AAWW (2020 - Q4)

Ladies and gentlemen, thank you for standing by, and welcome to the Fourth Quarter 2020 Earnings Call for Atlas Air. At this time, all participants are in a listen-only mode. After the speakers’ presentation there will be a question-and-answer session. Please be advised that today’s conference is being recorded. I would now like to hand the conference over to Atlas Air. Please go ahead. Ed McGar

Thank you, Sarah, and good morning, everyone. I’m Ed McGarvey, Treasurer for Atlas Air Worldwide. Welcome to our fourth quarter 2020 results conference call. Today’s call will be hosted by John Dietrich, our Chief Executive Officer; and Spencer Schwartz, our Chief Financial Officer. Today’s call is complemented by a slide presentation that can be viewed at atlasairworldwide.com under Presentations in the Investor Information section. As indicated on Slide 2, we’d like to remind you that our discussion about the company’s performance today includes some forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements relate to future events and expectations, and they involve risks and uncertainties. Our actual results or actions may differ materially from those projected in any forward-looking statements. For information about risk factors related to our business, please refer to our 2019 Form 10-K as amended or supplemented by our subsequently filed SEC reports. Any references to non-GAAP measures are meant to provide meaningful insights and are reconciled with GAAP in today’s press release, and in the appendix that is attached to today’s slides. During our presentation and answer period today, we like to ask participants to limit themselves to 1 principal question and 1 follow-up question, so that we can accommodate as many participants are possible. After we’ve gone through the queue, we’ll be happy to answer any additional questions as time permits. At this point, I’d like to draw your attention to Slide 3 and turn the call over to John Dietrich.

Thanks, Ed, and hello, everyone. Welcome to our fourth quarter earnings call. I’d like to start by thanking all the frontline responders, as well as all the essential workers around the world, including our more than 4,000 Atlas team members for their unwavering efforts throughout this pandemic. On behalf of all of us at Atlas, I want to express our sincere hope that you your families and friends continue to stay safe as we work toward better days ahead. We at Atlas take great pride in the role we’re playing in keeping global supply chains and our customers’ operating networks moving and in supporting COVID-19 relief efforts. From critical healthcare supplies like vaccines and other pharmaceuticals, medical equipment and PPE, as well as e-commerce, educational supplies, food and other everyday consumer products, our team has worked tirelessly to keep our aircrafts flying safely, so we can continue transporting the goods that matter most during this challenging time.

Thank you, John, and hello everyone. Our strong fourth quarter results are highlighted on Slide 6. On an adjusted basis, EBITDA increased to $279.7 million, with adjusted net income growing to $143.2 million. On a reported basis, net income totaled $184 million. Our fourth quarter adjusted earnings included an effective income tax rate of 23.9%. For the full year, we had an adjusted effective tax rate of 22.9%.

Thank you, Spencer. Moving on to Slide 9, 2020 certainly was an unprecedented year, and we finished it on a strong note. The higher demand for our aircraft and services has carried into the first quarter. And our team continues to step up and execute amid the ongoing operational challenges from the pandemic. We will continue to take every precaution to protect our world class team of employees and our operations to ensure that we can continue to transport the goods the world needs most. At this point, operator, may we have the first question, please?

Thank you. Our first question comes from a line of Bob Labick with CJS Securities. Your line is now open.

Good morning. Congratulations on just terrific execution in a fantastic year.

Thanks, Bob.

Thank you, Bob.

I wanted to start the discussion with talking about the -8. It’s a pretty exciting opportunity for you to get 4 more of them. Can you talk a little about the demand environment out there. Have you talked to customers? Are there inquiries? When would you expect to tell us about customers, I guess? And will these be going into a ACMI charter or have you decided on that yet?

