Atlas Air Worldwide Holdings

Good day, ladies and gentlemen. Thank you for standing by, and welcome to the Atlas Air Worldwide Holding Inc. Fourth Quarter 2021 Results Conference Call. At this time, all participants are on the listen-only mode. After the speaker's presentation, there will be a question-and-answer session. To ask a question during the session, you will need to press the star, then the one key on your touch-tone telephone. Please be advised that today's conference may be recorded. If you require offer assistance, you may press star, then zero. I would like to turn the conference over to our Atlas Air speakers. Please go ahead.

Thank you, Livia, and good morning, everyone. I'm Ed McGarvey, Treasurer for Atlas Air Worldwide. Welcome to our fourth quarter 2021 results conference call. Today's call will be hosted by John Dietrich, our Chief Executive Officer, and Spencer Schwartz, our Chief Financial Officer. Today's call is complemented by a slide presentation that can be viewed at atlasairworldwide.com under Presentations in the Investor Information section. As indicated on slide two, we'd like to remind you that our discussion about the company's performance today includes some forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements relate to future events and expectations, and they involve risks and uncertainties. Our actual results or actions may differ materially from those projected in any forward-looking statements. For information about risk factors related to our business, please refer to our 2020 Form 10-K as amended or supplemented by our subsequently filed SEC reports. Any references to non-GAAP measures are meant to provide meaningful insights and are reconciled with GAAP in today's press release and in the appendix that is attached to today's slides. During our question and answer period today, we'd like to ask participants to limit themselves to one principal question and one follow-up question so that we can accommodate as many participants as possible. After we've gone through the queue, we'll be happy to answer any additional questions as time permits. At this point, I'd like to draw your attention to slide three and turn the call over to John Dietrich.

