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meeting the ‘giant’ in ACMI business

Welcome to. meeting the ‘giant’ in ACMI business. Table of Contents. K ey player in the ACMI Business. serving various markets around the globe. largest B747F-Operator worldwide. globe-spanning customer network. Key figures (in USD). recent News.

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meeting the ‘giant’ in ACMI business

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  1. Welcome to.. meeting the ‘giant’ in ACMI business SWOT-Analysis: Atlas Air

  2. Table of Contents SWOT-Analysis: Atlas Air

  3. Key player in the ACMI Business serving various markets around the globe largest B747F-Operator worldwide globe-spanning customer network SWOT-Analysis: Atlas Air

  4. Key figures (in USD) SWOT-Analysis: Atlas Air

  5. recent News • Start of B748F operations (8th November) • Polar and Atlas Air crew pools are merged (19th October) • Termination of three B748F purchase rights due to performance issues(21st September) • Step into passenger business(ACMI / AMC) business bypurchasing B763ER + B744(30th June) SWOT-Analysis: Atlas Air

  6. Fast FactsHistoryStructure SWOT-Analysis: Atlas Air

  7. Facts ∙ History ∙Structure ∙ Business Model mainstay, versatile ACMI - Operator freight forwarder încl. sched. service charterer, focused on Dry-Lease long-term ACMI, based at Stansted, UK SWOT-Analysis: Atlas Air

  8. Business Model • Leading global provider of air cargo assets and outsourced aircraft operating services • Military Charter • Commercial Charter • ACMI, CMIand Dry Leasing • additional aviation services, including Flight-Crew Training • Global services in Asia, the middle east, Australia, Europe, South America, Africa and North America SWOT-Analysis: Atlas Air

  9. Business Vision • Leading industry position • Operating the largest and most modern fleet of 747 freighter Aircraft • Transformative growth • Delivering on commitments • Substantial operatingleverage • Global airfreightgrowth • Global scale, scopeandexecution • Enhance shareholder value SWOT-Analysis: Atlas Air

  10. Range of Products • Product: Bulk cargo capacity for airlines/operatorsArea: Worldwide, focus on Asia <> North America ¹Value-Added services include CMI, flight operations, training, etc. SWOT-Analysis: Atlas Air

  11. Market Analysis General Market Analysis ACMI AMC Commercial Charter SWOT-Analysis: Atlas Air

  12. General Market Environment • Air freight = cyclical business, even more inconstant than pax SWOT-Analysis: Atlas Air

  13. “Cargo Food Chain” • 42% of air cargo transported in belly hold • Scheduled service if case of persistent demand • includes ACMI (6% of total) • Charter services often only supplement volume by on-need basis ATLAS AIR SWOT-Analysis: Atlas Air

  14. U.S. Cargo market Revenue Freight Miles 2003 – 2011 (in thousands) SWOT-Analysis: Atlas Air

  15. “Cargo Food Chain” W “At the bottom of the food chain” • Scheduled capacity accounting for 90% of available volume • Atlas Air offering chiefly supplementary capacity • Hence, economical up/down-trends may have excessive impact SWOT-Analysis: Atlas Air

  16. Competitors SWOT-Analysis: Atlas Air

  17. Markets: Introduction Shares on overall revenue 2004 - 2010 SWOT-Analysis: Atlas Air

  18. Market Analysis General Market Analysis ACMI AMC Commercial Charter SWOT-Analysis: Atlas Air

  19. Range of Products ¹Value-Added services include CMI, flight operations, training, etc. SWOT-Analysis: Atlas Air

  20. ACMI - Definition A – Aircraft C – Crew M – Maintenance I – Insurance Wet-Lease includes all of the opposite features. It is being frequently used to cope with demand peaks and foreseeable shortages of capacity. This is the main stronghold of ATLAS AIR. Ad-Hoc charter is basically the same, but on short (day-to-day) notice. Dry-Lease contains only the aircraft and is usually be done on long-term basis. Key players in the market are e.g. ILFC and GECAS ... ATLAS AIR is involved in all three markets! SWOT-Analysis: Atlas Air

  21. Market Outline • Service for cargo operators • Operate freighters for customers carrying their cargo on their schedule to their destinations • Wet-lease • Log term contracts • Agreed upon prices and levels of operations • Customer advantages • Fleet Flexibility • Network Efficiency • Expand global presence • Serve highly seasonal markets • Expand network without big investments SWOT-Analysis: Atlas Air

