Chasing Capacity.jpg Atlas Air

Chasing Capacity

Atlas Air, playing the market, snaps up 747-400 freighters.

If you're in the market for some quality air-cargo lift in the form of a 747-400 freighter, you'd better move fast.

Atlas Air recently revealed that it had snapped up six of the venerable freighters, partially in response to a rapidly improving global cargo market, and partially in anticipation of the trend continuing. Two of them went into service last quarter, and the other four will be in the skies this year. They will be used both as charters and full-service, Atlas-operated additions to customer fleets. They'll even do some military flying.

"The market really inflected all the way back around July, August of 2016," Atlas President and CEO William Flynn says. "And we've seen just a continued solid growth, month-over-month. And certainly, a very good peak in 2017 and a very strong outlook for 2018 and beyond. There's not a lot of excess capacity in the market."

That made the 747-400s—which Atlas is leasing—attractive additions.

"There are only a few [worthwhile] 747-400s parked, which will take quite some investment to bring back into service," Flynn explains. "We have identified a number of aircraft and leased them in. We think that was a prudent thing to do as we think about growing demand over the next couple of years and our ability to service that."

The 767 market is better, but not by much. The emergence of the recently rebranded Amazon Air—which will eventually operate 20 Atlas-supplied 767 freighters as part of its fleet—as the poster-child of the e-commerce demand revolution is rapidly eating into that feedstock.

New freighters are an option, but FedEx and UPS are the only operators getting any fresh 767s or 747s anytime soon.

Meanwhile, IATA reports that widebody freighter utilization is climbing, and is now hovering around a five-year high.

All of this is in response to a global air cargo market that has seen freight-ton kilometers climb 7.4% in the three months ended January 31. While solid, that's in fact a slight decline from most of last year, when cargo rose 9%—the biggest year-over-year climb in a decade.

Atlas is betting on more of the same.

"From the sources that we look at and the conversations we have with our customers as well, [we] are looking towards a very strong 2018 and that continuing into 2019," Flynn says. "And I think this cycle could well be extended and continue to grow as a result of e-commerce."

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