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Air Transport Services Group Inc (NASDAQ:ATSG)
Q3 2020 Earnings Call
Oct 30, 2020, 10:00 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Welcome to the Q3 2020 Air Transport Services Group Incorporated Earnings Conference Call. My name is Darryl and I will be your operator for today's call. [Operator Instructions]

I will now turn the call over to Joe Payne, Chief Legal Officer of ATSG. Mr. Payne, you may begin.

Joe Payne -- Chief Legal Officer

Good morning and welcome everyone to our Third Quarter 2020 Earnings Conference Call. We issued our earnings release yesterday after the market closed. It's on our website atsginc.com.

Let me begin by advising you that during the course of this call we will make projections and other forward-looking statements that involve risks and uncertainties, our actual results or other future events may differ materially from those we describe here. These forward-looking statements are based on information, plans and estimates as of the date of this call. Air Transport Services Group undertakes no obligation to update any forward-looking statements to reflect changes in underlying assumptions, factors, new information or other changes. These factors include but are not limited to the following, which relate to the current COVID-19 pandemic and related economic downturn.

The pandemic may continue for a longer period or its effect on commercial and military passenger flying maybe more substantial than we currently expect. It may also affect our workforce and staffing capability, our ability to access airports and maintenance facilities, our customers credit worthiness and the continuing ability of our vendors and third-party service providers to maintain customary service levels. Other factors could also impact the market demand for our assets and services. These include our operating airline's ability remain on-time service and control costs. The cost and timing with respect to which we are able to purchase and modify aircraft to a cargo configuration. Fluctuations in ATSG's traded share price and in interest rates, which may result in mark-to-market charges on certain financial instruments; the number, timing and scheduled routes of our aircraft deployments to customers; our ability to remain in compliance with key agreements with customers, lenders and government agencies; changes in general economic and/or industry specific conditions; and other factors as contained from time-to-time in our filings with the SEC, including the Form 10-Q, we expect to file next week.

We will also refer to non-GAAP financial measures from continuing operations; including adjusted earnings, adjusted earnings per share adjusted pre-tax earnings and adjusted EBITDA. Management believes these metrics are useful to investors in assessing ATSG's financial position and results. These non-GAAP measures are not meant to be a substitute for our GAAP financials and we advise you to refer to the reconciliations to GAAP measures, which are included in our earnings release and on our website.

And now I'll turn the call over to Rich Corrado, President and CEO for his opening comments.

Rich Corrado -- President and Chief Executive Officer

Thanks, Joe, and welcome everyone. I want to begin by acknowledging the dedication and sacrifices of our employees, who despite the operating challenges of the pandemic continued to deliver excellent service. Their focus is not only yielding financial rewards, but also appreciation from our customers. We talk a lot about safety year around, but with the pandemic, it's personal. Our employees are focused on and keeping themselves, their fellow employees and their loved ones safe, while continuing to deliver excellent service.

The press release we issued last night shows that during the third quarter ATSG continued to show solid improvement in results for both its reportable segments, compared to the prior year, while maintaining focus on customer service. Our revenues, adjusted earnings and adjusted EBITDA all increased at double-digit rates, compared with the same quarter last year, that includes the 10% revenue increase, a 48% increase in our adjusted earnings and a 15% increase in adjusted EBITDA. Quint Turner, our CFO will share all the numbers in a moment.

CAM, our aircraft leasing business is setting records for leasing Boeing 767-300 freighters to external customers. Six were added during the third quarter, leading to eight by the end of September. Four more are expected in the fourth quarter to round out the 12, we expect to deliver for the full-year. That pace will get even faster next year, when we will deliver at least 15 more 767-300s, including 11 to Amazon. We are also releasing three 767-200s demonstrating the strong demand for the smaller 767 variant.

The pandemic continues to affect our business and not only in the stress it places on our employees and their families. Our passenger operations especially our combi flying for the Department of Defense and our commercial passenger flying have taken a significant hit, along with our external aircraft maintenance business. But, in spite of those factors and is demonstrating the resiliency of our business model, we now expect our adjusted EBITDA for 2020 to be about $490 million, which is where we begin, when we first issued 2020 guidance in February.

Quint is ready to fill in the details of our consolidated and operating results. And I'll close with more comments on the fourth quarter and 2021 outlook. Quint?

Quint Turner -- Chief Financial Officer

Thanks, Rich, and thanks to all of you on the call for joining us this morning. As Rich said, our third quarter results were very good on both our top and adjusted bottom line and on a consolidated basis tracked very closely with our comparable second quarter results.

On a consolidated basis third quarter revenues rose 10%, compared to 2019 to $404 million. Once again, the increase came from more leased aircraft in service and more ACMI, CMI and charter operations overall versus a year ago.

On a GAAP basis, we had a third quarter loss from continuing operations of $6 million or $0.10 per share basic. The 13% increase in ATSGs share price during the quarter required us to record a non-cash loss for outstanding warrants issued to Amazon. The warrants and other financial instrument effects reduced third quarter GAAP income by $51 million or $0.76 per share. To-date, none of the warrants ATSG has issued to Amazon have been exercised.

We also recognized a net benefit of nearly $0.28 in GAAP earnings from the ACRES Act grants for Omni and ATI. As we indicated last time, we are excluding those contributions from our adjusted results.