Thank you, Ed, and hello, everyone. Thanks for joining our fourth quarter earnings call. I'd like to start by thanking the entire Atlas team for their tremendous efforts in keeping our business moving forward, both in the air and on the ground, especially in this pandemic environment. 2021 was another outstanding year with excellent financial and operating performance. At Atlas, our greatest strength is our people, and without their professionalism and hard work, we wouldn't have been able to deliver these very strong results. With that in mind, we're very pleased to have achieved a long-term labor agreement with our pilots that recognizes their significant contributions to our company. Throughout 2021, we leveraged our world-class fleet and global operating capabilities to increase aircraft utilization and capitalize on strong demand for our services and aircraft to achieve higher air freight yields, and we continue to do so. As reported in our press release this morning, we've now placed all four of our new and incoming 747-8 freighters under long-term agreements. We've also enhanced numerous long-term contracts with our strategic and diversified customer base. We've deepened our relationships with valued customers, including Chinao, Siva Logistics, DV Shanker, DHL, DSV, FedEx, Flexport, Geotis, HP, Iceland Air, Inditex, Jazz, Kuninago, SF Group, and UPS, quite an impressive list. Consistent with our strategy, we not only secured these long-term agreements, but also reserved and allocated capacity to take advantage of very high yielding opportunities in the global spot charter market. This all contributed to Atlas delivering record block hours, record revenue, and record earnings in 2021. Before we review our fourth quarter results, I'd like to first share several milestones from our full-year record performance. We flew more than 360,000 block hours, exceeded the $4 billion revenue mark, delivered more than $1 billion of adjusted EBITDA, and generated over $550 million of adjusted net income. In addition to this strong financial performance, And as I mentioned, we reached a new joint collective bargaining agreement with our pilots in connection with Atlas Air's merger with Southern Air. We're very pleased to now have this long-term pilot agreement in place. It provides even more reasons for pilots to choose Atlas as their career destination. We've now effectively completed the merger with Southern, and we're operating under the single brand of Atlas and the Atlas Operating Certificate. With the strength, flexibility, and resiliency of our global business model, we delivered high-quality service to our customers despite a very challenging operating environment with persistent pandemic-related obstacles. The safety of our team and operations remains our top priority, and we're proud of the role we're playing in supporting the global supply chain and transporting essential goods around the world. I'd like to note that 2022 marks a significant milestone for Atlas, as it's our 30th year in business. Over these 30 years, we've built an industry-leading fleet, a broad array of service offerings, a diversified base of marquee customers, and the best team in the business. From a growth perspective, and as I noted, we're excited that we've placed all four of our new and incoming 747-8 freighters under long-term contracts. We'll operate one for Chinao, one for Inditex, and two for Kuninagel. As a reminder, we expect delivery of these aircraft between May and October of this year. We also look forward to the deliveries and placements of the four new 777 freighters we recently announced, for which there is very strong customer demand. We expect the first of these 777s to be delivered late in the fourth quarter of this year and three more throughout 2023. As previously announced, we also purchased six of our existing 747-400 freighters during 2021 that were formerly on lease to us. And we're purchasing another five of our other 747-400 freighters at the end of their existing leases during the course of this year. Acquiring these wide-body freighters underscores our confidence in the long-term demand for dedicated international air freight capacity, particularly in e-commerce and fast-growing global markets. such as Asia and South America. These investments are consistent with our long-term strategic growth plan and will provide customers with modern, environmentally efficient aircraft, especially from a fuel burn and noise perspective, which will drive strong returns for Atlas in the years ahead. Now turning to our outstanding fourth quarter results on slide four. Our revenue and adjusted earnings grew to new records. Our fourth quarter results reflected higher yields and increased aircraft utilization. They also reflected the impact of numerous new and extended long-term customer contracts and the full-year operation of 1747 freighter that we reactivated during the fourth quarter of 2020. Our fourth quarter performance also benefited from lower heavy maintenance expense. These benefits were partially offset by higher pilot costs driven by our new pilot agreement. Now moving on to slide five. While the pandemic continues to make the operating environment a very challenging one, we're seeing solid momentum in the first quarter. We continue to expect industry conditions and customer demand to remain favorable. Global air freight volumes are exceeding pre-pandemic levels. Capacity continues to be constrained as there are a limited number of new freighters entering the market, while older, less efficient aircraft will be retired. Passenger belly capacity, particularly on key international cargo trade lanes, remains subdued, and backlogs at ocean ports worldwide and other supply chain bottlenecks are driving demand for air cargo capacity as businesses look to address very low inventory levels. The pandemic has also spurred what we see as a sustaining step change in express and e-commerce growth. And it's also highlighted the value of speed and reliability that air freight provides to the global supply chain, which bodes well for air cargo today and beyond. As a result, we expect strong performance in the first quarter of 2022 with our adjusted EBITDA and adjusted net income, similar to that of the first quarter of 2021. We also anticipate revenue of about $1 billion from flying approximately 85,000 block hours. This outlook reflects higher yields, including the contribution from numerous new or enhanced long-term customer contracts, along with a higher pilot cost from our new JCBA. We also expect ongoing expenses driven by the pandemic, including additional pay for employees flying into locations significantly impacted by COVID, as well as other operational costs, including for regulatory compliance, and continuing to provide a safe working environment for all employees. For the full year, we expect aircraft maintenance expense to be similar to 2021, and we expect depreciation and amortization to be around $300 million. Core capital expenditures, which exclude aircraft and engine purchases, are projected to total approximately $135 to $145 million, mainly for parts and components for our fleet, including for the 747-8s and the 777 that we're adding this year. We also have commitments related to aircraft purchases and spare engines, including pre-delivery payments related to our 777 order and delivery payments related to 747-8 and 777 aircraft, all of which we expect to debt finance. Due to the uncertainty related to the pandemic, ongoing supply chain disruptions, and other factors, We are not providing additional guidance at this time. Before I turn the call over to Spencer to provide more detail on our fourth quarter results, I'd like to discuss our capital allocation strategy and the share repurchase program we announced in our press release this morning. As we've consistently stated, we take a disciplined and balanced approach to allocating capital. Our focus is on maintaining a strong balance sheet while continuing to grow the business and returning capital to shareholders. Over the last number of years, we've made significant investments in the business, including aircraft acquisitions and the purchase of Southern Air. Most recently, we've also made further growth investments with our 747-J and 777 orders and the 747-400s we're buying off lease. These modern, efficient aircraft remain in high demand and will be an important investment for our future. We're also always looking for ways to grow through mergers, acquisitions, or strategic partnerships, like our very successful acquisitions of Polar and Southern and our tight and dry leasing joint venture with Bain Capital Credit. Consistent with our balanced approach, we're now pleased to announce the establishment of a new $200 million share repurchase program, which includes $100 million in accelerated share repurchases that we expect to complete by the end of the second quarter. Our capital allocation strategy demonstrates our commitment to creating, enhancing, and delivering value for our shareholders. I'd like to now pass the call over to Spencer, and after Spencer's remarks, I'll have some additional comments, and then we'll be happy to take your questions. Spencer.