Yeah, look, Bob, I think we’re excited about the acquisition. As you know we like the aircraft very much. It’s performed exceptionally well for us. And we expect there will be continued demand for that aircraft. What we find in good times and in tougher times, the best most efficient aircraft are the ones that remain flying and the -8 will certainly be that. And in terms of where we’re going to place them, we’re going to continue to evaluate that. We have ongoing discussions in every segment. And we’re going to do what makes best for the organization once that time comes on delivery, but we’re excited about the opportunities.

Okay, super. And then just kind of following up on that, you mentioned the $265 million of aircraft parts and purchase commitments, including the PDPs for the -8s. But you also just mentioned the – I don’t know if it is the right word, but the obscene amount of cash, the $850 million plus on the balance sheet. So what are the other uses of cash, given the fantastic cash generation this year and what we expect next year going forward?

Yeah. Thank you, Bob. So, we have a capital allocation strategy. It remains disciplined and balanced. Our focus continues to be on growing the business while generating returns above our cost of capital and maintaining a strong balance sheet. There are a number of things that we continue to look at. We look at each opportunity kind of on its own. We evaluate each opportunity when it comes to deploying capital. We set pretty aggressive return targets. And, as John said, balance sheet strength and continuing to maintain low levels of leverage remain our top priority. But beyond that, we will continue to evaluate investments like we did for the -8.

Okay, super. Thanks very much. I’ll get back in queue.

Thanks, Bob.

Thanks.

Thank you. Our next question comes from the line of Chris Stathoulopoulos with Susquehanna. Your line is now open.

Good morning, everyone.

Hi, Chris.

Hi, Chris.

So, John, Spencer, I appreciate – yeah, I understand you not wanting to give guidance around COVID due to uncertainty. But I think it’s important here for investors, at least to help us frame about, getting through this year against what is clearly a tough comp on EBITDA and a really unique operating environment. So on the international side or the long-haul widebody side, you have your competitive capacity effectively sidelined, let’s say, for 2 to 3 more years. I would expect AMC and commercial charter flying to improve as the vaccine is more distributed. And you’ll also have opportunity, I don’t know, if you want to speak to this, but the 11 new Amazon planes that they purchased in January, whether you’re looking to bid on those, so just putting those together, and even if we assume that we have a labor deal sometime in the back half of this year, thoughts around getting through this environment? And then maybe a part B and sort of related to that, John, you’ve been in this seat now here for a year. I’m curious if there’s anything you’ve learned about kind of running this airline, with an operating playbook that that really doesn’t exist because of COVID. And whether there are any new opportunities here that you realized in terms of cost savings or that per block hour basis or network productivity. Thanks.

Thanks, Chris. And I’ll start with that last question in terms of what I’ve learned. It’s been a great exciting 14 months almost. And the one thing I’ve learned is that we’ve got the best team of employees in the business. And we’ve been able to execute in a remarkably complex and challenging environment on every front. That’s just about every regulatory challenge, operational challenge, or throw in some weather challenges along the way as well, spikes in demand. And this team has stepped up and executed on all cylinders in every front. And that’s the strength of our team and our resilient business model that we’ve talked often about. And, Chris, you’ve been following us a long time. We have often said that we are well positioned, both in – in more challenging times, but as we’re seeing now, well positioned to capitalize on opportunities. And working together, we delivered and executed. In terms of kind of new opportunities or other things that we’re looking at or have learned or developed, the new customer base, we talked about some of our long-term charter customers. We’ve really developed a new customer base for our aircraft and our services. And that’s really exciting. Spencer has talked about often, these are ACMI like agreements, And I think will serve the market well, serve our customers well, expanding the customer profile, beyond just the historical and typical ACMI customers we served in the past. That’s really exciting. So more immediately, we have a lot of work ahead of us on the immediate horizon. As I said, we look forward to keeping you informed when we’re in a better position to give more tangible guidance. But we’re following the market. We’re following the activities, what’s happening with COVID. And we just look forward to continuing to deliver. And we’ll keep you posted when we can.

Okay, so the follow-up, charter utilization was really strong here, 12.6 hours. I’m curious, at what point there’s a limit there in terms of having to pull additional aircraft from ACMI or potentially leasing other aircraft? Thanks.

