed services over a trans Pacific Route last fall.
Turning to the next slide our second quarter, EBITDA was $157 million flat compared to the prior year period on a trailing 12 month basis, adjusted EBITDA was down $2 million to $621 million.
On this slide you can see cams adjusted EBITDA for the trailing 12 months, which we are breaking out for the first time.
<unk> share of total adjusted EBITDA has remained at approximately two thirds over the periods shown.
<unk> is the foundation of our company and we project adjusted EBITDA to grow as global demand for at least mid sized freighters continues.
On the next slide you will see that capital spending reflects strong freighter market demand for our lease freighter fleet sustaining capex, mainly for airframe and engine maintenance technology and other equipment is higher this year due to the timing of aircraft engine overhauls, but will decline significantly next.
Last year as the number of projected engine overhauls decreases.
Total capex was $413 million for the first six months of the year, including $303 million for growth.
That's more than halfway to our projected $785 million total spend in 2023 of which $545 million is for growth.
That spending will primarily fund purchases of feedstock aircraft and freighter conversions.
The next slide updates, our adjusted free cash flow as measured by our operating cash flow net of our sustaining capex.
Operating cash flows increased $68 million to $192 million and $631 million for the trailing 12 months.
Adjusted free cash flow was $423 million over the last 12 months that equates to nearly $6 per share based on our outstanding shares as of June 30, and demonstrates the cash generating power of our company.
On the next slide you can see that available credit under our revolver facilities in the U S and abroad was $419 million at the end of the second quarter.
Operating cash inflows are expected to largely fund our spending through 2024, and we expect our debt to adjusted EBITDA leverage ratio to remain under three times.
Our balanced capital allocation strategy continues to include share repurchases. We bought back 950000 shares in the second quarter. Following 1 million shares in the first quarter.
Since the restart of share repurchases in October 2022, we have repurchased 4 million shares demonstrating our conviction to share with investors the returns atsg's investments and business performance generate.
With that summary of our financial and operating results I will turn it back to rich for some comments on our operations and outlook rich.
Thanks, Quint, let me begin with a few key drivers of our second quarter results, which support our confidence.
About our continued progress through the rest of the year.
The best news for the quarter was the strong rebound in our <unk> services segment.
As already noted our airlines posted a 10% pretax earnings gain to $24 million versus a year ago, which is a $26 million sequential improvement from the first quarter.
Passenger flying was the biggest change factor on these operation for its military and other government customers picked up significantly and it won new business with commercial customers compared with first quarter levels.
Our cargo airlines flew more hours in a year ago due primarily to the eight more customers signed 767 freighters and Theyre CMI fleet versus a year ago.
Cam continues to navigate a year of record lease deployments three of our projected 19 freighter leases for 2023 were completed in the first half of.
Of the 16 remaining the first six have been leased and just the last 30 days, including our first two <unk> hundred 20 ones.
Seven 767, 200 trade has returned to Cam as planned during the second quarter. Most of those returning two hundreds were part of the 12 Cam began leasing to Amazon in 2016 to jumpstart, it's Eric's breast network.
We expect to operate seven for Amazon at least through peak season.
We continue to regard the 767 200 freighter as a key player and Eric Express networks around the world operating over shorter routes, but with more capacity than narrow body freighters.
Our decisions about the future of 200 airframes that come off lease are case by case and based on cycle life and maintenance requirements.
We are actively engaged in discussions to re lease or sell most of those returning 767, two hundreds we project that the new owner of any 767 200 airframe, we sell we will need to contract with camp for engine power.
If you look at the next slide you may recall that in May we mentioned our flexibility to modify our capex plans that spend for 2023 is now expected to be approximately $785 million.
$65 million lower than prior guidance.
That reduction reflects fewer planned engine overhauls and the removal of two <unk> hundred 21 feedstock purchases from our plant when the counterparty decided not to move forward with the sale leaseback transaction.
