The high-profile cargo and passenger charter airline Atlas Air is likely to find itself under new ownership soon. Talks concerning the sale of the New York-based airline, best known for its fleet of Boeing 747-400s, are reportedly in the final and most sensitive stages. Lurking in the background is Amazon which may counter with its own bid. If so, a cargo version of the JetBlue / Frontier fight for Spirit Airlines could follow.
Apollo Global Management negotiates to takeover Atlas Air
Atlas Air has a fleet of 81 aircraft. Over half are Boeing 747s, and around one-third are Boeing 767-300s. There are also eight Boeing 737-800 freighters and a sole Boeing 777 freighter in the fleet. Aviation database ch-aviation.com values those aircraft around about US$2.4 billion. The average age of Atlas Air's planes is 22.9 years, and the airline is now the world's largest Boeing 747 operator.
The Wall Street Journal broke the buyout story on Monday. The newspaper said talks between Atlas Air Worldwide Holdings (parent company of Atlas Air) and its suitor, Apollo Global Management were in advanced stages but not a done deal yet. "A deal could come soon assuming talks don't fall apart," unnamed sources told the WSJ.
Since then, the buzz in financial circles has sent the share price of Atlas Air sharply higher, complicating final negotiations. Apollo Global Management is a New York investment firm with around US$500 billion under management. While its investment portfolio covers multiple industries, it has some previous form in the aviation sector, including buying Sun Country Airlines in 2018 and purchasing stakes in Swissport and Aeromexico.
Atlas Air is potentially a rich prize
Atlas Air's exposure to the burgeoning air freight sector makes it an attractive buy opportunity for deep-pocketed investors. Parent company Atlas Air Worldwide will present its second-quarter financial results on Friday. In the first quarter of the year, Atlas Air Worldwide reported net income of US$81.5 million off revenues of $1 billion.
"Atlas continues to demonstrate the value of airfreight as a vital component of the global supply chain. We are seeing a sustaining shift in long-term customer demand for Atlas' dedicated aircraft and the speed and reliability airfreight provides," said Chief Executive Officer John Dietrich. "During the first quarter, our customers continued to enter and enhance long-term contracts with Atlas for dedicated freighter capacity.
"We are expanding and diversifying our customer base and increasing flying under long-term contracts with attractive rates and guaranteed levels of flying. We are very well positioned for the years ahead. We have significantly strengthened our balance sheet and have a healthy cash balance. This provides us the financial flexibility to opportunistically deploy capital, including investing in our business and returning capital to shareholders."
Amazon may also have an eye on the Atlas Air prize
Notably, Atlas Air provides air freight services to global e-commerce giant Amazon. That deal, signed in 2016, resulted in Atlas providing 20 Boeing 767-300 freighters to Amazon on a wet-leased basis, providing the required crew, maintenance, and insurance. That deal significantly expanded Atlas Air Air's asset and revenue base.
The deal also gave Amazon the right to buy up to 20% of Atlas Air's shares at a predetermined price now significantly below the current share price. Amazon exercised those options in early 2021, becoming a minority shareholder in the airline as well as a customer. Besides the financial angle, Amazon is now heavily involved in the air cargo field and is not adverse to beefing up its own in-house capabilities. It opens the way for a possible bidding war between Apollo and Amazon similar to what occurred in the JetBlue / Frontier tussle for Spirit Airlines.