So we’re reviewing our fleet and our allocation of resources every day, and between our ACMI customers and our charter customers, and from a network standpoint, linking customers together at times to provide full utilization of the aircraft. So it runs the whole gamut in terms of, we’ve got our core ACMI customers, we’ve got our charter customers. But there are oftentimes opportunities where a customer may say, you know what, I’m interested in capacity, but I may not need it full time for the full operation. Can you join us with somebody else? So our marketing team does a great job of bringing customers together to ensure we’re maximizing utilization of the aircraft and also maximizing the trade lanes. So it’s a combination of all those things that go into building our total network, which is comprised of a number of sub networks.

Okay.

Chris, I’ll just briefly add. It’s Spencer. I’ll just briefly add. As you pointed out, 747-400, utilization in charter was up 51%, quarter over quarter. It’s primarily driven by really strong demand. But I just point out, as John noted earlier, this isn’t in the – in the midst of it the most challenging operating environment, I think, that we’ve ever seen. So it hasn’t come easy. But our organization has just continued to step up to make sure that everyone is safe, and that we can continue operating as much as we have.

Okay, thank you.

Thank you. Our next question comes from a line of Scott Group with Wolfe Research. Your line is now open.

Hey, thanks, morning, guys.

Hey, Scott.

Hey, Scott.

So I want to ask, last quarter you guys talked about $60 million of lower maintenance cost this year. Is that still the right way to think about it? And then, just separately, of the 33 aircraft in charter, how many of those are now in long-term charter?

Sure. Let’s see, the first part of it was with regard to maintenance. So we did say previously, during the last call, that about $60 million of heavy maintenance expense was incurred in 2020. That was related or would have been incurred in 2021. So that statement is still out there. But as far as maintenance expense overall for 2021, we’re still evaluating that. We’ll update that as the year progresses. We gave first quarter outlook for heavy maintenance expense, because we want to make sure that everyone had that. It’s pretty close in. As far as the rest of the year, we’ll update you as the year progresses. And then, with regard to the long-term charter question, we now have so many of these. It’s – the thing about these is it’s not necessarily utilization of an entire aircraft. It may be one flight per week or something like that. Sometimes it’s a couple of rotations. Sometimes it is the full utilization of the full aircraft. So it’s slightly different. But we have now entered into so many of these contracts, they are amazing. There are just a few of them that currently terminate at the end of this year, but most go into 2022 or 2023. And now, some have even been extended into 2024.

And, Scott, if I could, that ties in with the comments I was just making about our marketing team, linking customers together. So those one-off charges are maybe one a week. Okay, what’s that aircraft doing the rest of the week and that ties in with selling same tails to multiple customers on a long-term basis as well, in addition to the fully dedicated aircraft deals.

It’s very significant portion of our business.

So I suppose with more of this longer-term charter, you’ve got more visibility. And this situation with semis is clearly going to help this airfreight environment stay stronger. I know you’re not giving guidance, but directionally, do you think there’s an opportunity to grow earnings this year?

So like we said, we’re…

up a lot.

So like I said, we’re not giving guidance at this point other than what we’ve shared. And we look forward to getting back to you as soon as possible. We’ve got a lot of important work ahead of us, including following what the market is doing, and continuing to allocate our resources. So we’ll look forward to giving you an update on that.

One thing I’d just add to that, Scott, as you know, yields were incredibly high in the second quarter of last year. So that’s a very important thing to keep in mind. Yields have continued to be above historical yield levels. But we have not seen levels like April and May of last year. We have not seen that since.

Okay, that’s helpful. Thank you, guys. I appreciate it.

Thank you.

Thank you. Our next question comes from a line of Helane Becker with Cowen. Your line is now open.

Oh, thank you very much, operator. Hi, everybody, and thanks for the time here. So I wanted to ask you a question about the leverage, because, Spencer, you pointed out that it’s down quite a bit, right, 2.1. Where do you think the business runs best? At what level should – are you aiming for or how should we think about growth beyond the 4 747s that are coming and balance that against the balance sheet.