Our adjusted EPS for the third quarter was $0.44 versus $0.31 a year ago. On the same basis, our adjusted EBITDA was $126 million versus $109 million a year ago. Our capital expenditures for the quarter were $128 million for a total of $394 million for the year through September, that's up 17% year-to-date versus last year and includes purchases of eight Boeing 767-300 passenger aircraft for freighter conversion plus ongoing mod costs. As Rich mentioned our 767 freighters remain a hot commodity and more customers are approaching us to lease them. To meet expanded demand, we are now expecting to spend $485 million on capex in 2020.

As we noted on our second quarter call, some of this year's spending is for next year's freighter delivers, many of which come early in 2021. In fact, we expect five of the 11 767-300 leased deliveries to Amazon to occur during next year's first quarter, when ATI will also begin CMI service. Even with the strong order book for our leased 767s next year, we still expect 2021 capex spend to come in lower than the $485 million we are forecasting for this year. But that is likely to be as low as we had previously anticipated. Right now, we expect capex next year to be approximately $425 million. That summarizes our consolidated financial results for the quarter.

On a segment basis, I'm pleased to tell you that results from our ACMI Services segment continued to improve year-over-year, as both our express package network flying for e-commerce customers, an adhoc assignments for the US government increased. Partially offsetting these increases were a reduction in flying due to removing three out of four of our 757 freighters from service earlier this year.

The overall segment improvement came despite significant reductions in the commercial passenger flying that Omni does in the 757 combi flying for the military performed by ATI. On a block hour basis commercial passenger operations were down 80%, while our 757 combi flying was off by 50% from a year ago owing to the pandemic.

The ACMI Services segment earned $19 million on a pre-tax basis in the third quarter, up from just $4 million a year ago. The earnings improvement stemmed primarily from the airlines ability to find ACMI and charter opportunities during the pandemic, increased e-commerce network flying, lower aircraft and engine maintenance expense, reduce travel cost for positioning flight crews and a reduction in the Amazon related ramp-up cost we were incurring a year ago. Allocated interest expense also declined.

CAM, our leasing business, had pre-tax earnings of $20 million, up $2.4 million from the prior year. Its externally leased fleet increased by 11 aircraft, and external revenues increased by 22%. Fleet growth increased CAM's depreciation and amortization expense and interest expense by about $2.5 million versus a year ago.

Revenues from our other businesses, grouped as other activities, were down from a year ago, and the businesses collectively yielded a small pre-tax loss for the quarter. External revenues increased slightly, mainly from more fuel sales as customer flight operations for Amazon from the Wilmington Air Park expanded and due to the timing of customer schedule for aircraft maintenance services. The pre-tax loss from those businesses for the period was largely due to a lower margin revenue mix growth plus higher corporate expenses.

Additionally, we incurred start-up costs at two postal facilities operated by our logistics group and had lower profitability, compared to last year at our MROs, which are working on our own aircraft more than on external customer aircraft as many customer aircraft have been parked due to the pandemic. We have recently seen demand from the commercial passenger airlines pick up at our MROs, however, and expect improved prospects for those businesses next year.

That's a summary of our financial and operating results for the quarter. I'll turn it back to Rich for some other comments on our operations and outlook.

Rich Corrado -- President and Chief Executive Officer

Thanks, Quint. As I said at the outset, the ATSG businesses are performing well during a very unusual year, yielding customer service bonuses in seven of the nine months of 2020 so far. As I'd like to remind everyone, a service business requires good people who have the tools to perform well. We are giving our people everything we can to help them work safely, and we're investing in technology so that they can work more productively.

We are very focused on continuous improvement processes, which includes new software and other systems that monitor more components of our aircraft in real-time, track, compare and predict their performance over time. We're also driving out cost from our parts and maintenance operations through procurement optimization efforts across our airline and MRO subsidiaries.

As Quint mentioned, demand for our 767 converted freighters is exceptionally strong. During the year, we will place a record number of newly converted freighters, but also release several others, some of which are going to international customers like MasAir in Mexico, Astral Aviation of Kenya and Raya Airways in Malaysia. We are currently finalizing customer orders for at least four more 767s in 2021, in addition to the 11 we're scheduled to deliver to Amazon. ATI will be flying at least five of the 11 additional Amazon aircraft next year.

We also have indications of interest from others for 767s next year and into 2022, with requests for 767 capacity extending as far out as 2024. We are responding as best we can, given feedstock availability, conversion slots and pricing that meets our rate of return requirements. That will mean more capex in the near-term than we had expected, but also the prospect of more committed cash flow from leasing that will extend beyond 2030.

Our ACMI Services business is generating good returns overall. It was another busy quarter for our express network flying, rebounding demand from the DOD for true rotation operations, but still we had no demand from Omni's commercial customers and reduced demand for ATI's 757 combi flying related to COVID. We do not expect that overall pattern to change until next year. One heartening sign is that one of our larger commercial passenger customers has announced plans to resume service in early 2021. As more travelers gain confidence, we expect charter demand to resume as fast, if not faster, than scheduled carrier demand.

The prototype Airbus A321 converted freighter we developed with our joint venture partner, Precision, recently completed its first test flight and is undergoing FAA testing now. We are still anticipating FAA approval before year-end. A number of owners of A321 aircraft have already approached us about conversion slots in 2021. Our own plans for converted A321 investments have been pushed into 2022 as we focus in the near-term on meeting 767 demand. We do expect that our PEMCO conversion subsidiary will begin to convert A321s by mid-2021.

