IMG_0186-1024x682.jpg PEMCO

Pemco MRO, Conversions Work Providing Lift At ATSG

New business helps offset Amazon hub logistics changes.

Pemco’s busy overhaul hangars and Boeing 737 freighter-conversion backlog are proving to be welcomed additions to the Air Transport Services Group (ATSG) portfolio, adding both diversification and further capabilities, the company’s top executive says.

"The first quarter of 2017, the Pemco hangars were pretty much full, and that run rate will continue,” thanks in part to last month’s announcement of an expanded agreement with Frontier Airlines, ATSG President and CEO Joe Hete said on a recent earnings call. “We're pretty excited about the prospects with Pemco.”

Pemco last month announced a three-year deal to provide Frontier a variety of services, from heavy checks to away-maintenance work. The deal builds on a similar agreement struck last year. Most of the work is being handled at Pemco’s Tampa, Fla., facility. 

Last month also saw Pemco’s latest conversion offerings, for 737-700 combis and full freighters, come to market. The first aircraft, destined for Bahrain-based Chisholm Enterprises, is being modified this year, with certification expected by mid-2018. Pemco, which has modified more than 350 aircraft, has a backlog of 10 737 conversions, Hete says. 

Pemco’s steady clip of MRO and freighter conversion work is expected to help offset changes at ATSG customer Amazon that are hitting another area of the aviation service provider's business. The retail giant is building a massive air cargo hub at Cincinnati/Northern Kentucky International Airport. Part of the fallout is the shuttering of its hub operation at Ohio’s Wilmington Air Park, ATSG’s headquarters. While ATSG will continue to support Amazon’s Prime Air cargo operation via services that include leasing and maintaining aircraft, it is losing a sizable logistics contract as part of the hub relocation. 

“The impact of losing that hub is probably $7-$8 million of [pre-tax earnings],” Hete says. “We expect that the Pemco acquisition will take care of at least 50% of that.” 

ATSG subsidiary Airborne Maintenance and Engineering Services, Inc, bought Pemco earlier this year.

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