In the year ending December 2018, Air Transport Services Group (ATSG) reported a 12.4% operating profit on $892.3 million in total sales. Revenue for the year was down 16.5% compared to the previous fiscal year as competitive conditions grew more intense. However, we expect shareholders to shrug off the bad news at the top-line and focus on the improvement in the Company’s competitive position with the November 2018 acquisition of Omni Aviation, Inc., a passenger airline and aircraft leasing operation. Additionally, in late December 2018, the Company extended its cargo handling and logistical network management services agreement for Amazon and expanding the contract by ten aircraft. The Amazon relationship was further strengthened by the issuance of additional warrants to Amazon that expanded its potential stake in ATSG’s fortunes.
In our view, these developments bode well for a dramatic increase in revenue and profits beginning in the first quarter 2019. Furthermore, we expect expansion of the ATSG footprint in the aviation leasing and services sector to give the Company greater competitive strength to win additional business. In our view, the change in fortunes is only partially reflected in the Company’s stock.
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