Quint told you that our projected capex spend for 2020 is back up to $485 million this year. That includes three more feedstock 767s we are buying in the fourth quarter for 2021 deployment. We'll end 2020 having purchased 11 feedstock 767s with eight aircraft in or awaiting mod. We currently expect to purchase at least seven 767 feedstock aircraft next year and have already sourced the majority of them. We have access to ample conversion slots through 2022 to keep pace with continued exceptional capacity demand.

Our 2020 adjusted EBITDA is projected at $490 million this year based on current expectations about fourth quarter peak demand, maintenance expense and other factors. That's just about where we started when we issued preliminary 2020 guidance of $487 million to $492 million back in February. A combination of great service, charter opportunities and e-commerce demand and an on-schedule deployment of additional aircraft have offset significant reductions in our passenger operation caused by the pandemic. Keep in mind that the fourth quarter is Omni's slowest season for its DOD operations and that neither its commercial charters nor ATI's combi operation are expected to improve until next year.

While we will stick to our tradition of issuing full year guidance in February, I'm very optimistic about what I see ahead. By then, we anticipate having a clearer view of any continuing pandemic effects and perhaps even more orders for our 767 freighters. Until then, we will work hard to finish the year strong and look forward to generating more cash flow to allocate toward value-enhancing alternatives.

That concludes our prepared remarks. Quint and I, along with Mike Berger, our Chief Commercial Officer, are ready to answer your questions. May we please have the first question, operator?

Questions and Answers:

Operator

Thank you. The first question comes from Jack Atkins from Stephens.

Jack Atkins -- Stephens -- Analyst

Great. Good morning and thanks for taking my questions, guys, great quarter.

Rich Corrado -- President and Chief Executive Officer

Thanks, Jack.

Quint Turner -- Chief Financial Officer

Thank you, Jack.

Jack Atkins -- Stephens -- Analyst

So there are a lot of different places I'd like to go. But maybe, Rich, if I could start with the outlook into 2021. I think if we go back to the last report, you guys were -- quarterly report, you guys were talking about confidence in the ability to grow your business from a profitability perspective in 2021 and 2022, just given the outlook that you see for the demand for your assets. And here we are three months later, it feels like that demand is just increasing. But obviously, there's some uncertainties out there about the pandemic as we move forward.

How would you -- I know you're not providing 2021 guidance, but how would you characterize your confidence in that statement from three months ago? You still -- do you feel more confident in your ability to grow and perhaps maybe grow greater than you initially expected for 2021? Just can you kind of help us frame that up?

Rich Corrado -- President and Chief Executive Officer

Yeah, Jack, good question. We're even more bullish on 2021 growth and even 2022 than we were last quarter. We've had customers come to us with kind of longer-term profiles out into 2023 and 2024 potentially of what they're looking at. The interesting thing about this is a lot of this demand has spurred from -- there is some from the pandemic and from the increase in the e-commerce business. So -- but the customers are looking for long-term assets, looking for leased airplanes, which is great. So yeah, it's stronger. We have visibility right now via the 11 for Amazon, we have four others that we're finalizing an agreement on. So that's 15. We believe we may have the ability to deliver more than that, depending on feedstock availability. We've got slots into 2022. So we're pretty confident in terms of our ability to deliver and -- but it's definitely stronger than it was last quarter.

Jack Atkins -- Stephens -- Analyst

Okay. That's great to hear. Maybe this one's for Quint. But when we think about the guidance for this year, the EBITDA guidance, $400 million in EBITDA, it's sort of about where, to your point, where we thought we would be when we started the year. And obviously, a lot of things are different. I know that the pandemic has weighed on your results, particularly within Omni and some other parts of the business like MRO. Quint, is there a way to kind of think about the net impact that the pandemic has had on your profitability this year? I think it just would be helpful to think about what could be once things return to normal.

Quint Turner -- Chief Financial Officer

Yeah. It's a great question, Jack. And it gets a little complicated because some of the mitigating opportunities we've had, the charter trips, really were also related to the pandemic. For example, retrieving -- repatriating folks, we talked about that in prior quarters, right, that Omni did. But I think one kind of yardstick, if you think about, again, fourth quarter, this is a little -- I guess, this comment is a little forward-looking, but fourth quarter, a year ago, Omni did commercial passengers flying, probably the revenue was around $20 million, maybe just a little shy of that in the fourth quarter. And this year, we're not anticipating any of those opportunities in the fourth quarter. They were doing some flying for Air Canada at that time. They had their longtime customer, Vacations Hawaii, who was operating.

So we've seen that impact on commercial passenger flying, sort of a regularly scheduled-type flying that we would expect to do since the pandemic began, but we've mitigated it. We've been resourceful. And on the cargo side, the business has really performed very well. Rich spoke to that. I don't know that we've seen demand on the cargo side like we're currently seeing. So it certainly cost us, I think, the $490 million that we originally guided to. But for the pandemic, we feel like we could have bettered that. We -- as we've said, we do -- on the plus side, we expect those opportunities on commercial passenger flying to come back early next year. Although, as we all know, the evolution of the pandemic effects are difficult to predict, but we are getting some positive feedback from some customers that they're going to restart. So I don't know if that gives you an idea.

