Atlas Air Worldwide Holdings Inc. (AAWW), one of the world's largest freight carriers, said Wednesday that traffic to and from Asia was starting to improve, though its U.S. military business may dip in the fourth quarter.

The global air cargo industry suffered a precipitous drop in traffic at the end of last year, but signs of recovery are viewed as a proxy for broader economic stabilization.

"We are starting to see [an] improvement in activity," said Chief Executive Bill Flynn on a conference call after reporting a rise in second-quarter net profit to $11.3 million from $1.5 million a year earlier.

Flynn singled out traffic to and from Asia, a key market that includes consumer electronics and time-sensitive industrial components.

Atlas Air provides charter and lease services to scheduled and other airlines with a fleet of 28 Boeing 747 freighters.

Customers include British Airways PLC (BAIRY) and Emirates, and Flynn said other scheduled carriers have been looking at bringing in freighters next year. Some carriers such as Delta Air Lines Inc. (DAL) have been parking some or all of their all-cargo aircraft amid the downturn.

The second-quarter performance was lifted by strong demand from the U.S. military for transport to the Middle East, principally Afghanistan.

Flynn said this was expected to moderate in the final quarter in what could be a sign of U.S. military strategy, though he cautioned that this could change.

The U.S. defense department is expected to put out tenders for 2010 flying later this month or in early September, he noted.

Atlas has been helped by a modern fleet that includes 22 Boeing Corp.'s (BA) 747-400 freighters and six older -200 models. Flynn said the so-called "Classic" 747s were being pulled by operators, notably from the Asian market, with many of them not expected to re-enter service.

The company has ordered 12 of Boeing's new 747-8F freighters which, like the 787 program, has been delayed by design and production problems.

Atlas has been seeking compensation from Boeing, and Flynn said it remained in "live" talks with the manufacturer having rejected a proposed delivery schedule. He declined to say whether it expected to receive any aircraft next year.

Boeing announced a six-to-nine month delay in initial 747-8F deliveries earlier this year, pushing back the arrival to launch customer until the third quarter of 2010.

The aircraft will enter final assembly this month, and a Boeing spokesman said Wednesday that first flight remains on schedule for the fourth quarter.

Atlas Air shares were recently up 4.7% at $26.91, shedding half their early-session gains.

-By Doug Cameron, Dow Jones Newswires; 312-750-4135; doug.cameron@dowjones.com