Investments in <unk> hundred 30 freighter conversions will continue as planned including our first three feedstock purchases this year for lease to customers in 2024, we're eager to launch. This next phase of our fleet development plan with our first $3 30 conversion deduction in October and a second to enter conversion by year end.
While we remain confident in global e-commerce growth driving strong demand for our mid sized freighters, we intend to time, our feedstock investments when possible to more closely tie purchases to induction dates we are focusing on generating strong returns on capital and making sure we see the demand to support the investments in the conversion.
We currently expect to spend less for both growth and sustaining Capex in 2024, then this year the.
The reduction in our fleet investment outlook gives us even more flexibility to return capital to shareholders should our shares remain undervalued.
Our next slide covers our outlook for the rest of the year with the positive trends, we see in passenger airlines and a strong pipeline of freighter deliveries in the second half.
We are maintaining our adjusted EBITDA guidance for 2023.
$610 million to $620 million.
But raising our adjusted EPS guidance to a range of $1 65 to $1 80 per share.
That increase reflects our projections for second half lease freighter deployments and improved CMI services performance.
Our balance sheet remains strong we have a leadership position in the midsize freighter leasing market and a blue chip roster of large express and E. Commerce customers. Those factors are why we remain attractive to credit investors, who support our credit facility and debt securities.
Our employees stand ready to deliver our 2023 goals and generate long term superior returns for our shareholders.
Along those lines I'd like to thank the teams at all of our businesses for their continued efforts to deliver unparalleled services to our customers and especially those who maintain solid on time performance during Amazon's Prime day event last month.
That concludes our prepared remarks, Quintin I, along with Mike Berger, our Chief strategy Officer, and Paul <unk>, Our Chief commercial officer are ready to answer your questions.
Operator.
Ladies and gentlemen, if you'd like to ask a question at this time, you will need to press star one on your telephone and wait for your name to be announced to withdraw. Your question. Please press star one again, please standby, while we compile the Q&A roster.
First question coming from the line of Brian .
Gallazzi with Stifel. Your line is now open.
Okay.
Hi.
For taking my question.
Wanted to ask about <unk> segment, it's really good to see that margin improvement there but.
But can you sort of talk about expectations for that segment for the remainder of the year.
How does that generally look from a seasonality perspective.
And then sort of from a visibility perspective from what you've seen on.
Contract refreshes and passenger demand.
Hi, Frank and thank you for the question.
On the passenger side.
Our.
We have evaluated the outlook in terms of the we had a nice improvement in the second quarter.
And we see a strong third quarter from the passenger side.
In the fourth quarter is generally a seasonal quarter for the.
For the passenger side and we look look to that to be flat as compared to last year. So we were confident that the gains that the passenger.
<unk> gained in Q2 will continue in Q3 and be flat for the fourth quarter, which is generally.
What they see on the cargo side.
We've been encouraged by.
The.
Block hours that were going to be doing in the fourth quarter.
Really going to be flat over last year, but when you compare that to what's going on in the general cargo market, which has been fairly weak.
We look to be.
Holding our own remember.
Our.
ACI operations on the cargo side are generally are targeted at specific network.
Hi.
Geared towards e-commerce and integrated packages in that.
As reacted differently.
The downturn in the general Air cargo.
If I could just answer the seasonality piece and its Mike Berger.
As Amazon announced they had record prime days.
Earlier, a few weeks back and that normally translates to a very strong seasonality season, as we get into the peak season as well.
Okay.
Okay. That's helpful and then switching over to Cam.
It looks like.
Hey.
Growth Capex is sort of come down but that looked like it was mostly from engine and your maintenance and then the <unk> hundred 21.
Had there been any changes this year.
Six seven or 830, then and what are you seeing.
Demand for those claims.
So on the on the demand for both the 760 sevens in the three <unk>, where we're on plan for the year.
We'll deliver.
14, 767, three hundreds this year and 500 <unk> hundred 20 ones and we will be putting our first two <unk> hundred <unk> into conversion so all.
The customer demand remains strong.
All of those aircrafts.
