Ed Koharik, Air Transport Services Group (ATSG) COO, talks to Lee Ann Shay about its aircraft leasing and cargo businesses, which includes Amazon as a customer, as well as a new type of sale and leaseback deal. Some of ATSG's companies include Pemco Conversions, Airborne Maintenance & Engineering Services, ABX Air and Omni Air.
The cargo market is one of the strongest in aviation right now, and ATSG operates, leases, maintains and performs passenger-to-freighter conversions. What plans does ATSG have in place to react to the current market climate?
We were very well positioned for the pivot that you see in market since the pandemic started. We were focusing on ecommerce and the express networks, as well as our ability to support customers through any part of the lifecycle in an air cargo operation—whether we dry lease or we operate it or as a wet lease. In fact, we delivered a record number of aircraft: 16 deployed in 2020. The 16 represents fresh conversions, along with our partners, and any aircraft redeployment--aircraft that came back from one customers and went to a different one. We’re looking at another record-setting year in 2021—at least 16 or more aircraft.
Amazon has said “By expanding the Amazon Air network through our partnership with ATSG we’re able to ensure we have the capacity to quickly and efficiently deliver packages to customers for years to come.” How does ATSG help with the “quickly and efficiently” part?
That is reflective of the service we provide to all our customers around the globe including Amazon. Our reliability supported by our service offerings from leasing to maintenance to logistics support give them the ability to grow. So from the aircraft we lease to the crews that operate them our focus is supporting our customers mission and growth. We support that by the service we provide to Amazon—from the aircraft that we lease to them and the aircraft that we operate for them. We do operate a large number of aircraft for Amazon, and we’ve announced that we are adding a couple more this year.
How many do you operate for Amazon?
We fly 34 767-200s and -300s for Amazon—Cargo Asset Management (CAM, part of ATSG) leases 32 of them to Amazon and two others are leased from Titan. In addition, CAM plans to deliver an additional 10 767s this year.
ATSG, through its CAM subsidiary, earlier this month signed an agreement with Air Canada to purchase, convert and lease back two Boeing 767-300ERs. Do you expect to see more deals like this in 2021?
We thought this was an outstanding opportunity with Air Canada. We would welcome more opportunities to partner with Air Canada and we see an opportunity going forward to execute more of those leasebacks. There have been additional inquires for a program like that—from companies that have been operating passenger aircraft and they’d usually sell them to buy a new aircraft, but now because of the current market, they would like to move into the cargo market with their own airframes. We would manage the conversion—and our investment in that of course is why we would lease it back to them. Operators could do the whole process on their own but we have the expertise to do this.
Are you concerned that there aren’t new mid-size freighters to replace 757s and 767s in development?
We have a joint venture (321 Precision Conversions) with Precision Aircraft and we think the Airbus A321 will be the next generation for conversion. It features newer technology and has more efficient engines than the later 767 models.
However, we think the 767 has a long life in front of it. There is lot of 767 feedstock available now but the conversion capacity is the limiting factor.
We maintain four lines with IAI and those are booked through a good portion of 2022. We’re already scheduling deliveries for mid-2022.
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