Atlas Air Worldwide said Thursday it is purchasing eight Boeing 747-400 freighters as their leases expire between this summer and the end of 2022 to ensure capacity as strong air cargo volumes collide with supply shortages.

The cargo airline holding company’s second-quarter revenue increased 20% to $990.4 million and it projected sales will reach $1 billion in the current period as shippers flock to air transport to support heavy ordering from customers and avoid ocean shipping congestion that has doubled or tripled transit times. Atlas officials said exorbitant ocean prices have been a catalyst for increased volumes, with aircraft utilization increasing to 93,190 block hours compared with 84,966 hours in the second quarter of 2020.

With airfreight volumes above pre-pandemic levels and the exit of many international widebody flights due to COVID, Atlas is flying more hours and charging more for space on its aircraft, resulting in higher yields. 

Air cargo volumes increased 8.8% for the first half of the year, the strongest performance in four years, according to the International Air Transport Association.

Revenue and earnings exceeded internal forecasts and consensus expectations on Wall Street. Adjusted pretax earnings of $243.7 million dipped a hair from $247 million a year ago because of increased operating costs due to higher pilot pay and COVID-related measures to maintain crew safety, but relative stability of profits shows the market for air cargo services remains very strong. 

“Economic and supply chain conditions remain favorable for air cargo and our dedicated freighters,” President and CEO John Dietrich said.

Comparisons are skewed by a huge boom in 2020 charter activity when governments and their partners needed emergency deliveries of personal protective equipment and medical supplies to combat COVID. Adjusted profit jumped $157.3 million compared to the second quarter of 2019, which was a more normal year for the global economy. 

Yields have fallen industrywide since the pandemic rush last year but are much higher than normal.

Atlas Air (NASDAQ: AAWW) said it expects third-quarter adjusted earnings before interest, taxes, depreciation and amortization of about $250 million, with adjusted net income up 50% versus 2020 ($82.7 million). 

“This outlook reflects the contribution of long-term customer agreements with favorable rates and guaranteed levels of flying; high levels of aircraft utilization driven by strong customer demand; and commercial cargo charter yields to remain above typical seasonal levels,” Dietrich said. 

Management said it is experiencing higher operating costs due to higher pilot pay and COVID-related measures to maintain crew safety.

The largest operator of 747 cargo aircraft in the world said it has purchased three 747-400 aircraft that were previously leased and reached agreement with lessors to take ownership of five more aircraft at the end of their existing lease terms next year. Officials said the move reflects the company’s confidence in the ongoing strength of the air cargo market, which is being turbocharged by the rapid growth of e-commerce transactions and demand from express parcel carriers for extra airlift.

Second-quarter performance was boosted by the reintroduction last year of four 747 freighters that were in long-term storage, and a 777 that Atlas kept for its own use rather than leasing to other airlines.

“This capacity, along with a tremendous team effort, contributed to our ability to enter into and extend long-term agreements with strategic customers, as well as to capitalize on lucrative short-term opportunities in the strong global airfreight market,” Dietrich said.

Flexport, for example, last year signed a long-term agreement with Atlas to fly two 747 freighters six or seven times per week from Asia to the U.S., officials at the San Francisco-based freight forwarder have said.

The parent company said contentious negotiations with its Atlas Air and Southern Air pilots have moved closer to completion, with an arbitrator’s binding decision expected late in the third quarter. 

Click here for more FreightWaves/American Shipper stories by Eric Kulisch.

RELATED NEWS:

Growth in air cargo volume hits record high

Blowout cargo revenue helps United Airlines beat Q2 expectations