Another airline bidding war looms with Atlas Air in play
High-profile cargo and passenger charter airline Atlas Air is expected to find itself under new ownership soon. Talks to sell the New York-based airline, best known for its fleet of Boeing 747-400s, are said to be in their final and most delicate phase. In the background hides Amazon, which can counter with its own offer. If so, a freighter version of the JetBlue/Frontier fight for Spirit Airlines could follow.
Apollo Global Management negotiates to take over Atlas Air
Atlas Air has a fleet of 81 aircraft. More than half are Boeing 747s and about a third are Boeing 767-300s. There are also eight Boeing 737-800 freighters and a single Boeing 777 freighter in the fleet. The aviation database ch-aviation.com values these planes at around US$2.4 billion. The average age of Atlas Air planes is 22.9 years and the airline is now the largest operator of Boeing 747s in the world.
The Wall Street Journal reported the takeover story on Monday. The newspaper said talks between Atlas Air Worldwide Holdings (Atlas Air’s parent company) and its suitor, Apollo Global Management, were at an advanced stage but not yet concluded. “Deal could come soon assuming talks don’t collapse“, anonymous sources told the WSJ.
Since then, the buzz in financial circles has sent Atlas Air’s share price skyrocketing, complicating final negotiations. Apollo Global Management is a New York-based investment firm with approximately $500 billion under management. Although its investment portfolio spans several sectors, it has a previous form in the aviation sector, including the purchase of Sun Country Airlines in 2018 and the purchase of stakes in Swissport and Aeromexico.
Atlas Air is now the world’s largest operator of Boeing 747 aircraft. Photo: Atlas Air
Atlas Air is potentially a rich prize
Atlas Air’s exposure to the booming air cargo sector makes it an attractive buying opportunity for deep-pocketed investors. Parent company Atlas Air Worldwide will report its second-quarter financial results on Friday. In the first quarter of the year, Atlas Air Worldwide recorded a net profit of US$81.5 million on revenues of US$1 billion.
“Atlas continues to demonstrate the value of air freight as an essential part of the global supply chain. We are seeing a sustained shift in long-term customer demand for Atlas’ dedicated aircraft and the speed and reliability that air cargo offers,” said general manager John Dietrich. “During the first quarter, our customers continued to secure and enhance long-term contracts with Atlas for dedicated freighter capacity.
“We are expanding and diversifying our customer base and increasing flights under long-term contracts with attractive fares and guaranteed flight levels. We are very well positioned for the years to come. We have significantly strengthened our balance sheet and have a healthy cash position. This gives us the financial flexibility to deploy capital opportunistically, including investing in our business and returning capital to shareholders.”
Amazon may also have an eye on the Atlas Air price
Atlas Air notably provides air cargo services to global e-commerce giant Amazon. This agreement, signed in 2016, allowed Atlas to provide 20 Boeing 767-300 freighters to Amazon on a wet lease basis, providing the necessary crew, maintenance and insurance. This deal significantly expanded Atlas Air’s assets and revenue base.
The deal also gave Amazon the right to buy up to 20% of Atlas Air shares at a pre-determined price now significantly lower than the current share price. Amazon exercised those options in early 2021, becoming a minority shareholder in the airline as well as a customer. Apart from the financial angle, Amazon is now heavily involved in the field of air freight and does not hesitate to strengthen its own internal capacities. This sets the stage for a possible bidding war between Apollo and Amazon similar to what happened during the JetBlue/Frontier fight for Spirit Airlines.