  22. Environment • Highly competitive market • based on efficiency & cost effectiveness of aircrafts and the quality of the operating services & the solutions provided • Competitors in the 747-400F & 747-400 BCF/SF ACMI • Air Atlanta Icelandic, World Airways, Evergreen International Airways • Customers • Airlines (BA, Qantas, Emirates..) • Freightforwarder (DHL Express, Panalpina) • Long term contracts with customers • British Airways (long-term, B748F) • Emirates (long-term, B744F) • SonAir (long-term, pax B744) SWOT-Analysis: Atlas Air

  23. Implications • Provides predictable annual revenue + cost base • Minimizes risk of fluctuation • Customer pays fuel & fees • Risk of yields & demand is borne by customer • Difficulties • Requirement to meet performance targets, arrival/departure reliability standards • Not fulfilled = remedies, costs, cancellation • Dependency on limited number of customers (5-6) SWOT-Analysis: Atlas Air

  24. SWOT s • Long-term contracts guarantee reliable income • Predictable annual revenue and cost base • By minimizing risk of fluctuation • Dependency on limited number of customer (long term contracts) • New 747-8F • Improved efficiency • Only operator in the market so far • Loss of long term contracts • Airlines operating own cargo s W O T SWOT-Analysis: Atlas Air

  25. Range of Products ¹Value-Added services include CMI, flight operations, training, etc. SWOT-Analysis: Atlas Air

  26. Definition « The Commercial Charter business provides the customer full planeload capacity of one or more flights based on specific airports of origin and destination » SWOT-Analysis: Atlas Air

  27. Environment • Based on Short-term agreements • therefore not generating relyable revenue • Risk of yields, costs and load factor are borne by Atlas Air • Economical flunctuations have great impact on business • Unsteady developement / growth SWOT-Analysis: Atlas Air

  28. Environment Competitors: • ACMI is more competitive and price sensitive than the com. Charter • Therefore Atlas Air is operating mainly the less efficient 747-200F &-300F in com. Charter • Southernair and Evergreen are operating 747-200 as well • Kalitta Air operates 727, DC-9 and Falcon 20 in com. Charter • Atlas Air is cost-effective in operating one-way flights from Europe or Asia (high demand), making use of AMC-flights as positioning flights SWOT-Analysis: Atlas Air

  29. Implications • Ca. 1/7 of Block-Time is Commercial Charter • Difficulties: • Crew-Management • Maintenance • Load-Factor / ferry flights SWOT-Analysis: Atlas Air

  30. SWOT s AMC business offers the oportunity for One-Way-Flights from Europe or Asia to the U.S. Without expensive ferry-flights. s The merge of the crew-pools of Atlas Air and Polar Air offers the opportunity to be more flexible in crew planning • Fleet consisting mainly of 747-200F and -300F • Not flexible in terms of capacity • Equal to many competitors W Operational challenges are crew-management, maintenance and unprofitable ferry-flights W With the start of the operation of the new 747-8F, some 747-400F will be deployed to the com. Charter segment. Therefore the fleet will gain competitiveness. O • Unsteady revenue: • Flunctuations in the global economy have a great impact • Short-term contracts T SWOT-Analysis: Atlas Air

  31. Range of Products ¹Value-Added services include CMI, flight operations, training, etc. SWOT-Analysis: Atlas Air

  32. Mil. Charter: Definition « The transportation of military personnel and goods on strategic level, also into (non-embattled) combat areas. Capacity is usually tendered according to specific needs of armed forces » SWOT-Analysis: Atlas Air

  33. Market Outline • Involves Cargo as well as Pax • about 40% of military goods are transported by commercial charter • strongly regulated market • Experience and extra certificates needed¹ • Special regulation for procurement apply • Contracts subject to tender • Demand-Monopoly • Main Customer: U.S. Air Mobility Command (AMC) • > Therefore dependent on U.S. military activity causing extra costs and risks ! SWOT-Analysis: Atlas Air • ¹ defined as per Commercial Air Transport Quality and Safety Requirements (attached)

  34. Environment • Competition by various Airlines • Three major “teams”, GTI part of ‘Team FedEx’ • Commission paid/received according to revenues • Cost-plus contracts in form of • pre-agreed fixed volumes • tendered annually • therefore volumes and revenues predictable • ‘as-needed’ on short call • account for majority of flown block hours • hard to calculate, steady fluctuation SWOT-Analysis: Atlas Air