We have in our plan.
Going forward.
Recall, we had guided to 20 last quarter, we dropped that to 19 and thats really related to one aircrafts that.
We'll be out of conversion, but we'll be awaiting a service bulletin and kit.
From Airbus and others.
We've tried several different avenues to try to improve the timing on that but it looks like it's going to push to next year and the first quarter.
Okay, great. Thanks, so much.
Thanks, Greg.
Thank you and our next question coming from the line of Jack Atkins with Stephens, Inc. Your line is now open.
Okay, great. Good morning, guys and congratulations on a nice rebound quarter here.
Good morning, Jay Yes, so I guess, if I could maybe start I just would love to make sure expectations are calibrated correctly for the third quarter I mean, how are you thinking about.
Within the context of EBITDA guidance, how are you thinking about results sequentially would you expect them to be.
Yes.
Fairly consistent maybe a little bit of improvement I, just want to make sure.
We're all kind of thinking about that within the context of your.
You or your outlook.
Yes, I appreciate the question Jack.
I think that.
Third quarter of course, as we as we mentioned on the Cam side. We had some returns that came back so youll get sort of that full quarter effect of some of those came back during the second quarter, there, but on the ACI services side, we're expecting a very similar strong.
Performance there so I think overall third quarter.
Hey.
As a whole ATSG look similar to second quarter in terms of.
The production and I.
Thank the sequential.
Progress that will be more evident in the fourth quarter, because there you'll have.
All of the deployments that Mike mentioned contributing.
We do expect a sequential improvement in fourth quarter.
Right now in the second half and of course, we're giving you our guidance range on EBITDA. So you know kind of what the.
But the whole second half is projected at so hopefully that helps you a little bit yeah. No. That's great. That's perfect and I appreciate that that context, so I guess, maybe maybe shifting gears to <unk>.
The passenger operations I'm, just maybe expanding on that a bit.
It looks like you made some changes from a leadership perspective, there during the quarter.
Could you maybe talk about just the progress that you've made in terms of recouping.
Some of the inflationary costs that you've been seeing I mean do you feel like you've made the progress that you wanted or is there additional sort of opportunity left to go to kind of get that business back operating like you'd want.
Yes.
So thanks for the question Jack in terms of volume. These passenger operations. They were already on their way to operating efficiencies in the first quarter and we're able to leverage that ended during the second quarter for improvement there.
They reduced their head count is one thing just to attrition we didn't furlough anybody.
And they were able to.
Many times they fly into markets, where they may make one stop where they may they may go through there for a full quarter.
And so they are able to negotiate for ground handling for catering and some other things to get better cost efficiencies out of those operations.
<unk> also looked at real estate, they have really done a nice job with.
Kind of looking at any any cost in their operation and terming that out so they've done a good job.
And getting additional revenue they sold three.
<unk> opportunities commercial opportunities outside of the government business that were multi months.
Opportunities.
They will leverage probably some of them through October and some will end in the third quarter.
So they were able to do both improved both on the revenue side and both.
And then on the cost side. The government did help they are block hours picked up in the second quarter again, <unk> got a seasonal tone to it and generally the second and third quarter are their strong season, Okay. No that's great to hear and good luck.
That business has seen some improvements there.
I guess, maybe for my last question shifting gears to the Capex you guys definitely sort of heard.
Voice of the shareholders I think just in terms of the Capex plans and I think it's encouraging to see you kind of attribute.
For this year as Youre thinking about next year.
In 2024, you talked about 'twenty four Capex peak below 2023.
I know you are still forming your plan, but is there a kind of a way to think about order of magnitude.
To what degree can 2020 for Capex to be below 2003, I know you still have probably quite a more room to work that you do 23. So just would be curious to kind of get your take on that yeah. We've been we've been looking at the 2020 for Capex since the beginning of the year as you know.
And you're right.
We heard the shareholders loud and clear, but we still have great growth opportunities in front of us, but there are some efficiencies we look from a cash to cash cycle in other words.
