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Air Cargo Industry Is Not Facing Same Problems Afflicting Passenger Airlines

Airline Business Report June 22, 2005 12:00am

Airline Business Report via NewsEdge Corporation :

In sharp contrast to most of the airline industry, air cargo companies are
off to an impressive start in 2005 and are poised to have a banner year. All
of the air cargo companies surveyed by Airline Business Report had profits
in the first quarter, and with the exception of one company, those profits
were above the same quarter in 2004. The story is quite different for U.S.
passenger airlines. Legacy carriers showed a loss for the first quarter, and
most of the losses were worse than the same quarter in 2004. Several
low-cost carriers had first quarter losses as well (ABR, May 9).

EGL Inc. [EAGL] is the air cargo company that did not exceed its first
quarter 2004 profits, but the difference was slight. It was bogged down by
high fuel costs, yet gross revenues still increased 20 percent.

Randy Martinez, CEO of World Air Holdings Inc. [WLDA], characterized the
company's first quarter as "outstanding." On April 27, it acquired North
American Airlines, which presumably will expand commercial contracts. The
first quarter financial results do not include North American. "Not only
will North American be accretive to earnings this year, but we also expect
immediate cost savings associated with aircraft insurance and other
synergies," he said.

World Airways, a wholly owned subsidiary of World Air Holdings, is a
U.S.-certificated air carrier providing services for major cargo carriers,
the United States military, international freight forwarders and leisure
tour operators. During the first quarter, the company continued to provide a
high level of flying for the Air Mobility Command (AMC), signed two new
commercial customers, and generated strong operational results, evidenced by
a nearly 16 percent rise in block hours.

UPS Inc. [UPS] says its good first quarter bodes well for the second
quarter. "The first quarter set the pace for UPS to generate earnings in
2005 at the higher end of our historical range," said Scott Davis, the
company's chief financial officer. "We grew our international operating
profit by more than 25 percent and we did a very good job of managing our

The U.S. next day air service brought in $1.5 billion in revenues in the
first quarter compared to $1.48 billion the year before. The average revenue
per piece of U.S. next day air service was $20.45, up from $19.78 in 2004.
Consolidated revenue for the three months ended March 31 rose 10.8 percent
to $9.89 billion, reflecting in part the addition of revenue from the
recently acquired Menlo Worldwide Forwarding. International package revenue
climbed 13 percent while U.S. package revenue rose 2.8 percent. Export
volume was up 9.3 percent.

Expeditors International of Washington Inc. [EXPD] also is happy with its
first quarter results. The company managed to expand its operating margin,
saying that is "no small feat" given that the first quarter of 2004 was
exceptionally strong. Net revenues for first quarter 2005 were $230.7
million, compared with $202.4 million for the first quarter of 2004. This
quarter's net revenue growth, measured year-over-year, was pretty much
uniform across all its products.

Dynamex Inc. [DDMX], a leading provider of same-day delivery and logistics
services in the United States and Canada, says its latest quarterly results
were measurably better than a year ago. (The company's quarter ended April
30 instead of March 31. Its fiscal year began August 2004, and this was the
third quarter for fiscal year 2005.) In addition to across-the-board
improvements in its quarterly financial results, Dynamex reduced long-term
debt by $2 million to $3.8 million. The company expects year-over-year sales
growth of between 9 percent and 11 percent for fiscal year 2005. The gross
profit margin is expected to improve slightly in the fourth quarter from the
current level as the company implements a number of cost reduction measures.
The company expects FY 2005 net income to range from $0.96 to $1.01 per
diluted share.

ABX Air Inc. [ABXA] did a lot more business in the first quarter. The number
of packages handled totaled 160.6 million, a 30.8 percent increase compared
to first quarter 2004 volume. Under agreements with DHL Express, ABX Air has
the potential to collect revenues from an incremental mark-up each quarter
based on cost-related goals. During the first quarter of 2005, ABX Air
earned $0.6 million or 46.5 percent of the maximum incremental quarterly
mark- up. DHL is making a significant investment in ABX Air's main Ohio sort
hub and in several of its regional hubs.

Earnings from non-DHL business increased to $2 million, up 55.6 percent as
compared to the first quarter of 2004. The increase was primarily the result
of an increase in the level of aircraft maintenance services and parts sales
as well as revenues associated with ABX Air's operation of a U.S. postal
hub, which the company has operated since September of 2004.

Atlas Air Worldwide Holdings Inc. [AAWWV.PK], which emerged from Chapter 11
bankruptcy protection in July 2004, expects a pretax profit for the first
quarter and pretax earnings for the full year above the $68 million target
in the company's creditor plan. It expects demand for widebody freighter
aircraft to exceed supply throughout 2005. For the first quarter, it expects
pretax income of $3 million to $8.5 million on revenue of $346 million.
President and CEO Jeffrey Erickson said the first quarter is traditionally
the slowest part of the business year. "Looking ahead, current business and
economic forecasts lead us to expect continued improvement in our quarterly
results over the balance of the year, with business conditions peaking on a
seasonal basis in the September to mid-December time frame," he said

Atlas Air expects to report operating income for the first quarter of 2005
in the range of $22 million to $27 million compared with an operating loss
of $22 million in the first quarter of 2004.

Atlas Air's principal business is the airport-to-airport transportation of
heavy-freight cargo. Its fleet of 43 Boeing [BA] 747 freighter aircraft
operates throughout the world, providing air cargo and related services.

AirNet Systems Inc. [ANS] said its point-to-point surface shipments and air
charters increased approximately $1 million and $0.8 million, respectively,
in the first quarter. Passenger charter revenues increased to $9.3 million
for the first quarter from $3.7 million for the same period last year.
Jetride Inc., a wholly owned subsidiary, operated 16 aircraft as of March 31
compared to 11 aircraft on the same date in 2004. The company conducts its
business in two segments, delivery services and passenger charter services
through Jetride.

First quarter revenues benefited from the net addition of five aircraft to
Jetride's fleet during the past 12 months, a 116 percent increase in flight
hours and higher average revenue per flight hour. Passenger charter services
revenues rose to 18.7 percent of total net revenues for the first quarter,
from 9 percent for the same period in 2004. Aircraft fuel expenses, which
the company tries to recover through fuel surcharges, increased about $2.7
million for the first quarter.

On May 4, AirNet's board of directors unanimously authorized Brown Gibbons
Lang & Co. (BGL) to solicit offers to acquire the company. BGL is the
investment banking firm retained to analyze the AirNet's "strategic
alternatives to enhance shareholder value."

>>>>Contacts: Steve Forsyth, World Air Holdings, (770) 632-8322; Norman Black,

UPS, (404) 828-7359; Jordan Gates, Expeditors International of Washington,
(206) 674-3427; Dallas Ray Schmitz, Dynamex Inc., (214) 561-7503; Quint
Turner, ABX Air Inc., (937) 382-5591; Alan Caminiti, Atlas Air Worldwide
Holdings, (914) 701-8400; James Crane, EGL Inc., (281) 618-3100; Eden
Prairie, C.H. Robinson Worldwide Inc. (952) 937-7779; Gary Qualmann, AirNet
Systems Inc., (614) 532-4072.<<

[Copyright 2005 Access Intelligence, LLC. All rights reserved.]

<<Airline Business Report -- 06/22/05>>

<< Copyright 2005 Access Intelligence, LLC. All rights reserved. >>

2005, Reed Business Information, a division of Reed Elsevier Inc. All
Rights Reserved.

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