Yeah. So you know that we made a commitment to reduce our leverage. And as you’ve seen, as you said, our net leverage and our net leverage ratio have really declined, and then we’re going to take on some debt next year with the -8s before enjoying the earnings from the -8. So that will presumably increase our net leverage ratio a little bit. Ideally, we would like – we’ve always kind of targeted somewhere between 3% and 4%, really much closer to the 3% part of that range. So ideally, we think the business is right somewhere around there. And we’re happy that it’s down at these levels. But it’s probably right somewhere around 3%. And, again, when we take on the -8s, we’ll take on debt before enjoying the earnings. So it’ll take a little bit of time to catch that back up. Just the way that calculation works.

Right, exactly. So are you thinking of – how are you thinking of financing this actually, maybe it’s the right question?

Yeah, we have a number of opportunities to finance those, and we’re looking at all of them. We think that the bank markets are open and available to us. We think there are some potential other opportunities with whether the ECAs or public debt facilities. We think we have a bunch of options, and we’ll pursue all of those.

Okay. That’s very helpful. And I just had a maintenance related question, I missed the kind of . The $117 million you’re forecasting for the first quarter. Is that – should we – I mean, you said, 21 less than 20, and I think Scott pointed out $60 million less, just because you’ve pulled up maintenance forward. Is this the high watermark then, I mean, normally, you would do all your heavy maintenance in the first quarter anyway? So should we think about this as being like the high watermark for the year?

Well, we’re not going to provide maintenance outlook beyond the first quarter today, but we did say that we expect it will be lower this year. And so, yes, the first quarter of this year is higher than the first quarter of last year, we have an incremental C Check, we have an incremental D Check, which is driving that. But we’re not really going to comment beyond that. But yes, if the first quarter is higher and the full year is lower, obviously there will be some catch up. We think there will be catch up between the first quarter and the end of the year.

Okay. Thanks very much. Have a nice day.

Thank you.

Thank you.

Thank you. Our next question comes from the line of David Ross with Stifel. Your line is now open.

Thank you. And good morning, gentlemen.

Good morning.

Hi, Dave.

Just a real quick clarification question on the pilot talks. You said binding arbitration starts mid-March, is that a 90-day process, and so by that, you expect the resolution by the end of 2Q?

So it is not a 90-day process. The scheduled hearings are to start in mid-March and go through the end of March. And then there are some procedural things that take place typically what happens is, the arbitrator seeks what’s called post-hearing briefs. And it’s kind of a summation of both side’s arguments and their case, and then he takes those matters under advisement. I think the duration how long it takes we have under the agreements – under the collective bargaining agreements, there’s an expedited request to the arbitrator to have the decision made as soon as possible. But there’s no defined timeline that’s binding on the arbitrator. I think a lot of it depends on how many open issues remain to be resolved. The more issues open, the longer it may take for the arbitrator to render a decision. That all said, and nothing prevents the company and the union from continuing to have discussions to try and narrow the scope of issues, both before during and after arbitration, and pending the ultimate outcome. So a lot of variables go into that, just like any kind of court proceeding there’s no defined timelines per se. But I know both sides are committed to move forward. We certainly are. And we’re looking to get it done as soon as reasonably possible.

Excellent. And then, Spencer, there’s been a big change in the unallocated expense line. Can you talk a little bit about that and where we should think about that for a run rate this year?

Yeah, sure. So what’s included the biggest change that’s included in unallocated is the CARES Act grant income. So we received that money, and then as we pay qualifying non-executive U.S. salaries, wages and benefits then we record the grant income in unallocated. So when you’re looking on a period over period basis, that’s the item that will stand out.

So is the $28 million a good run rate to use for the next several quarters? Or when does that expire? How do you think about that?