Rich Corrado -- President and Chief Executive Officer

I think the other thing, Jack, real quick, is that the MRO segment was impacted significantly as well as our passenger customers in the MRO segment stopped the work going into the rest of the year. The MRO has been able to rebound. We put a lot of our own assets in there to cover the slots, keep the employees working. And now what we're seeing is the passenger -- customers are coming back. We've started up a 767 line here for United in Wilmington and then some A320 lines down in Tampa. So that's good. And our hangar outlook for next year is looking much better than how we adapted this year. So there are some things that are kind of precursors, hopefully, to what we'll see on the passenger side going into 2021.

Quint Turner -- Chief Financial Officer

Yes. And lastly, Jack, and I should have mentioned it, but our combi flying, we talked about it in our release and in the remarks -- script remarks. But the combi flying has also been negatively impacted, those 757s that ATI operates. And it's really not because the military doesn't want us to fly. It's because some of the destinations they're flying into impose restrictions on our ability to fly. So we've had -- and expect to continue to have those impacts, at least through the balance of the year.

Jack Atkins -- Stephens -- Analyst

Okay. Is that -- I'm sorry, Rich. Go ahead.

Mike Berger -- Chief Commercial Officer

No, Jack. It was Mike. I just wanted to maybe just tag on to -- a little bit to your first question to Rich about the marketplace. A big driver as well why we're so bullish on the go-forward into 2021 and beyond, internationally, the flights have just not come back. The belly freight remains dramatically down, well over 30%. The virus -- with the uptick in the virus specifically as we see now across Europe, we're going to see a continuation of the lack of belly capacity, which is crucial, right? So that's just really fueling the market in terms of freighter demand. So you're going to continue to see that on a go-forward basis for some time.

Jack Atkins -- Stephens -- Analyst

Okay. That's great. Maybe one -- if I could sneak one more quick one in. Just could you give us an update, if there is one, on what's going on with the labor negotiations at ABX? Any progress there worth reporting?

Rich Corrado -- President and Chief Executive Officer

Yes. So the parties have been continuing to work on the process, they took a little break. They scheduled to get back together next week. We've made significant progress on several of the items and we've got it down to a few. So we're optimistic that we'll get that over the goal line. By the end of year is a little aggressive because of the process that you need to go through, but we believe that due to the progress that's been made recently, that we'll get the ball over the goal line. The other side of it is, obviously we have been negotiating so that we get a market competitive contract for the pilots to be able to attract crew members into the airline, but also so that we can price and sell ABX services in the market. And based on where we're at today, we believe we're going to accomplish that goal so that when the contract comes in, it's going to be good for the employees and it's going to be good for the growth of the company.

Jack Atkins -- Stephens -- Analyst

Okay, that's great to hear. Thanks again for the time guys.

Quint Turner -- Chief Financial Officer

Thanks, Jack.

Rich Corrado -- President and Chief Executive Officer

Thanks, Jack.

Operator

Thank you. The next question comes from David Ross from Stifel.

David Ross -- Stifel -- Analyst

Yes, good morning gentlemen.

Rich Corrado -- President and Chief Executive Officer

Good morning, Dave.

Quint Turner -- Chief Financial Officer

Good morning.

David Ross -- Stifel -- Analyst

Rich, maybe talk about the international opportunity. You mentioned Mexico, Africa, Malaysia starting up with operations, very small. But if you think about over the next five to 10 years, is there more opportunity in the U.S. or outside of the U.S.?

Rich Corrado -- President and Chief Executive Officer

Both, actually. I mean keep in mind that these are -- the Kenya, Mexico and Malaysia are lease opportunities. So we're leasing the airplane there, and it's going to be operated by another operator. But what we're seeing is an increase in interest for the 767 freighter in other parts of the world. Now it's still kind of a network-based airplane, and a lot of these folks that we're leasing to are actually flying for the large integrators. So they're vendors -- not vendors, but they're airlines that are contracted for work with folks like DHL. So -- and that's who we look to market to in areas, in geographies around the world where the aircraft will prevail. And so what we're seeing is more interest in that.

The interesting thing is those were 767-200 deployments, so it's the smaller variant of the 767, which kind of makes sense given where they're going and how they're flying. And we know we've had discussions with two of those new customers that they will also be looking at the 767-300 in the future.

Now as far as the U.S. goes, I mean, obviously, we've got two large customers here related to 767 deployments in Amazon and DHL. And a lot of their strong growth, as you've seen in their numbers, is related to the e-commerce growth. There was a study put out in August by IBM retail index, and they noted that due to the pandemic, their estimate is that e-commerce growth has been pulled five years forward, which explains the volumes that everybody is seeing. And if you also noticed, most of the integrators are producing or projecting, I should say, extremely large peak.

But all that said, we anticipate that they will continue to grow into the future and they'll continue to need aircraft, which is a good thing for ATSG going forward.

David Ross -- Stifel -- Analyst

And then how does M&A fit into the growth plans, whether it's ACMI-related, buying other smaller operators or MRO or any other adjacencies that you might find interesting?

Rich Corrado -- President and Chief Executive Officer

Yeah. So kind of our MRO strategy has been to really look for adjacencies that make sense with our business model, opportunities to diversify revenue and profit going forward. And so we -- the ones we've made in the past that you've seen fit into that pocket, and we'll continue to look for those and which includes airlines, which includes logistics companies, MROs and other companies -- other service companies that may produce value for our customers.

