Another airline offering war looms with Atlas Air in the game

The high-profile cargo and passenger charter company Atlas Air is likely to get a new owner soon. Talks about the sale of the New York-based airline best known for its fleet of Boeing 747-400s are reportedly in the final and most sensitive phase. Amazon lurks in the background, who can counter with their own bid. If so, a cargo version of the JetBlue/Frontier battle for Spirit Airlines could follow.

Apollo Global Management Negotiates Atlas Air Acquisition

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. Aviation database ch-aviation.com estimates those planes at about $2.4 billion. The average age of Atlas Air’s aircraft is 22.9 years and the airline is now the largest Boeing 747 operator in the world.

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The Wall Street Journal released the buyout story on Monday. The newspaper said talks between Atlas Air Worldwide Holdings (Atlas Air’s parent company) and its lover, Apollo Global Management, were at an advanced stage, but not yet a finalized deal. “A deal could come soon, assuming the talks don’t fall apart‘, anonymous sources told the WSJ.

Since then, the buzz in financial circles has sharply pushed Atlas Air’s share price, complicating the final negotiations. Apollo Global Management is a New York-based investment company with approximately $500 billion under management. While its investment portfolio spans multiple sectors, it has an earlier form in the aviation sector, including buying Sun Country Airlines in 2018 and buying 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 burgeoning air freight industry makes it an attractive buying opportunity for deep-pocketed investors. Parent company Atlas Air Worldwide will present its financial results for the second quarter on Friday. In the first quarter of the year, Atlas Air Worldwide reported net profit of US$81.5 million on revenue of $1 billion.

“Atlas continues to demonstrate the value of airfreight as a vital part of the global supply chain. We see an ongoing shift in long-term customer demand for Atlas special-purpose aircraft and the speed and reliability that airfreight offers,” said Chief Executive Officer John Dietrich. “During the first quarter, our customers continued to enter into and improve long-term contracts with Atlas for special cargo capacity.

“We are expanding our customer base and diversifying and increasing flying with long-term contracts with attractive rates and guaranteed flight levels. We are very well positioned for the coming years. We have significantly strengthened our balance sheet and have a healthy cash balance. This gives us the financial flexibility to opportunistic capital, including by investing in our company and returning capital to shareholders.”

Amazon may also have an eye on the Atlas Air price

In particular, Atlas Air provides air freight services to global e-commerce giant Amazon. That deal, signed in 2016, resulted in the delivery of 20 Boeing 767-300 freighters to Amazon on a wet-leased basis, with the necessary crew, maintenance and insurance. That deal significantly expanded Atlas Air Air’s assets and revenues.

The deal also gave Amazon the right to buy up to 20% of Atlas Air’s shares at a predetermined price that is now significantly lower than the current share price. Amazon exercised those options in early 2021, becoming both a minority shareholder of the airline and a customer. In addition to the financial side, Amazon is now heavily involved in the air cargo field and it is not unfavorable to strengthen its own internal capabilities. It opens the way for a potential bidding war between Apollo and Amazon, similar to what happened in the JetBlue/Frontier battle for Spirit Airlines.

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