Air Transport Services Group ATSG,purchases used Boeing 737, 757 and 767 airplanes, refurbishes them for freight transport and then leases them to other companies. The company, which has a stock-market value of about $1.4 billion, announced in December that it had expanded its relationship with Amazon AMZN, -1.68% to lease and operate 10 additional 767s, while extending agreements for the 20 767s Amazon was already leasing.
Air Transport Services supplies crews for the planes and handles maintenance, insurance and the warehousing of the Amazon products it transports. Amazon pays for the fuel.
“As it moves away from FedEx FDX, and the U.S. Postal Service, Amazon will look to outsource transportation through ATSG and its competitor Atlas Worldwide AAWW,while not owning the planes because of the high capital outlay. Amazon is looking potentially to deliver packages for other parties as well,” Cartwright said.
Kornitzer Capital Management
Doug Cartwright and Craig Richard, portfolio managers with Kornitzer Capital Management.
He estimated that more than half of Air Transport Services Group’s revenue would come from Amazon once the new planes are deployed, and another 25% of revenue from DHL (a unit of Deutsche Post AG DPW).
As part of the new agreement, Amazon was granted additional warrants that give it the right to purchase 39.9% of ATSG’s common shares, rather than 33.2% under the previous deal.
Since Dec. 20 (the day before the new Amazon deal was announced), ATSG’s shares have surged 33% through Feb. 5. This means the market value of Amazon’s warrants has risen as well, which “reduces Amazon’s overall cost of doing business with ATSG,” Cartwright said.
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