Air Transport Services Group, a diversified provider of cargo aircraft and transportation services, has fired CEO Rich Corrado and replaced him with Joe Hete, the current chairman of the board who previously ran the company for 17 years.
The announcement late Monday afternoon coincided with the company’s publication of third-quarter earnings after the market closed. ATSG’s (NASDQ: ATSG) revenues increased 1% to $523 million, about $15 million below analysts’ expectations, with earnings per share of 32 cents, 17 cents below consensus and almost half as much as in 2022.
Adjusted earnings before accounting measures of $137 million were 16% lower than the prior-year period, with operating profit of $24 million falling by 63% year over year.
“Macro and operational pressures throughout the latter part of the quarter materially affected our results. Particularly in September, our passenger airline operations experienced service related issues that drove significant unplanned travel and flight crew costs. In our CAM leasing operations, we realized lower revenues from 767-200 aircraft sales and associated engine power than forecasted during the quarter,” Hete said in a statement.
Hete, who will continue as chairman, served as CEO of ATSG from 2003 to 2020. He previously held various senior management roles at ABX Air Inc., the predecessor to ATSG that had its roots in the former Airborne Express.
ATSG’s two cargo airlines, ABX Air and Air Transport International, are contract carriers for Amazon air and DHL Express. They also provide charter service on as needed basis for a multitude of customers. Subsidiary Omni Air provides passenger charter service for the U.S. military, airlines and others.
“After careful consideration by the board, we determined that Joe is the right leader to accelerate our strategy and capitalize on the long-term opportunities ahead. … Joe has extensive knowledge of our business and its competitive position within the industry. He is uniquely qualified to step into this role to optimize our current performance and position ATSG for the future,” said Randy Rademacher, lead independent director, in a news release.
“Under Joe’s leadership, we believe the company will be well-positioned to continue building on its strong foundation, solidifying its market-leading position, and working to deliver meaningful value for our shareholders.”
The leadership change comes one month after Tim Strauss left as CEO of Amerijet. He also was terminated without notice, according to sources with close ties to the cargo airline.
Investors have punished ATSG’s stock this year because of worries the company is committing too much capital toward fleet expansion when airfreight demand has plummeted for more than a year. In August, management scaled back projected spending for used passenger aircraft and freighter conversion work by $65 million in 2023 to improve cash flow. Executives insist that express carriers and other operators around the world continue to need converted freighters to replenish aging fleets and for growth, especially as e-commerce continues to place a premium on fast delivery. They argue that lease revenue from those planes will begin to make a material impact on the bottom line in the next couple of years.
ATSG’s stock finished the day 1.8% lower at $20.25 per share, down from $22.97 on Aug. 4. and $29.05 a year ago.
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