Originally Posted by 3raser

Many businesses offer lower prices to customers that commit to buy on a larger scale. For example, hotels charge airlines less because they bring a steady amount of business on a regular basis. That's how it works for us too. The portion of the business that is long-term and steady has a smaller profit margin.

I'm pretty sure if a customer comes along and asks what it will cost to have a 767 on a route for a 3 month period, the price is going to be higher than what DHL pays on a 5 year contract.

ABX has a large portion of resources committed to a long-term contract with DHL. The remaining resources generate revenue from shorter duration agreements. During peak demand periods, the corporation has higher than average profits. Those higher than average profits have to be enough to carry them through the leaner periods to cover fixed costs like depreciation, insurance, staff, administrative overhead,

Do you remember the last time the corporation said “we did a $hitload of charters last month and made a buttload of extra money so we want to give the pilots a little extra beyond what's called for in the CBA?” Of course, that doesn't happen and it probably shouldn't happen because that extra profit from those shorter-term agreements should be used to help carry through the months when there is less of that type of business.

This is a capitalist society so, let's look at this from the point of view of the corporation and the shareholders. What if those extra profits from the shorter-term work didn't have to be saved for getting through those leaner times? That money could be used instead to increase earnings per share.

According to a Nov 10, 2012 article:

“Air Transport Services Group reported earnings on Nov. 8. Here are the numbers you need to know.

The 10-second takeaway
For the quarter ended Sep. 30 (Q3), Air Transport Services Group missed estimates on revenues and beat expectations on earnings per share (EPS). Compared to the prior-year quarter, revenue shrank significantly and GAAP earnings per share expanded. Margins expanded across the board.

Revenue details
Air Transport Services Group tallied revenue of $153.8 million. The five analysts polled by S&P Capital IQ hoped for a top line of $160.0 million on the same basis. GAAP reported sales were 21% lower than the prior-year quarter's $195.5 million.

EPS details
EPS came in at $0.18. The five earnings estimates compiled by S&P Capital IQ anticipated $0.17 per share. GAAP EPS were $0.18 for Q3 against -$0.08 per share for the prior-year quarter.

Margin details
For the quarter, gross margin was 37.9%, 240 basis points better than the prior-year quarter. Operating margin was 14.5%, 140 basis points better than the prior-year quarter. Net margin was 7.4%, 990 basis points better than the prior-year quarter.

Looking ahead
Next quarter's average estimate for revenue is $167.0 million. On the bottom line, the average EPS estimate is $0.21. Next year's average estimate for revenue is $626.0 million. The average EPS estimate is $0.65”