Atlas Air, the high-profile passenger and cargo charter airline, is likely to find itself under new ownership soon. Talks about selling the New York-based airline best known for its fleet of Boeing 747-400s are reportedly in the final and most sensitive stages. Lurking in the background is Amazon, which it can counter with its own offering. If so, a cargo version of the JetBlue/Frontier fight over Spirit Airlines could follow.
Apollo Global Management negotiates the acquisition of Atlas Air
Atlas Air has a fleet of 81 aircraft. More than half are Boeing 747s and about a third are Boeing 767-300s. There are also eight Boeing 737-800 freighters and a single Boeing 777 freighter in the fleet. The aviation database ch-aviation.com values those planes at about $2.4 billion. The average age of Atlas Air aircraft is 22.9 years, and the airline is now the world’s largest operator of the Boeing 747.
The Wall Street Journal broke the story of the purchase on Monday. The newspaper said talks between Atlas Air Worldwide Holdings (Atlas Air’s parent company) and its suitor, Apollo Global Management, were in advanced stages but had not yet reached an agreement. “A deal could come soon, assuming talks don’t fall apart”, unnamed sources told the WSJ.
Since then, buzz in financial circles has sent Atlas Air’s share price skyrocketing, complicating final negotiations. Apollo Global Management is a New York investment firm with around US$500 billion under management. While his investment portfolio covers multiple industries, he has some previous form in the aviation sector, including the purchase of Sun Country Airlines in 2018 and the purchase of stakes in Swissport and Aeroméxico.
Atlas Air is now the world’s largest operator of Boeing 747 aircraft. Photo: Atlas Air
Atlas Air is potentially a big prize
Atlas Air’s exposure to the burgeoning air freight sector makes it an attractive buying opportunity for wealthy investors. Parent company Atlas Air Worldwide will present its second-quarter financial results on Friday. In the first quarter of the year, Atlas Air Worldwide reported net income of $81.5 million versus revenue of $1 billion.
“Atlas continues to demonstrate the value of air freight as a vital component of the global supply chain. We are seeing a sustained shift in long-term customer demand for Atlas dedicated aircraft and the speed and reliability that air travel provides.” CEO John Dietrich said. “During the first quarter, our customers continued to enter and upgrade long-term contracts with Atlas for dedicated cargo capacity.
“We are expanding and diversifying our customer base and increasing long-term contract flights with attractive fares and guaranteed flight levels. We are very well positioned for the years to come. We have significantly strengthened our balance sheet and have a healthy cash balance. This It gives us the financial flexibility to deploy capital opportunistically, including investing in our business and returning capital to shareholders.”
Amazon may also have an eye on the Atlas Air award
In particular, Atlas Air provides air cargo services to the global e-commerce giant Amazon. That deal, signed in 2016, resulted in Atlas providing 20 Boeing 767-300 freighters to Amazon on a wet lease basis, providing the necessary crew, maintenance and insurance. That deal significantly expanded Atlas Air Air’s asset and revenue base.
The deal also gave Amazon the right to buy up to 20% of Atlas Air stock at a predetermined price now significantly below the current stock price. Amazon exercised those options in early 2021, becoming a minority shareholder in the airline and a customer. Aside from the financial angle, Amazon is now heavily involved in the air cargo arena and isn’t averse to beefing up its own in-house capabilities. It paves the way for a possible bidding war between Apollo and Amazon similar to what happened in the fight between JetBlue and Frontier over Spirit Airlines.