Jeff LeeHello and welcome to this episode of cargo facts connect, the podcast of cargo facts, the newsletter of record for the air cargo and freighter aircraft industries for over 40 years. I’m Jeff Lee, editor of cargo facts and it’s Friday, the 25th of October. Today, we continue with a look back at last week’s Cargo Facts Symposium, where one of our fireside chats was with Mike Berger, CEO of ATSG. In this extract of the discussion, Mike talks with me about the company’s expansion, not just geographically but also in terms of airplane types, with the group’s leasing subsidiary CAM adding Airbus freighters to its portfolio and eagerly awaiting its first A330-300P2F conversion. Take a listen.
Jeff LeeWhat would you say is the overall vision or your strategy for the company? And then where do you see, ATSG, you know, five years like,
Mike BergerWell, I see us as the world’s largest, lesser cargo freighters in the world, just as we are here today. We’re really proud of it. We’re humble about it, but, you know, we’re it’s something that we can continue to strive for. We’ve made a conscious decision to push ourselves out further globally. From a strategic standpoint, that decision was made several years ago. If you look at us today, we’re now leasing aircraft into 10 countries around the world. If you would have told us a few years ago that we would have multiple airplanes in Tbilisi, Georgia or Tashkent, Uzbekistan, or call on poor we would have said, you know, heck, you know, you know, we don’t see that, but that’s, you know, that’s a strong strategy that we took, we undertook, and we’re delivering on it, and we’re making good sound businesses around it. We’re looking at the underlying economic drivers within these economies. We’re looking at what the consumer is doing within these economies, infrastructure growth. We’re seeing in Central Asia, Southeast Asia, other parts of the world, in Europe, etc, central South America. And we’re following the data. And you know, it’s so far, it’s it’s worked out well for us.
Jeff LeeAnd of course, you have a new or different leadership team now with you. How does that enable you to a manage costs better, but also maybe have a different outlook on the business?
Mike BergerYeah, I think our core fundamentals, Jeff, are solid. You know, when I talk about and think about the fundamentals that make business successful, sound leadership, good administrative skills, good decision making skills, core, good, fundamental foundation. Those were in place for a lot been in place for a long time. Culturally, we’re gritty, you know, our roots are in the Midwest, and, you know, outside of, outside of Cincinnati. So, you know, like, as I like to tell people, even though we’re in this beautiful little town in Wilmington, Ohio. You know, we’re a global business, and doing business around the world, but our core disciplines and who we are are really grounded. And the folks that have joined us, Jeff Dominic as president, is here today, you know, brings a very, very good dimension to him that we that we have embraced and Jeff Scott, Jeff was a board member several times for us over the years. His experience in the financial world, the Wall Street side of things, the leasing side of things, is a core competency that you know will certainly help us going forward to fulfilling the strategy. Todd Franz, who was recently named Chief Commercial Officer, like a lot of us, grew up in the business, from the ground, from the ground up, going back to his days, you know, learning groundhogs here in California. So he’s the only he’s the only guy that’s been president of two of our businesses, which says a lot for who he is and what he’s been able to accomplish. So, you know, they’re good thinkers. They’re going to challenge us, challenge me, challenge the others. To evolve our business. We really firmly believe that our business needs to continue to evolve. We can’t stand still. We won’t stand still, and these two guys specifically are new parts of the leadership. They’re going to help us get there.
Jeff LeeSo it seems like your model now has shifted slightly from from having a relatively small number of very large customers to now a more diversified base, including some new and smaller customers with, you know, just one or two aircraft, yeah.