When we buy an airplane how long does it take us to put it through conversion historically due to the.
The feedstock environment on the 767 in particular and when you'd normally like to buy multiple aircraft from an operator, we were buying lots of airplanes and weren't necessarily able to.
They have as much.
Control, if you will over the deliveries of those going forward, we're looking to minimize that so take delivery of an airplane in the year in which we're going to do the conversion rather than.
And then have them parked so we'll be.
Looking at that and looking at some of the programs and deals that were going on for the feedstock for 2024.
We feel we'll be able to reduce the capex.
Without really impacting the delivery profile that we've got lined out for that so if I were to.
We haven't done.
Zach calculations, yet, but order of magnitude, maybe maybe $100 million lower than <unk>.
2023.
But again, we're not we're not guiding to that number. We're just we're just looking at where we can be for given the demand that we have in hand.
But we get set up for the future, Okay, well I'll promise I'll hold you to that number.
Yeah.
Very good.
That's great that you guys are able to find efficiencies that way and lower capex, while still maintaining the opportunity for growth. So that's great to hear and congratulations again and I'll pass it on.
Thanks.
Thank you and our next question coming from the line of Michael Mueller with Jos Your line is open.
Hey, good morning, guys nice results. Thanks for taking my questions.
Hi, Quinn.
Just just mechanical here.
On sort of the second half I'm, assuming some of the debt Paydown retired.
Some of the convertible the share count went down and then the second half earned adjusted earnings looks to be lower than this.
First half EBITDA is there something is it just interest expense or what's that kind of disconnect with EBITDA being up first half, but adjusted earnings being down versus <unk>.
First step.
Well there is.
In terms of the of course the guidance as you know it was.
Centered a lot on interest and depreciation Michael because.
For one thing.
We talked about in our remarks earlier.
We had airplanes that I think we were expecting to get six airplanes.
During the second quarter and I think we've got one right, but then in the last 30 days, which can be deployed six lease new lease airplanes, which is pretty remarkable so since the quarter ended deployed but what that so we've had some sliding.
Capex spend which of course has a positive impact on the.
Interest expense and also we don't start depreciating at Ko assets go into revenue service. So.
Positive impact on that as well and then the capex reductions, making our capex spend more efficient there.
Rich just described.
Some engine overhauls that we were able to.
To reduce our capex projection by all of that combined has had a favorable impact on.
Both of those line items depreciation that Andrew.
Got it got it that's helpful. And then just could you give us an update on status of negotiations with.
With the pilots Union.
I guess it sounds like still status quo.
Kind of think anything's imminent here, either resolution or one way or another but just maybe a general update on what's happening there.
Yes, thanks, Michael its rich yeah. So we're in mediation with both of our pilot unions that at omni entity.
ATI and as we've said before we've always been able to come to agreement with our unions and our goal always is to get the right.
Get the right contract, where we can attract and retain the pilots that we have.
And then also have the cost structure that we're able from which we're able to compete for business and that's our goal and we've maintained that we don't expect that either CBA will be settled prior to 2024, so it's pretty much.
Similar to what we talked about last quarter.
Got it okay perfect. Thanks, guys I'll jump back in the queue.
Thanks, Mike.
Thank you and our next question coming from the line of Thomas Fitzgerald with Cowen. Your line is now open.
Sure.
Alright, thanks, very much for the time everyone.
Last couple of quarters, you've mentioned that the theme about how many west freighters were retired during the pandemic.
Then in a normal period and I was just wondering if you could remind.
Alright walk investors through how are you already seeing that in the the lease rates for your freighters and the longer term opportunity.
In that greater market demand seems like it's really going to inflect higher in the middle part of the decade.
An exciting theme and you are probably the best way to play it longer term thanks very much.
Yes so.
Whereas we're seeing client playing out and you are right.
For the recall.
A normal year pre pandemic about 70 traders were retired and then that skinny down to about 15 during each year during the pandemic those three years and so there was a pent up demand for retiring assets and so what we're seeing is a.