Having spent a lot of time in marketing and sales throughout my career, there's -- one of the things that's easier is to sell a new service to an existing customer rather than trying to drum up new customers. So wherever we can add value to our customers, we're looking to look for that.

David Ross -- Stifel -- Analyst

Excellent, thank you.

Rich Corrado -- President and Chief Executive Officer

Thanks, Dave.

Operator

Thank you. Our next question comes from Helane Becker from Cowen.

Helane Becker -- Cowen and Company -- Analyst

Thank you very much, operator. Hi, everybody and thanks for your time. Rich, congratulations on Cincinnati 300. I think that was another accolade in addition to one you received earlier in the year from another publication. So well done. So a couple of...

Rich Corrado -- President and Chief Executive Officer

Thanks, Helane.

Helane Becker -- Cowen and Company -- Analyst

Of course. So a couple of questions. Earlier this week, you talked about Walmart and the fact that anything you were talking to about them is not coming to fruition. But are there other companies -- maybe Walmart -- never made sense for them because they've such a big footprint, right, around the country. But are there other companies similar to that, that would make sense for your services?

Rich Corrado -- President and Chief Executive Officer

So yeah, interesting comment on Walmart. It was -- I had made in the Cargo Facts fireside chat in their conference this week, and it was taken a little bit out of context in some -- what they wrote about it. But that being as it may, it's a very good question. If you look around the world, there aren't too many companies that are as captive and large as Amazon when it comes to their ability to have the scale sufficient enough to warrant the network that they're growing.

Walmart, if you just look at what they do, they've taken a different strategy. They have such a strong retail footprint that they've linked their supply chains with their e-com and their store footprint to produce buy online, pick up at store opportunities as much as just regular e-commerce.

Probably the biggest population where you would find some significant size would be in China, the Alibaba network. Alibaba has a network, a separate logistic network called Cainiao that's made up of a number of different logistics providers, but it isn't Alibaba with their own fleet. So that there's -- we continue to believe there will be significant opportunities for regional-type freighters in China and around Southeast Asia.

There have been some large retailers that have shown interest in putting up captive aircraft but nowhere near what Amazon is doing, more in the two to four airplanes to make sure that they have their lift captive. But I definitely -- I don't see any large opportunities that would produce the type of network that we're seeing out of the Amazon Air group.

Helane Becker -- Cowen and Company -- Analyst

Gotcha. That's very helpful. And then the other question, with feedstock, it's kind of a mixed bag out there, I guess, right? Some airlines like Delta and American announced they're retiring 767s. And I know you were able to capture a lot of the American 767s. But others like United haven't really indicated that they're willing to part with those aircraft. So a long way to get to the question, which is, are you having difficulty sourcing aircraft to meet up with -- to keep up with your demand?

Rich Corrado -- President and Chief Executive Officer

Today, we haven't. But as you know, we strongly prefer to buy fleet segments from airlines. We had the 20-aircraft buy from American. We had purchased eight from them prior to that. We bought 23 from ANA. We bought another five from ANA over the past year. So we prefer that, because, obviously, we think about -- even though we're a leasing company first, we think about acquiring feedstock as an operator. So if you can keep your pedigree the same, it obviously leads to lower costs going forward..

That said, we, right now, have all the two slots filled for our 2021 need. We've been able to secure that feedstock. So we're looking for two more aircraft for 2021 and then going forward for 2020. So we're paying particular attention, but we don't see any fleets on the market right now. I know Delta made the announcement. We -- we talk to Delta all the time because they're a large vendor for us, a large engine vendor. But we're always in the market. We don't come in and out. We're always looking at what those airlines are doing. We know where the large fleets are. We know where all the pieces parts are as well.

In the 1991 to 1999 segment, there's probably about a little less than 200 aircraft -- feedstock aircraft that are available in that segment. And then there's probably about 150 aircraft that are younger. So there's plenty. If you look at that, you're looking at close to 350 aircraft. Now that's a split of GE engine and Pratts. Most of our owned aircraft are GE, but we do own three Pratts. They perform the mission fine. It's just that when you have a second fleet type, a second engine type, you have to spare that separately. And so it's usually better.

But we don't think feedstock is a limiting factor right now. And we also have -- and we're looking forward to, hopefully, the prices coming down. We haven't seen that yet either. And slot-wise, we're in great shape as well.

Helane Becker -- Cowen and Company -- Analyst

Great. And then my last question is on pilots. Given what's going on, on the passenger side, I'm assuming you're not going to have any issues finding pilots over the next year or so. Is the -- how do I group that you see -- I mean, you have two groups, I would think. One are the younger pilots that are going to be furloughed. And the question there is, is there a risk that, when passenger business comes back, they go back to their passenger airline?

And then the other is on the other side, the passenger airlines are encouraging older pilots to retire early, but even as young as 58 or 57. And I know they have to retire at 65, but does it make sense to hire some of those pilots, as well even though you may not have them as long?

Rich Corrado -- President and Chief Executive Officer

Yes. So we -- the interesting part is we have not. There was a lot of talk about pilot shortage and pilot retirements over the last couple of years. And we've had some very strong growth at ATI and growth at Omni. And we have had no problem getting very qualified pilots to apply for those opportunities. Pilots like to get into a growing airline, because that helps them move their career faster to try to get from the first officer seat to the captain seat. And we were getting -- our average hours of experience was over 6,000. So we were getting already experienced pilots. Now with the pandemic, there was a thought that there'd be more resumes, but we already -- we can't tell one pilot from the other, I guess, is the point. But we've got no limitation in terms of the pilots. And our pilots for all of our airlines, there's a group that's getting close to retirement as well. So we're managing that as well as the new pilots coming in.

