Air Transport Services Group (ATSG) fired CEO Rich Corrado on Tuesday, and instated the board’s current chairman, Joe Hete, as the new chief executive. This follows ATSG’s latest earnings report, showing a 63% year-over-year drop in operating profit.
This leadership overhaul signals a strategic pivot for the cargo transportation giant after it reported a weak 1% revenue rise to US$523 million in its third-quarter earnings – approximately US$15 million short of the projected figure.
A noticeable decline in earnings per share was also evident, dropping to 32 cents. This was in stark contrast to the previous year’s equivalent period.
ATSG’s financial headwinds
Taking the reins on Tuesday, Hete highlighted several challenges faced this year, including unforeseen operational costs and a dip in leasing revenue. Moreover, the air cargo sector witnessed a 5% decrease in 2023, hitting a prolonged low.
Adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) projections have shifted from the US$610-620 million range down to US$560-580 million. Hete now has the task to navigate ATSG through these turbulent waters.
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The board is confident that Hete’s 17-year tenure as former CEO positions him to steer ATSG toward future growth and stability. Hete, who has been a member of the board since 2003, also has 40 years of leadership experience in the industry.
Randy Rademacher, ATSG’s lead independent director says: “Under Joe’s leadership, we believe the company will be well-positioned to continue building on its strong foundation, solidifying its market-leading position, and working to deliver meaningful value for our shareholders.”
Meanwhile, Cargo Aircraft Management, ATSG’s leasing unit, showed a decrease in revenue. This was due to reduced ATI Boeing 767-200 leases and corresponding engine maintenance earnings. Increased lease rates for newly leased freighters will mitigate the risks.
ATSG also faces investor scrutiny over extensive capital funneled into fleet expansion. Responding to investor concerns, ATSG has scaled back its spending plans, now expecting to reduce 2024 capital expenditures by US$100 million.
With its revised delivery forecast, ATSG plans to hand over 16 converted freighters this year, with a focus on Boeing 767-300s and Airbus A321s. The company will also purchase three Airbus A330 widebody aircraft for deployment in 2024.
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Cheryl has contributed to various international publications, with a fervor for data and technology. She explores the intersection of emerging tech trends with logistics, focusing on how digital innovations are reshaping industries on a global scale. When she's not dissecting the latest developments in AI-driven innovation and digital solutions, Cheryl can be found gaming, kickboxing, or navigating the novel niches of consumer gadgetry.