A lot of the.
<unk>.
Not in our segment with the 734% of games being retired and replaced by 730 eights.
<unk> hundred 20 ones, which which is good for our segment because.
As you know we are getting into that aircraft.
And so it's one of those things that we're keeping a close eye on is a lot of larger airplanes coming out.
That had been announced.
Of MD elevens out of UBS and Fedex as an example, those are being replaced by seven predominantly by 760 sevens by those operators. So there is some definite movement in terms of.
<unk>.
And replacement traders.
Yes in the forecast.
Right, you mentioned that the forecasts from Boeing and Airbus.
Over the next 20 years.
<unk>, new freighters in excess of 2500 2800.
And if we skinny that down to what we're really focused on from a medium wide body standpoint.
That's anywhere from just under 900 to just over 1200, so demand for freighters over the next couple of decades is going to be continue to be strong.
Boeing and Airbus forecast with just raised another 5% recently, so real strong validation of what we're doing.
Thanks, very much that's really helpful. And then just kind of curious another big theme that's been coming up on the calls is the opportunity in e-commerce and emerging market I'm. Just curious if you have anything anything new or anything interesting to share with investors or what's going on in that space. Thanks very much.
Sure Paul Chase here, so as we've stated before right the assets and redeploy our targeted these global ecommerce integrator networks.
Many reports youre seeing that these these networks are projecting double digit growth outside the United States and Youre seeing continued cross border barriers e-commerce, they're facilitating more movements of door to door goods between these countries. So when you look at our freighter deployments roughly 80% of those aircraft are going outside of the United States. So we're confident in that.
Long term outlook.
Thank you and our next question coming from the line of Christopher <unk>.
With Susquehanna Your line is now open.
Good morning, everyone. Thanks for taking my question.
Rich.
Utilization for the fleet and QQ.
I guess in block.
Block hours per segment or however, you.
Typically measure that and then if you could break it out on the passenger side.
What it was for the U S Dod versus commercial.
Chris This is quint, we had total block hours.
In the second quarter.
Sure.
<unk> <unk> 46.
800, roughly how rounded to the nearest 46800 block hours.
And.
In terms of.
The D O D.
Dave made up.
And again there is that they have youre talking about our Combi flying we do the 757 Combi flying and we also do passenger flying for the Dod.
And that was about.
7500 of those hours.
And then on a per day basis I just wanted to see if you were if you.
Got back to where you typically are where you need to be.
Well I mean, certainly sequentially that was.
Nice increase as we talked about.
Last quarter your crop you recall that was part of.
The explanation on results last quarter was some lower hours there so nice nice increases sequentially.
When you are comparing to the prior year keep in mind, we have.
Had the things going on in Europe that were taking longer.
Segments, we were flying back and forth to Europe .
And so the hours were actually higher in second quarter, if youre talking about still talking about the Dod.
Those hours were higher and we also were not operating a long route for the economy, we've talked about that Ryan there is what we call the deep Pacific Route, which with those 757 comments that was added last fall. So it wasn't in second quarter a year ago.
So we were flying like 8000 hours.
For the.
A little over 8000 hours in the second quarter, a year ago, but those were longer routes and so.
Had you had that going on but in terms of rate per hour I think.
Omni.
Realized some benefit from a better revenue or rate per hour. This.
This year than they had in the prior year and again that that is part of the that's one of the drivers of the success that we spoke.
With our passenger results for Q2 passenger operations.
Yes.
Okay and on the two hundreds could you just remind us the age of that aircraft.
Years or cycle times, and then how does the efficiency I guess fuel compared to the 300 <unk> just trying to.
Get a sense of what the appetite might be for those two hundreds for three hundreds with widely used.
The original jump in here, but just to remember the two hundreds what we talk about it.
Our useful life post conversion because you remember the cargo conversion for an aircraft is really substantial right and we've talked about that.
Heavier heavier structures that are that are put in the upgrades to the cockpit.