Mike BergerYou know, every app has a beginning, right? And the people have to start somewhere. And, you know, as we look to diversify ourselves, you know, globally, you know, evaluating the risk of putting 30 plus million dollar assets, you know, a long way from home, around the world, you know, is something we take very serious. And you know, we’re looking at a lot of the things that are underpinned, underpinning the ability for these companies to be successful. The one thing that we have often looked at as we’ve expanded our business and our customer base is Who are these folks doing business with? And when we look at our customers outside of our major three customers that everyone is very familiar with, at Amazon and DHL, US government. When we look at a lot of our other customers around the world, they’re also doing business for the same companies right in their regional networks, or indirectly or directly, flying at their hubs, whether they be in Leipzig or or Bahrain or even Hong Kong, for example. So those are the little things underneath that, as we look to expand ourselves with smaller airline, certainly we don’t look just to only have one or two airplanes with these folks. But as I said, we’ve got to start someplace. And you know, ride airways is a good is a good example of that. They’ve been a customer since 2015 you know, and started with one airplane, and I’ve got themselves now where, you know they’re going to approach 10 airplanes with us, you know, not in the distant future. So that’s the approach that we’ve taken. But yeah, the message that I would leave you with is there’s a lot of due diligence underneath that are allowing us to go in and feel confident that the risk that we’re taking with our assets in these parts and geographic parts around the world is the right decision, the right business decision.
Jeff LeeYeah, just just as an example, two examples, they’ve been very noticeable, but very impressive. Uzbekistan and Georgia. You’ve placed several seven six sevens into these countries now, and it’s just been remarkable how quickly these carriers, in these countries, have been growing, and how interested they’ve been in the 767, specifically.
Mike BergerWell, listen the 76 the great airplane, it’s a great freighter. The reliability of it is. Well noted, the data, you know, validates all that kind of stuff. You know, the engine of this industry remains and will continue to be E commerce, and the geographic location of the country of Georgia, the country of Uzbekistan. You know, the distance from from China into Europe, for example, you know, 767, you know, does that mission really well and enable them to do a, you know, a tech stop in those countries that we just mentioned. And that’s what’s driven the success, right? I mean, the, you know, the makeup of the volume that’s in the back of those aircraft is not originating in those countries. It’s originating, you know, the majority of it, you know, from from China. And as we see the the E commerce growth from there, not only ourselves. You know, certainly FedEx and UPS, and everyone else is enjoying it as well. You know, we’re kind of capitalized on that as much as we can. The thing that we’re we’re also very keenly aware of is how much capacity can be absorbed into this market. And that’s something we have a very, very close eye on. And, you know, see our competitors now and some other other less stores also leasing aircraft into the same markets. So, you know, we’ll, we’ll balance that out with how many more assets do we think they can absorb? What are the business plans that make up this? What are the contracts underneath this? Are making up the demand and evaluate on a go forward basis? We’ve been very, very impressed with the customers, the knowledge of the customers, not only from a business perspective, but really from a technical perspective, that that represent these folks. We’ve had visits. We visit, of course, of course. We’ve been there ourselves. We’ve also hosted them several times here in the US and in Ohio. And you know, really, so far, we’ve we’ve been really, really satisfied with the investments that we’ve made and how they’re running their businesses, right?
Jeff LeeAnd it’s also the winningness appetite to keep investing in expansion.
Mike BergerYeah, there, they’re assertive folks, and you know, we’ve, at times, need to moderate it a bit, but that’s our job to do so, and our team’s job to do so. And you know, we’ll, we’ll keep, we’ll keep going and again, until we see signs that may be enough in terms of, let it digest for a while.
Jeff LeeMeanwhile, back at home, you will still strengthen your relationships with some of your biggest customers here in the US, talking about, of course, the new or the expanded Amazon deal, if you’re taking more seven six sevens and placing them with ABX, those are really coming, coming in pretty quickly. So congrats to you and ABX,
Mike BergerYeah, thank you. We’re, you know, we’re really happy and pleased that Amazon, you know, showed the confidence in transferring those, transferring those aircraft to us, specifically the ABX air, the team, who’s here, who’s here for the show, and thanks for the guys for attending, has done a fabulous job of getting them. We had a very aggressive timeline to get them all into service by peak. We have nine in service today. We have one more that will go in the next couple of weeks. So the ABX team, Dave Soper and his team, and certainly the members of the guys who fly the aircraft, have been very, very responsive, and that’s gone very well. We’ll have 51 aircraft. We’ll fly 51 aircraft for Amazon by the end of the year. We’re really proud of that. I mentioned that we’re really focused on execution. This has really been demonstrated through, throughout the last couple of months, of getting these 10 aircraft, you know, bridged and into service. And you know, the one piece that we’re extremely proud of is it’s a service that we provide to Amazon directly, as well as their customers. That is the piece that we feel we could control. Amazon has been a terrific customer. They’re also a great shareholder of ours, as most know. And you know, by controlling the things that we can control, the day to day service levels that we control by them providing us incremental aircraft to fly demonstrates to us that we’re doing the right thing.