  35. Implications • Fleet part of Civil Air Reserve Fleet (CRAF) • AMC may deploy aircraft at anytime • > Implication on availability of aircraft • All major U.S. Airlines participate • Major part (⅓) of revenues • AMC-Business profitable since 2004 SWOT-Analysis: Atlas Air

  36. SWOT s • Reliable income with low expenditures • Flexible handling due to Team-Agreements • Lucrative opportunity to sell capacity on empty return legs • Increased costs due to.. • Higher risks and therefore higher insurance • Special regulations regarding procurement and operations • Strongly dependent on U.S. military activity • New pax-AMC services s O W T O SWOT-Analysis: Atlas Air

  37. Range of Products ¹Value-Added services include CMI, flight operations, training, etc. SWOT-Analysis: Atlas Air

  38. other Services • Crew + Maintenance + Insurance (CMI) • Boeing: four B747-LCF Dreamlifter • SonAir: three B747-400 • DHL: five B762F • Training • U.S. Air Force (training for B744-Crews) • Flight operation support • e.g. Dispatch, traffic rights, administration SWOT-Analysis: Atlas Air

  39. Resources SWOT-Analysis: Atlas Air

  40. Revenue Structure • widespread revenue distribution • Slump of one sector can be offset • Flexible fleet deployment SWOT-Analysis: Atlas Air

  41. Cost structure → Quite similar cost structure! W SWOT-Analysis: Atlas Air

  42. Fleet owned (Ø 18.1 years old) performance still un-known: T CMI SWOT-Analysis: Atlas Air

  43. Fleet: B747 LHR GRU NRT JFK to .. SWOT-Analysis: Atlas Air

  44. s Fleet: Comparison SWOT-Analysis: Atlas Air

  45. Human Resources • 1500 Employees as of Dec. 2010 • roughly ½ of them being flight crew • 21.4 % of operating expenses caused by wages and staff benefits • highly-qualified and specialised staff needed • Own training facilities for Flight Crews • Cabin crew recruited via external Agency SWOT-Analysis: Atlas Air

  46. External Influences • (upcoming) Financial crisis • > Impedes fund raising (esp. Acft-financing) • > Impairs global economy • Unstable situation in the middle-east • > Fuel prices might soar up • > Interruption of MEA-operations • > Possibly increase demand of AMC(or even deployment of CRAF) W T T O SWOT-Analysis: Atlas Air

  47. Summary: SWOT • diverse product portfolio • Long-term contracts in ACMI-business • flexible aircraft deployment • modern fleet • Dependency on other carriers • Mil. Charter entirely depend on U.S. military activity • High funding requirements Strengths Weaknesses • Global economic turndown • U.S. retreat from middle east • Volatile Gulf-Area • B747-8F performance • Only ACMI-carrier offering new B748F • Pax-ACMI/AMC services Threats Opportunities SWOT-Analysis: Atlas Air

  48. Sources • Literature + Journals • World Cargo Forecast 2011 (by Boeing) • Reports • official ‘Atlas Air Fact Sheet’ • AAWW 2011-3 Quarterly Report • AAWW Annual Reports 2003 – 2010 • GLAH SEC-Annual Fillings 2010(http://www.sec.gov/Archives/edgar/data/1397867/000110465911017469/a11-8646_110k.htm) • Web • http://www.bts.gov/programs/airline_information/ • http://www.atlasair.com/ • http://www.ch-aviation.ch/airlinepage.php?code1=5Y (Fleet) • http://www.ad-hoc-news.de/atlas-air-worldwide-announces-expansion-into-military--/de/News/22106623 (AMC) • http://www.airfleets.net/ageflotte/Atlas%20Air.htm • http://www.planespotters.net (Data Center for Fleet figures) • http://www.flightglobal.com/airspace/groups/fleet_and_orders_gossip_shop/blog/archive/2011/08/05/fleet-plan-news-atlas-air-adds-first-767.aspx • http://www.centreforaviation.com/analysis/jade-cargo-suspension-reflects-trend-of-slowing-air-freight-demand--pressured-freight-profitability-65603 • http://lufthansa-cargo.com/index.php?id=1660 SWOT-Analysis: Atlas Air

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