ATSG: THE GROUP THAT WORKS TOGETHER EXTREMELY WELL

Air Transport Services Group (ATSG) is a leading provider of aircraft leasing and air cargo transportation services formed of ten group companies. The Wilmington, Ohio-based operation is the largest lessor of freighter aircraft of all types in the world. At the end of 2022, it had ninety-nine 767 freighters under dry lease. This represents almost 2/3 of the overall 767 freighter leasing market.

The group is now branching into A321 and A330 conversions as they will service the same market and current customers; network express operators that provide time-definite and day-definite commitments.

The A321 will be a solid large narrow body replacement for the Boeing 757 freighter, with similar cubic volume, but with a 15-20% fuel burn advantage. The A330 is a logical replacement aircraft for the 767, as feedstock aircraft for the 767 conversion get more difficult to find.

Typically these aircraft are 15-25 years old prior to conversion. ATSG has converted some younger and some older than that range. It really looks at the history of potential aircraft that it purchases for conversion. Many of the aircraft are “cycle-young”, in that they may be 20 years old, but they have only flown 20,000 cycles, and ATSG knows these aircraft can fly up to 50,000.

“We do more than just convert the aircraft; we also upgrade the avionics and upgrade some of the large components where required. When an aircraft comes out of conversion it is set for the long haul.

Because we have airlines that fly 767 freighters, we approach every conversion as if we were going to be the operator. We are a leasing company that thinks like an airline. The 767 freighter is the backbone for express and integrator operations all over the world, and those networks require high reliability. That’s what we deliver!” says the company.

Rich F Corrado is CEO and president of ATSG and said of Q4 2022: “Operating hours for our airlines continue to grow, and we’re expecting another busy peak season.” Did the peak happen for ATSG?

“We did see a peak, but we had grown our operating fleets for DHL and Amazon during the year, so we had an expectation that they would fill that new capacity. The weights of one of our networks were up about 20% during peak (vs. peak 2021) just prior to the weather challenges. We follow e-commerce trends closely as they are a clear demand indicator for our networks, and we saw that Black Friday and Cyber Weekend were both up 3-4% over the prior year,” says the company.

Licensed positions

As an owner and lessor of freighters, Corrado knows well that Ohiobased ATSG is “not immune” to the labour and staffing issues that affect many in the US freighter market.

There are pressures in the hiring and retention of staff, especially pilots, in the current economic climate both in the United States and the foreign markets in which ATSG is involved.

Corrado explains: “The issue is really with licensed positions, pilots and mechanical engineers.” He adds that the training and professional requirement of licensed roles mean there are lags in the supply of newly-trained staff. It can take months to train a pilot, all the time while they are not generating income.

Attracting experienced and trained licensed staff is a better alternative for ATSG. One factor that helps the group attract people is where it sits in the market, he considers. “We are a cool niche as a business,” he says. It is in the middle of the market, as it has a better offering for pilots than regional US airlines while being outgunned by the major airlines.

While employment issues for flight crew may be easing in 2023, the same pressures are felt for mechanical engineers. In relation to this sector, Corrado admits ATSG is “not where we want to be.”

In terms of non-licensed staff, his pressure is a US unemployment rate of around 4% that sees it become a buyer’s market for labour.

At the same time, with ten group companies, how cohesive can the group be with what are hundreds of staff members?

“Our individual subsidiaries operate independently of each other but we also leveraged a bundled solutions strategy to offer our customers a solution that combines leasing, aircraft operations, aircraft MROs and logistics to offer a value proposition that is unmatched anywhere in the market.

“Our companies work together extremely well but they also need to be stand-alone profitable. The strength in our company comes in the leverage we get across the enterprise. Consider our two largest commercial customers, DHL and Amazon. Both of these customers lease aircraft from our leasing company, Cargo Aircraft Management. They also sub-lease them back to our two operating airlines ABX Air and Air Transport International.

“We fly those freighters under a separate flying agreement. Both customers also use our heavy maintenance MRO, airborne maintenance and engineering services for heavy checks, modifications and line maintenance. Likewise, our logistics company, LGSTX Services has agreements with both customers for additional services including: aircraft handling operations and sort centre operations, material handling equipment maintenance, de-ice services, to name a few. Our leasing company provides both customers engine leases and spare engine support. Clearly, the value of the bundled model makes these customers more ‘sticky’ to ATSG,” notes the company.