The other thing we've made some great progress on is the maintenance technicians. And we believe the pandemic has an impact on providing more labor in that sense. We had done some things with the compensation program and done some things to attract labor, and we're having a lot of good progress not only with attracting new folks, but the retention has obviously improved, too. And you could look at that in terms of -- that they would be concerned to go anywhere and so the pandemic has had somewhat of an effect there as well.

Helane Becker -- Cowen and Company -- Analyst

That's very helpful. Well, thanks for all this detailed answers. I really appreciate it.

Rich Corrado -- President and Chief Executive Officer

Thanks, Helane.

Operator

Thank you. The next question comes from Stephanie Benjamin from Truist.

Stephanie Benjamin -- Truist Securities -- Analyst

Hi, good morning.

Rich Corrado -- President and Chief Executive Officer

Good morning, Stephanie.

Quint Turner -- Chief Financial Officer

Good morning, Stephanie.

Stephanie Benjamin -- Truist Securities -- Analyst

My first question, I'm just looking at how many freighters are coming to their end of their leases in either 2021 and 2022 that would need to be redeployed? Thanks.

Mike Berger -- Chief Commercial Officer

Yes. We'll have zero in 2021. Stephanie, it's Mike, and we have four that are coming due in 2022. But at this point, there's a high expectation that we would anticipate to extend those.

Stephanie Benjamin -- Truist Securities -- Analyst

Got it. Thank you. And then I wanted to circle back a little bit on just any commentary you want to provide on feedstock conversion capacity. Obviously, the market is getting pretty busy on the freighter side, particularly in this environment. So how do you view 2022 and beyond from a available capacity standpoint? I believe you said you are pretty much locked in through 2021, but would love to hear where you stand or where you think you stand beyond 2021? Thanks.

Rich Corrado -- President and Chief Executive Officer

Yes. I think with the increase in demand, you may have read that IAI was increasing their capacity in Mexico on both the 737 and 767 side. And I think Boeing is looking to potentially put up another line of capacity. That really hasn't impacted us, because we've been with IAI so long and we've been their anchor customer for so long. We've had four lines of conversion ongoing for a couple of years now, and we anticipate maintaining those four lines well into 2022. We've got all those slots for 2021 already under agreement. We have slots in 2022 under agreement as well. So irregardless of what's going on in the rest of the industry, given the fact that this is our core business, this is what we do and the demand is strong, we try not to get over our skies. And we feel we're in great shape as far as slots go.

Stephanie Benjamin -- Truist Securities -- Analyst

Got it. Thank you so much for the color.

Rich Corrado -- President and Chief Executive Officer

You're welcome.

Operator

And our next question comes from Chris Stathoulopoulos from Susquehanna.

Christopher Stathoulopoulos -- Susquehanna International Group -- Analyst

Good morning.

Rich Corrado -- President and Chief Executive Officer

Hey, Chris.

Quint Turner -- Chief Financial Officer

Good morning, Chris.

Christopher Stathoulopoulos -- Susquehanna International Group -- Analyst

So Rich or Quint, right now, we are in a -- obviously very unique time for aviation in general and certainly on the freighter side. In the past, you've said that you can do high single-digit EBITDA growth, I think, in a steady state is how you described it. And right now, if we just -- if we kind of look at what's happening here in terms of the supply demand dynamic, it looks like the passenger airlines for the reasons we all know, are not going to layer or add back on their pre-COVID capacity or ASMs for one or two years. We have the vaccine here, which looks like this is going to be a multi-year event. What looks like also ample feedstock in the 767s with Delta and others retiring that aircraft.

And of course, you're attached to Amazon. So if we assume that there's a vaccine in the first half of next year, why can't we see higher than this -- or why can't we, let's say, do a mid-teens type EBITDA growth or a few points above what you've said in the past as a high single-digit steady-state growth trajectory?

Quint Turner -- Chief Financial Officer

Well, Chris, this is Quint. Of course, our base is growing nicely with the $490 million that we're guiding to this year. So it becomes a larger base. But certainly, to your point, we're in an unprecedented, at least we believe, demand environment right now for our mid-sized freighters. We said in the release, and Mike can buttress this, but 15-plus aircraft deliveries next year. And of course, they are more evenly distributed throughout the year. You may recall that in the past few years, with a lot of those deliveries going to Amazon, they wanted them later in the year. This year it's a -- it's more of an even distribution, which will help our EBITDA growth. But the big bogey is the -- is how quickly some of those commercial passenger flying opportunities that have adversely impacted Omni come back.

And when you say a vaccine mid-year, well, does that mean those trips resume mid-year? Or do they resume early in the year? Those are some of the things that can impact us. At the same time, we keep growing our cargo CMI business with Amazon primarily as well. Right now, we expect to be operating over 40 aircraft for Amazon next year in the CMI. So that is a good fact. We -- if the passenger airlines recover, that will help our MROs, certainly. But how fast will that occur, that's a bogey. But it may be possible to get to double-digit. I think, when you talk about mid-teens, that's -- that would be -- things have to fall right to get that kind of a growth rate.

