Air Transport Services Group's (ATSG) purchase of Omni Air International is intended to diversify the growing cargo aircraft-leasing specialist's revenue stream while adding passenger aircraft that could help satisfy future freighter-conversion needs.
Under the $845 million deal announced Oct. 2, Omni will become an ATSG subsidiary and continue to operate its 13-passenger aircraft—10 owned and three leased Boeing 767s plus three Boeing 777-200ERs—from its Tulsa, Oklahoma, headquarters.
Omni specializes in passenger charters and generates about 70% of its annual revenues from flights for the U.S. Defense Department (DOD). The company is a long-time Civil Reserve Air Fleet (CRAF) contract holder, and provides about 50% of CRAF's troop-transport flights each year. ATSG also performs some CRAF flying and with the Omni purchase, the DOD would become ATSG's largest customer, jumping to providing 33% from 11% of its revenue based on first-half 2018 results. ATSG projects annual consolidated revenues of $1.4 billion for the two companies.
While ATSG executives welcomed the diversity that Omni's passenger-focused operations bring, the company plans to use some of Omni's cash-generating ability to help feed its growing air express and e-commerce leasing businesses, which include large contracts providing lift to Amazon Air and DHL. ATSG, which generated $1.1 billion in revenue last year, has 75 aircraft in service, including 65 Boeing 767 freighters: 36 -200s and 29 -300s. ATSG's current operating fleet comprises eight Boeing 757s—four combis that serve the DOD and four freighters at DHL—two Boeing 737-400Fs dry-leased to West Atlantic. Additionally, five 767-300s are being converted to freighters and expected to enter service this year.
Omni's owned fleet could become future conversion candidates, ATSG President and CEO Joe Hete said.
"It allows us to buy future potential feedstock, younger aircraft at higher prices, run them for a number of years in the passenger mode and then roll them out into the cargo conversion side when they hit that sweet spot that we always strive for in terms of our 767 acquisitions," he explained.
Besides adding to ATSG's sizable 767 fleet, the Omni deal adds a new aircraft type—the 777-200ER—to the company's portfolio and one that is popular among freight carriers, including DHL. Hete suggested they could become conversion feedstock as well. "The 777 platform . . . provides another option that we don't have today [and] actually enhances our ability to serve the growing e-commerce segment," he said.
ATSG's subsidiary Airborne Maintenance & Engineering Services purchased Pemco in early January.