It kind of comes out as a newly build airplanes and we generally expect to get kind of 20 years post conversion a lot of the 7672 hundreds that were talking about went into service in the late nineties.
Right.
Four.
First conversion, yes, coming out of converged right. So they've they've sort of achieve that kind of a lifespan that I just described.
The 767, 300 fleet and comparison is relative to us.
It's quite young in terms of age since it came out of conversion.
I don't have I haven't calculated the average lately, but it was like five years four years five years out of conversion because remember we put in significant numbers of those as our as E. Commerce has picked up and as we have.
As Cam has began producing double digit numbers of <unk>.
737, three hundreds so our 763 fleet is pretty young in that respect in terms of cycle life.
And youre right to focus on that because that is more relevant in determining when an airplane might be getting near a point, where it make some economic sense to perhaps your tire and for the 200 is what we've talked about is kind of 50000.
Cycles on the airframe as a benchmark and the reason for that is isn't that you have to take it out of service at that level or anything but there are some additional maintenance and inspection requirements that come into play when the airplane comes in and for a C check and that probably drives some additional cost because you have to open up more areas.
And look at them to comply with those requirements.
And there is I think there is an app pressure bulkhead, it's not particularly onerous.
I don't know cost a million and a half to 2 million Bucks.
Take care of it but those are things that that come into play so as rich mentioned, we evaluate the two hundreds on a case by case, but many of our 200 fleet is still pretty young and cycle life. I mean, we have some out there flying rich that are in the 20 thousands right in terms of their cycle time, so far away from the 50.
If you look at the efficiency of the aircraft which is.
It's still and even when you compared to the 767 300 or any other.
Comparable aircraft <unk> hundred 600, Airbus as an example.
767, 200, if youre only handling between 85 and 100000 pounds in a lane.
Is the most efficient solution today.
Despite.
The age of the aircrafts, so it's still an efficient aircraft for the mission.
It's pointed at.
The 77 300, as a larger airplane handles about 2025% more.
More volume and weight.
No.
It really provides a different mission, but $70 70, you understand there is a good opportunity in the e-commerce market.
Okay, and if I could squeeze in one more on the Cam breakout. So now that we have a sense of size.
As it relates to two to EBITDA. The last time I checked I think cam was somewhere in that.
25 of our top 25 to 30 in terms of lessors is there a plan.
To get to top 20 top 15, and if so would that.
Imply further diversification, which aircraft type I realize your business is very different from someone like an aercap.
But with the relative size here, even though I'm curious, how we should think about that.
That business, let's say through mid decade, and beyond top 15 top 20 player. Thank you yep. Thank.
Thank you for the question, we really don't that's really not an or.
View, we don't we don't look to be ranked in a certain place.
I don't think that really lowers our cost or raises our profitability.
We're focused on investment returns and capital allocations in the best interest of our shareholders.
Okay. Thank you.
Okay.
Thank you and I'm not showing any further questions in the queue. At this time I would now like to turn the call back over to Mr. Rich Corrado for any final comments.
Yes.
Thank you operator.
As we've talked.
We've made some significant changes and got some operating efficiencies out of our.
CMI operations over the past quarter, we're focused on returns our capital returns for our shareholders and we're looking forward to.
Completing the year and great fashion in.
In our business the number of freighter lease deployments military charter flights or maintenance checks can be can vary materially from one quarter to the next but the long term trend is consistent.
Predictable and resilient the fragrance released the aircraft, we fly and support services. We provide are essential to the fast and efficient delivery of military personnel e-commerce goods and other cargo within the many regional air networks, now forming and expanding around the world.
We intend to remain at the center of that process with the right mix of medium aircraft talented people and customer focused businesses and well considered capital allocation strategies that will continue to generate superior returns for our investors over the long run.
You for listening to our call today and as always please stay safe.
Ladies and gentlemen that does conclude our conference for today. Thank you for your participation you may now disconnect.
Yes.
[music].
Okay.
Good.
Okay.
Yes.
[music].
Okay.
Okay.
[music].