Rich Corrado -- President and Chief Executive Officer

Yes. And we're going to deliver -- just to Quint's point, we're going to deliver five airplanes by the end of Q1 in 2021.

Christopher Stathoulopoulos -- Susquehanna International Group -- Analyst

Okay. Are there any plans right now to participate in the distribution of the vaccine?

Rich Corrado -- President and Chief Executive Officer

We don't have any direct plans through what we're doing as it relates to communication. We are -- some of our airlines are talking with government agencies, but there's nothing fixed right now. Also through the flying that we do for our partners, they may be tapped to distribute the virus. So we would fly for them going forward. So there's definitely some conversations going on, but nothing fixed in terms of what our role would be. Obviously, a lot of our assets and resources are committed to the customers already. And so the ability to free up lift in those -- in that respect is -- we're looking to do the best we can.

Christopher Stathoulopoulos -- Susquehanna International Group -- Analyst

Okay. And then, Quint. Just remind us what's your mix of freight versus pure passenger in terms of revenue or EBITDA?

Quint Turner -- Chief Financial Officer

Well, we don't really break it that way. We put Omni in our ACMI Services segment with our cargo carriers. And we -- so we don't -- because those carriers tend to have -- their customer base is somewhat concentrated, we don't typically talk about the individual airline contributions, Chris. But certainly, the CAM segment is responsible for the majority of the EBITDA. And the ACMI Services segment, which is an asset-intensive, so what they contribute is nice on a return on asset basis, but it's a smaller portion of our EBITDA.

Christopher Stathoulopoulos -- Susquehanna International Group -- Analyst

Okay, thanks for the time.

Quint Turner -- Chief Financial Officer

Sure.

Rich Corrado -- President and Chief Executive Officer

Thank you.

Operator

Thank you. The next question comes from Steve O'Hara from Sidoti.

Steve O'Hara -- Sidoti -- Analyst

Hi, good morning. Thanks for taking the question.

Rich Corrado -- President and Chief Executive Officer

Hey, Steve.

Quint Turner -- Chief Financial Officer

Good morning, Steve.

Steve O'Hara -- Sidoti -- Analyst

Hi, just kind of curious, I mean it seemed like things came in better than expected in the third quarter. And can you just kind of remind me what the expectation was in terms of what you're expecting to either slowdown from 2Q? I thought it was about kind of repatriation, things like that and then maybe fewer charter opportunities. But it seemed like you had -- I think it was better flying for other customers and things like that. And I guess I'm just wondering why that wouldn't continue into 4Q given kind of cargo demand and where it is and things like that.

Quint Turner -- Chief Financial Officer

Yeah, I mean some of the factors that helped Q3 was the DOD flying volume was a bit stronger than we had forecasted. We had some better results in terms of some of the expenses. We mentioned in the remarks some lower engine and maintenance costs, which helped us in the third quarter. And the leases that we put in place -- and we put a record number, CAM did, of aircraft into service for external lessees during the third quarter. I think we may have mentioned that in our earnings release. But the contributions from getting those in place a little earlier than we had budgeted also was a factor in better performance during the third quarter.

Steve O'Hara -- Sidoti -- Analyst

Okay, all right. All right, that's helpful. And then just maybe going to the share count. Was the -- what drove that? Was it the -- kind of the readjusting for the makeup in terms of getting them to 19.9%? Is that what kind of drove that increase? Or was it a time thing given the, I guess, they're vested and expire within a year if not executed?

Quint Turner -- Chief Financial Officer

Yeah. The biggest driver in that, Steve, when you're talking about the adjusted share count that we use or adjusted EPS, is the increase in ATSG's traded stock price during the quarter. And it relates to the warrants that Amazon holds. We essentially apply the treasury stock method in calculating an adjusted share count. And so when you do that, part of that calculation is factoring in how many shares you could reacquire at the traded stock price. I think the price at the end of the quarter was a bit over $25 versus -- I'm going from memory here, but something like $22 at the beginning of the quarter. And so when you apply that, at $25, the proceeds from warrant exercise would allow you to reacquire fewer shares at that price than they would at $22.

So you can see that we added about 13 million shares when applying the treasury stock method this quarter. And I think in the previous quarter, it was about 9 million. And I'm glad you asked the question because as the analysts think about earnings per share going forward, they need to factor in that into their calculation of EPS for the coming quarter. Because, obviously, you're spreading your earnings over a greater number of shares, it's going to have -- it's going to push your EPS down a bit.

Steve O'Hara -- Sidoti -- Analyst

Right. Okay. And then maybe just going to the current expectation for 2020, and I mean it seems like it's kind of on par with what you guys were initially expecting and you had good things and bad things kind of to get there. You're adding aircraft next year -- I guess, a record number of aircraft next year. Does -- is $490 million kind of a right base to think about adding those aircraft on? Or do some of the positives maybe that happened in 2Q and 3Q subtract from that a bit in terms of what comes back? And obviously, it's a little early to tell, I'm sure, but what's the best way to think about that?

Quint Turner -- Chief Financial Officer

Steve, I think if you -- as we -- I think -- I don't know if it was Jack or who asked the question. But so many factors, of course, have affected 2020. And it's ironic that we're winding up about where we thought we were going to be at the end of February when we gave our initial guidance. But certainly, the pathway we've taken to get there has been anything but what we would have predicted.