Okay. There’s about $41 million of CARES Act grant income to be – CARES Act that will be recognized as grant income in the first quarter of this year. So we expect that that will then be fully utilized after the first quarter. So it won’t be an issue as we head into the second quarter. And then you’ll see sort of more normalized unallocated expenses.

Okay. Excellent. Well, thank you very much, guys.

Thank you.

Thank you.

Thank you. Our next question comes from the line of David Campbell with Thompson Davis. Your line is now open.

David, are you there?

Mr. Campbell, if your line is on mute, please un-mute your phone.

We heard some background noise, operator. So maybe it’s not quite working. Maybe we move on to the next one, and come back to David.

Certainly, our next question comes from the line of Barry Haimes with Sage Asset Management. Your line is now open.

Thanks very much for taking the question. I have 2 really. One, relative to the new planes you’re buying, I’m wondering if you look at conversion opportunities. I would think there’s a lot potentially available with finding them so much commercially. I’m just curious, have that set up and have you thought about that? And then second question, could you just remind us, I believe, under the government CARES Act situation, you’re precluded from buying your stock back for the moment. Could you tell us when that restriction eases up? Thank you.

Yeah, I’ll take the first one with regard to the new planes and the conversion opportunities. Absolutely we’re looking at all opportunities. On the 747 platform, however, really the conversion market no longer exists. The freighters that are in the marketplace will be phased out over time, because they’re older and the economic viability of doing 747 conversions at this time, while I guess possible, highly unlikely at this point. And, but other gauges, we’re looking at every opportunity, as you see from our history, we were very active in the 767 conversion market for our growth with Amazon, we went out and acquired and converted those airplanes. We’re also operating the 737-800 conversions that Amazon took on lease on their own. And for us, we view both of those aircraft types is still very attractive. We’re also being very active and interested in the marketplace, and how COVID has impacted the passenger side of the business to see what opportunities are out there. Our Titan organization, along with our Titan JV is looking closely at all opportunities in the marketplace so whether conversion or otherwise. So we look forward to continuing to advance the Titan opportunities as we go forward, both from a Dry Leasing standpoint, but an operating standpoint as well. The 777 was recently announced as a conversion candidate. We’re still looking at that one as well. Nothing imminent on the horizon, but I just wanted to share that we’re constantly looking at fleet opportunities. And on the CARES Act, Spencer, maybe you can give some guidance on the expiration of that commitment on share repurchases.

Sure. And Barry, before I talk about the CARES Act, just to add to John’s comments, there hasn’t been a 747-400 passenger to freighter conversion in about a decade. And as John said, we just don’t expect that that’s going to happen. As far as the 777-300 passenger to freighter program. It will deliver its first aircraft in 2024, so it’s still a number of years away. With regard to the CARES Act, the share repurchase restriction and in October of this year. I think that was your question there.

Great. Thank you.

Thank you.

Thank you. We do have a follow-up question from a line of Chris Stathoulopoulos with Susquehanna. Your line is now open.

Hey, thanks for taking my follow-up. Spencer, what was free cash flow ex any revenue from refunds and PSP1 funds?

Are you talking about during the quarter or the full year?

Both if you have those handy?

Okay. So let’s see, as far as the fourth quarter of the year, free cash flow, which we calculate as operating cash flow, less core capital expenditures was 100 – just short of $189 million. For the full year, it was about $926 million. And amazingly, for the full year, we had a new threshold operating cash flow greater than $1 billion. So we’re very excited about that. And then you were asking about the refund of excess rent. And so for the fourth quarter, that was about $6.6 million. And for the full year that was about $37 million – $38 million – $39 million, sorry.

Okay. Has any of the airline subs apply for PSP2?

We have not. No.

