Atlas Air Worldwide Holdings is consolidating its position at the top of the ACMI freighter market. On January 19 the world’s largest ACMI provider of widebody cargo aircraft announced that it had reached agreement with Southern Air Holdings, another large ACMI outfit, to take over the smaller player for US$110 million.
The takeover, which is subject to approval by the US Department of Transportation, is expected to be completed in a few months, according to Atlas. Southern Air had about US$100 million in revenues last year.
Combining the pair creates an outfit that operates 78 aircraft, most of them large widebodies. Southern Air has been flying five Boeing 777-200Fs and five 737-400 freighters, and sister company Florida West has one 767 cargo plane.
“We are very pleased to announce a strategically compelling, highly complementary and immediately accretive acquisition of Southern Air,” said William Flynn, president and CEO of Atlas Air.
According to Atlas, the acquisition of its smaller competitor gives it “immediate entry into 777 and 737 aircraft operating platforms, with potential for developing additional business with existing and new customers of both companies.” Adding these types to its line-up will “augment Atlas Air Worldwide’s ability to offer customers the broadest array of aircraft and operating services for domestic, regional and international applications,” the company said in its announcement of the deal.
The marriage constitutes consolidation not only in the widebody ACMI provider sector but also in terms of operational arrangements for DHL. The integrator has been the sole customer of Southern Air, which has been flying the 777 and 737 freighters for it on a CMI basis.
DHL is also a huge client of Atlas Air. Since 2008 it has been providing trans-Pacific lift for the integrator through its Polar Air Cargo arm under a 10-year block-space agreement. This arrangement has grown to 12 747 freighters. In addition, Atlas operates nine 767s for DHL. According to one source, service for the integrator accounts for as much as 40% of the Atlas Air fleet.
Partly through this tie-up, but also through other moves to diversify its business, Atlas has expanded its fleet significantly over the past seven years. From 25 aircraft of two types – 747-400s and -200s – back in 2008, it has grown to 67 planes across 747-8 and -400, 777, 767, 757 and 737 platforms.
The 737 platform has been rather small and young. To date, it consists of one 737-400 freighter that Atlas is dry leasing to China Post.
Atlas management has been eager to broaden its base, taking on 767, 757 and 737 types as well as 777s (which are leased out via its Titan Aviation subsidiary).
Southern also went through a massive revamp over the past couple of years, morphing from a 747 freighter leasing outfit into an ACMI firm focusing on the integrator segment with a fleet base of 777 and 737 cargo planes.
The focus on smaller freighters than the 747 makes sense, one industry executive-turned-consultant said privately. Due to the rise of e-commerce, the focus on the freighter scene has been on 767 and smaller types, he noted. At the large end, Boeing recently announced another cut in the production rate of its 747-8. It will turn out the type at a rate of one every two months, as opposed to 1.3 per month currently.
“The air cargo market recovery that began in late 2013 has stalled in recent months and slowed demand for the 747-8 freighter,” Ray Conner, chief executive of Boeing commercial planes, commented in a statement.
Michael Steen, executive vice president and chief commercial officer at Atlas Air, remains bullish on the 747, though. “There will be growth in intercontinental and intra-regional markets. I see opportunities in both,” he remarked.
By Ian Putzger
Air Freight Correspondent | Toronto