Amazon strengthens ties with Atlas Air and ATSG

E-COMMERCE giant Amazon is gearing up to take up to 40 per cent of the shares of both Air Transport Services Group (ATSG) and Atlas Air Worldwide Holdings (WW), providers of Amazon Air operations

08 April 2019 - 19:00

E-COMMERCE giant Amazon is gearing up to take up to 40 per cent of the shares of both Air Transport Services Group (ATSG) and Atlas Air Worldwide Holdings (WW), providers of Amazon Air operations.

According to Securities and Exchange Commission (SEC) filings, both aircraft operators detailed Amazon's plans to add both Boeing 737-800 and B767 freighters to the fleet, reported UK's The Loadstar.

ATSG subsidiary Cargo Aircraft Management Inc (CAM) will lease ten extra B767-300Fs to Amazon, five this year and five next, while the leases on the first B767-200Fs will be extended by two years, and the initial B767-300F contracts will run for a further three years.

All 20 existing leases have renewal options for up to three more years.

The amended agreement, which provides for the operation of the 30 aircraft by Air Transport Services Group (ATSG) subsidiaries ABX Air and Air Transport International (ATI), as well as the performance of hub and gateway services by LGSTX Services Inc, was also extended from its original term by five years through March 2026, with a renewal option for an additional period of three years.

WW will, furthermore, this year lease five converted B737 freighters from lessor Gecas and operate them via its Southern Air subsidiary. It marks Amazon's first foray into B737s.

The CMI deal covers a seven-year term, with an option for Amazon to extend that to ten years. Amazon may also place up to 15 more B737s with Southern Air before May 31 2021.

As part of the deals, both ATSG and Atlas have signed up to 40 per cent of their shares to Amazon. The e-commerce giant already had warrants to acquire up to 20 per cent of each company when they signed the original lease deals in 2016.

According to ATSG's Schedule 14A, the issue of additional warrants would give Amazon the right to purchase up to 33.2 per cent of the outstanding shares of common stock, based on its weighted average price over the 30 trading days preceding October 29 2018.

If Amazon takes more aircraft, or switches its B767-200s to B767-300s, ATSG will issue more warrants, representing up to 39.9 per cent of the company.

The move needs to be agreed by shareholders, however.

In the filing, ATSG noted: 'The board believes that the transactions provided for in the company's various agreements with Amazon and its subsidiaries are of significant value to the company and its stockholders and critical to its long-term plans.'

It stressed: 'Any termination of the 2018 investment agreement resulting from the failure of the company's stockholders to approve the share amendment would have materially adverse consequences to the company.'

Atlas has also awarded Amazon incremental warrants that would entitle it to acquire up to 39.9 per cent of WW's common shares. As part of the original 2016 accord, Amazon would receive 37,500 shares every time it paid out US$4.2 million in revenue to Atlas, up to a total of $420 million, for incremental new business beyond the original agreement.

Once those shares are vested, Amazon will receive 45,428 shares each time it pays Atlas $6.85 million revenue for new business for up to a total of $1 billion.


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