Okay. And just going back to this is the topic of cash deployment here which I mean, this is a very unique place for Atlas to be all things considered. Even if I don’t know we put on 400 a tail for these 747s you’re taking next year. And assuming you finance half of those and very modest assumptions around EBITDA for next year – this year or next year? There’s still here a lot of cash exiting or going through kind of early innings of the recovery. So should we think about that the priorities are going to be more on the aircraft side? I know twin aisles are expected to be weaker than single aisles, given what’s happening on the long-haul international travel side? Could we see something along perhaps an acquisition be a smaller airline, you haven’t done anything. I think since 2016 or perhaps something downstream in logistics were sort of complimentary side of things? And any color there’d be helpful. Thanks.

So Chris, from my perspective, from an operating standpoint, my focus is more on the larger wide body aircraft. While we value all our fleets, our strength and our kind of core business starts with the larger wide body aircraft. From a leasing standpoint, all opportunities are on the table. But again, I think our Titan platform is more freighter centric or aircraft that can become freighters on the conversion from a feedstock standpoint, that’s one of the core philosophies of Titan. But if there are other opportunities in the marketplace that that have attractive returns, everything’s on the table. In terms of, beyond that, M&A and all the other things for which we could deploy our capital, I just would say this, everything’s on the table from our standpoint. And we want to be sure that we are judicious during this volatile period of time, through COVID. I’ve a couple times now stressed the operating environment, and some of the challenges that have been presented to the team. These results – and I’m not saying this in a boastful way. But these results don’t just happen. There were extraordinary workarounds on the international scale to continue to operate into foreign locations that had some varying and very restrictive quarantine, testing requirements, access to hotels, restaurants, the basics of food and shelter, I’m not overstating that. So we want to be sure that as – that we get through this period, I think, better times are ahead with the vaccine. But if you follow the media, everything has been slower than people thought. So it’s important for us to be responsible and prudent with our cash in the near-term. But it’s a long winded way of saying everything’s on the table in the longer term.

Okay, thank you. And, John, to your point there, maybe if you could help us frame here, you addressed it in your prepared remarks, and certainly the press release about some repositioning expense or headwinds due to COVID. So just maybe if you could give us departures for fourth quarter, not block hours. But departures were absolute year-on-year maybe sequentially. And then also, where are we with the AMC movement restrictions and what are we seeing there with your utilization on the related aircraft? Thanks.

Yeah, so I’ll talk on the AMC piece. Spencer, I don’t know if you have information on departures or whether that’s anything we’re in a position to provide at this point. But on the AMC, you’re right, and particularly in the early part of 2020, when COVID hit, the military put a stop-movement order in place, which affected certainly the passenger demand significantly and also had ripple effects on cargo demand. And that remained in place until mid to later part of 2020. That stop-movement order has since been lifted. But the demand on the passenger side has not yet fully recovered. But we expect that to get to more normalized levels as we move through the year, especially as the vaccine starts to the rollout and get more traction.

Okay. And anything on the departures?

The only thing I would say on departures is that, they’ve really been growing year-over-year-over-year. Our departures continue to grow. We, typically, while from an operational standpoint, we look at all of it. But I typically focus a bit more on the hours that we operate, or the charter flights that we operate. That’s how we build our customers.

Okay. I could just get one last one here, the 11 planes that Amazon purchased in January, I don’t think I’ve seen anyone pick up the CMI leases, are you bidding on those? Thanks.

We’re going to be competing for every aircraft that our customers have to offer. So you’re right, there’s nothing been reported, but we’re going to do everything we can to secure as much business as we can from Amazon, and all our customers.

Thanks for the time today.

Thank you, Chris.

Thanks, Chris.

Thank you. We do have a follow-up question from the line of Scott Group with Wolfe Research. Your line is now open.

Hey, guys, thanks for the follow-up. Just quickly, how should we think about excess rent refunds this year?

Sure, Scott. There is just a tiny amount left, small amount left, one last tranche of it in May of this year, and it should be about $4.5 million. And then that program should be completed.

Okay, very helpful. And then when you guys first started buying the -8 center almost a decade ago, you guys talked about pretty significant initial earnings accretion per plane per month with the maintenance holidays. Is there any reason to think that the math would be any different for the next 4 that you guys are taking?

