EARNINGS plummeted in the second quarter for the Purchase, New York-based cargo airline Atlas Air to US$1.53 million from US$43.19 million in the same period last year.
During the reported period the company paid 70 per cent more in jet fuel charges, averaging $3.61 a gallon and faced an overall fuel bill of $213.42 million against the $122.12 million it paid out in the corresponding period last year, according to a report in the West Harrison (New York) Journal.
Atlas spokesman Dan Loh said that despite surcharges on its scheduled service covering "well over half" of the extra costs there are delays between recouping surcharges and fuel price spikes. Fuel surcharges have yet to be announced, he said.
Fissures in its business model occur through its scheduled service where fuel, airport fees and flights costs are met by Atlas with customers pay shipping fees only.
Atlas CEO William Flynn was reportedly steering the company away from less scheduled service with a strategic focus on it's aircraft, crew, maintenance and insurance (ACMI) business with customers paying fuel bills unlike scheduled flights where Atlas must pay hefty bills.
The strategic move to go into business with DHL express with its scheduled service subsidiary, Polar Air Cargo Worldwide, in a long-term agreement will weather the financial storms and eliminate fuel spikes, said the report in the Journal.
Mr Flynn said in a statement the company met its target of $100 million in yearly savings six months ahead of schedule and expects pre-tax earnings for 2008 to be $85 million with a projected $165 million to $175 million next year.
"With our focus on operating efficiency and de-risked earnings growth, our business fundamentals remain solid," he said.
Analyst Robert Labick, of CJS Securities in White Plains, NY, said the DHL contract will prove timely and that Atlas will earn 5 cents a share in the final quarter of 2008 with full-year profit of $2.30 a share with expectations of doubling that in 2009 to $4.90.
Mr Labick said: "For these guys, fuel is a major problem. But they have best-in-class assets [aircraft] and demand for their 747-400s remains very high."
Atlas revenues for the quarter increased to $438.78 million from $372.63 million with shares up $1.58, or 3.4 per cent, closing at $48.60.
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