Jeff LeeSpeaking of the 767, you will see the largest owner of 767, racism, the largest, let’s solve. But how much longer do you think you’ll continue to convert seven, six, sevens? I mean, in Wilmington, for example, you have, I don’t know how many, but a lot of 767, both two hundreds and three hundreds either parked waiting for conversion or having come off lease.
Mike BergerYeah, so I’ll start on 200 side. You know, we, we haven’t converted any two hundreds for a long time, and certainly we won’t. A lot of the two hundreds are retiring. A lot of them are coming up, or come up against the 50,000 cycle limit. So they’ll naturally be being retired. We still have, you know, plenty of service. We still have, you know, a lot that have some some lights on it, even though the age of them are, you know, are into the, you know, the the early 80s or mid 80s. You know, Boeing built a hell of an aircraft, and the reliability of that 767 200 statistically, to this day, is really, really good answer your question. Specifically, you know, the market for the 767, freighter, you know, remains, you know, pretty, pretty strong right now. The challenge is really on the feedstock side of things, we’ve been fortunate enough to have some feedstock as the market slowed coming out of covid. We still had available feedstock that we were had purchased on a forward sale that we took delivery of in late, mid to late 2023 and then as recently as early 24 and when you take your visit out to Ohio, you saw some of the some of the available feedstock. We’ve got three aircraft currently in conversion today with our dear friends at III. And a shout out to Rafi and his team, not only for the great job that they’ve done for us for, you know, a long time, we’ve done well over 120 conversions now with I IntelliBid, 100% in Tel Aviv. And certainly not only, they continue to do a great job for us, you know, all the time, but as this unfortunate conflict has persisted now for well over a year, they haven’t missed a beat. And, you know, so Jacob Berkowitz, Raf, the entire team, really, in Israel, really, you know, just feel really proud of the work that they’re doing, not only for athg, but for all their customers, you know, in a very, very difficult, difficult situation. So, you know, we’ll continue to deliver them, convert them. Are we going to continue to convert? You know, 1012, 1415, that we’ve done over the last several years? No, we’ll moderate that growth in terms of the seven, six, but we’ll still go it. Will still go out and convert a handful. You know, 3456, a year until this year of the future. We’ve got plenty of slot availability with our folks and friends in Israel, as I mentioned, and then we’ll see how it goes. The constraints around the 330 right now, which we made a big decision, a big commitment to get into a few years ago, which we’re really excited about, as I mentioned, you know, we’ll, you know, we’ll allow the 767, to, you know, to continue on, not only in terms of continuing to service existing customers, but as long as feedstocks available, you know, we think there’ll be some, you know, be demand that will allow us to continue to convert.
Jeff LeeYeah. So speaking of the A330s, well, first of all, what’s the latest on your first one at Turkish? That’s almost ready, isn’t it?
Mike BergerIt is almost ready. We’re probably looking at somewhere around mid November, end of November, delivery of our first one. We’ve got a couple of aircraft in Istanbul being converted, and we’ve got a couple currently in conversion in Dresden as well. You know, our intention and plan right now is to deliver two by the end of the year, and then a couple of them early, early in 2025. So, you know, it’s our future. Make no mistake about it. We think that the the aircraft is going to, you know, be really well adapted. It already is being used, obviously, by by several folks, including DHL, or our longtime partner and friends, you know, already, and all indications are it’s going to be a terrific freighter and continue to be. It needs more time, as I like to say, to get data on it that we can say it’s as reliable as a seven, six, but we have no reason at this time to believe it won’t be. So we’ll we’ll see how we go.
Jeff LeeThat was ATSG CEO Mike Berger there, talking to me in a fireside chat at last week’s 30th Cargo Facts Symposium. Thank you again for your time, Mike. And that’s all the time we have today. You can find more coverage of CFS and the freighter aircraft market on cargofacts.com. Thank you very much for tuning in, and join us again next time.