Yeah, we provided that information back then, because the planes were late. And so we had included the earnings from those planes in our guidance, and then when the planes were laid from Boeing, we let everyone know that just that amount of earnings would not be happening in that period of time. But it was never meant to really be a sort of forecast going forward for those earnings. But clearly, in the early days of the aircraft, the early years of the aircraft, they don’t need maintenance, there are warranties and things like that, that are available on the aircraft, if there are any sort of maintenance issues, so they’re absolutely more profitable in the early years. And we’ll see what the overall market is like, this is a strong market, as John said, we hope to replace them with a great customer at a great rate. And we’ll just have to see how the profitability as we have pretty good expectations.

Yeah, the other thing I’d add to that, just from an operational standpoint, and this is true of aircrafts that are in production for a while. The longer the aircrafts are in production, generally speaking, the better the aircraft perform, meaning the likes of Boeing and GE get the kinks out over time. These aircrafts are likely to be somewhat lighter than some of the other -8s and the engines performing at their peak performance compared to the earlier deliveries. So we’re excited about that. And think that’s a great value proposition to our customers as well as they review the opportunity.

That makes sense. Thank you guys, again. I appreciate it.

Thank you.

Thank you.

Thank you. Our last question comes from a line of David Campbell with Thompson Davis. Your line is now open.

Yeah. Thanks for taking my question. I had to step off the phone for a while. So I may have missed something that I’m asking about. But as you know, January and February every year are distorted by the changes in the Chinese New Year. And this year, we have also the problem of the port congestion on the West Coast, which adds into your business in January and February, I guess. But, what about March, March is a seasonal peak, as you know? And I was wondering if you’ve seen any or had any discussions with your customers about demand in the month of March this year?

Yeah, I think that’s reflected in our first quarter guidance. A lot of the variables that we talked about which favored air freight in 2020 continued into 2021 Q1. Lunar New Year, for example, because of COVID and the desire of the Chinese government to limit travel, we saw a unique environment where factories, many of them stayed open during Lunar New Year, which was unprecedented. You also see the demand for international passenger air travel continuing to be down, which is a favorable environment. That’s not going to last forever. The passenger carriers I expect will have a tremendous appetite to get their aircraft back up in the air as quickly as possible. But then, then what, will people be willing to travel? So that remains to be seen. But I think March is a reflection of what we saw in January, February, adding to a couple of comments I just made.

All right, thanks. And my second question is related to Amazon. Amazon adding aircrafts all the time it seems. Correct me if I’m wrong. These are primarily aircrafts designed for domestic use in the United States I think. And if not, if they’re not using them for international cargo, is that because they need operating rights? And they don’t have operating rights, the bilateral rights under these countries?

Yeah, David, I can’t speak for Amazon. They’re going to do what they’re going to do with those airplanes. Generally speaking, the type of aircrafts they’re acquiring are more regional, not long-haul widebody international. But that’s their call where they’re going to deploy them. And I don’t think they’re public with that yet.

But they don’t have any restrictions internationally, by not having authority or bilateral…

I can’t speak to Amazon. I mean, they don’t operate their own air operating certificate this time, so that I do know. They would deploy those aircrafts to carriers, I suspect that would be able to operate them wherever they want to operate them. But they themselves as Amazon, today do not have their own air operating certificate, which by definition means they don’t have air route rights.

Right. Right. Okay. Thank you very much.

Thank you, David.

Thank you, David.

Thank you. This concludes today’s question-and-answer session. I would now like to turn the call back to Atlas Air for closing remarks.

Okay, thank you, operator. And thanks to all of you for your great questions. On behalf of all the employees, Spencer and I would like to thank you for your interest in Atlas Air Worldwide. We appreciate you sharing your time with us today and we hope you and your families remain safe and we look forward to speaking with you again soon. So thank you all so much. Thank you, operator.

Ladies and gentlemen, this concludes today’s conference call. Thank you for your participation. You may now disconnect.