Amazon Air Cargo Operator Buys Repair Shop
04 January 2017 - 4:49AM
Dow Jones News
By Doug Cameron
One of the two providers to the fledgling Amazon.com Inc. air
cargo operation has acquired an aircraft maintenance business that
could ultimately compete with Boeing Co. in converting passenger
planes for cargo use.
Air Transport Services Group Inc. said Tuesday that it had
bought Pemco World Air Services Inc., which maintains planes for a
number of carriers and specializes in the Boeing 767 jets, the
centerpiece of Amazon's outsourced Prime Air cargo airline.
Pemco doesn't convert 767s for cargo use but does modify smaller
jets such as the Boeing 737, a market that the plane maker and
others expect to expand because of demand in China.
Quint Turner, ATSG's chief financial officer, said it may be
several years before the economics work for converting newer 737
models such as the 737-800, but expects there could be other
opportunities for older versions such as the 737-300 and -400.
Mr. Turner said Pemco can support ATSG's planned cargo airline
in China that it hopes to launch this year, subject to regulatory
approvals. The company has joined with China's United Star Express
Airlines in the Tianjin-based venture, and has a minority stake in
a Sweden-based air cargo carrier.
Boeing last year launched a program to convert its workhorse
737-800 passenger jet to cargo use with an initial 55 orders and
commitments from some Chinese customers and the aircraft leasing
arm of General Electric Co., with first deliveries set for the end
of the year.
ATSG, which already services planes for carriers including Delta
Air Lines Inc., is diversifying even as its Amazon service ramps
up.
Mr. Turner said it is now operating 15 planes for Prime Air,
with the remaining five of the initial 20-jet lease deal due to
arrive by July. Rival Atlas Air Worldwide Holdings Inc. currently
operates a single 767 for Amazon but this will also rise to 20.
Nine of ATSG's Amazon jets are flown by its ATI unit, with the
other six operated by the ABX Air subsidiary whose pilots went on
strike briefly late last year following a long-running dispute over
working practices.
Mr. Turner said he expects ATI to be the primary operator of the
Prime Air planes.
ATSG said it expects the Pemco deal to be accretive to earnings
this year, and though it didn't disclose terms, Mr. Turner said the
price was in line with its investment of around $16 million to $17
million in each of the joint ventures in China and Sweden.
The company's overseas expansion has fueled speculation that
Amazon could expand Prime Air beyond the U.S.
Pemco spent six months in chapter 11 protection in 2012 and is
being sold by an affiliate of Sun Capital Partners Inc., the
private-equity group.
Write to Doug Cameron at doug.cameron@wsj.com
(END) Dow Jones Newswires
January 03, 2017 12:34 ET (17:34 GMT)
Copyright (c) 2017 Dow Jones & Company, Inc.
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