That said, we're still in a pandemic, and we're still having impacts on our commercial passenger flying. But based on everything we know now, I would say that using $490 million as a sort of a jumping off point and then factoring in the 15-plus leases that are anticipated next year of additional aircraft is not a bad place to begin in terms of your thinking about what the business might produce in 2021.

Certainly, the balance sheet is in a fantastic position. We're back below 3 times levered, which was also, I believe, what we had planned for when we gave you the initial guidance. So certainly, the company is in a strong position heading into next year. And the visibility we have on growth is really, I think, nothing we've seen. It's the best we've seen.

Steve O'Hara -- Sidoti -- Analyst

Yeah. Okay, all right, thank you very much.

Operator

Thank you. We have a follow-up question from Chris Stathoulopoulos from Susquehanna.

Christopher Stathoulopoulos -- Susquehanna International Group -- Analyst

Hey, thanks for taking my follow-up. So two here. Quint, any credit concerns or perhaps maybe the percent of your book that might be toward the lower end of the credit spectrum?

Quint Turner -- Chief Financial Officer

Rich just handed me a dollar bill. I'm glad he paid me back. I was going to single you out, Rich. But no, Chris, it's a good question. And certainly, at the initial part of the pandemic, there were pieces of our receivables that we had some commercial carriers, right, customers for the MROs. But we have worked with them, and they have -- we are in, I think, very good shape currently in terms of our lease customers.

Of course, we concentrate on cargo leasing. And as you know, cargo leasing has been so much more fortunate than passenger lessors. And our customers for cargo leases, by and large, are doing very well. And so I would say our receivables are in excellent shape. We really don't -- unless there's something in services I'm not aware of, we really don't have any kind of significant concerns about collection.

Rich Corrado -- President and Chief Executive Officer

I think, Chris, just to add, as we look to growth and specifically global growth, we've done a lot of due diligence in regards to who we're partnering with to ensure the sustainability of these customers on a go-forward basis. And as you've heard many times and you heard again today, we're very comfortable understanding and knowing what their business models are, who their customers are. In a lot of cases, the customers that we've had for years here, specifically on the big integrators, these folks are doing work for them and are also large customers for them, even though they're smaller airlines as we grow and progress. But as Quint mentioned, our receivables are in great shape, and it's -- that's not by accident. We're really choosing to make sure that we're partnering with the right folks around the world.

Christopher Stathoulopoulos -- Susquehanna International Group -- Analyst

Okay, thank you. And then two on the balance sheet. So your balance sheet, as you said before, is in relatively good shape. Is there an opportunity here to grow your presence in the commercial charter market on the cargo side? And then two, I guess, for Quint, just what does your maturity schedule look like for 2021? And then just remind us what your revolver capacity is now. Thanks.

Quint Turner -- Chief Financial Officer

Yes. I guess I can do the second one first, Rich?

Rich Corrado -- President and Chief Executive Officer

Yes, you go ahead.

Quint Turner -- Chief Financial Officer

But the -- yes, in terms of the revolver, we have currently a $600 million revolver. There's probably roughly about $400 million or so that we have room under that revolver currently. And debt maturities, of course, they're in our 10-Q, which we'll have out next -- probably next Wednesday, Chris. And I don't have -- I'm not exactly on that pace, but I encourage you to take a look there. It's the -- it's probably about -- hang on here, let me take a quick look. The current portion of our debt is about $14 million. So that's probably what we're looking at for next year.

Christopher Stathoulopoulos -- Susquehanna International Group -- Analyst

Okay. And then on whether it makes sense to grow your presence in the charter market for commercial cargo.

Rich Corrado -- President and Chief Executive Officer

Yes, Chris, we think about it a little bit differently on the charter market and cargo. Our first look is to lease the aircraft, and that's what we invest our dollars to do. The charter market tends to be up and down. And when you're buying a 20-year asset, for us, it's much better to look in the leasing side of the business. So we don't allocate aircraft to our airlines to simply do commercial charters on the cargo side. Omni has a fairly robust charter capability, and it's one of the reasons that they have been successful in capturing additional business, because of their experience and knowledge of -- particularly on the government side and their folks that run the charter group there. But on the cargo side, it's -- we're just not allocating assets to it, because the demand for the assets is significant on the leasing side. And that, we believe, is a better return on that investment.

Christopher Stathoulopoulos -- Susquehanna International Group -- Analyst

Okay, thanks for the time.

Rich Corrado -- President and Chief Executive Officer

Thank you.

Operator

We have no further questions at this time. Mr. Corrado, please begin your closing remarks.

Rich Corrado -- President and Chief Executive Officer

Thank you, Nana. I would like to again thank our employees for their vigilance against the Coronavirus, their tenacity in meeting challenges and their commitment to maintaining great customer service as we enter the peak holiday season and winter months. Our business model continues to deliver good results during the most challenging environment. At the same time, we're getting commitments for more 767 leases that will produce great cash flow for the long-term. That's the definition of resilience, good results during tough times and commitments from great customers that extend for a decade or more.

We all hope this pandemic will end soon. But no matter how long it lasts, I'm confident that we'll generate strong returns for years to come. Stay safe, and thank you for your interest in ATSG.

Operator

[Operator Closing Remarks]

Duration: 61 minutes

Call participants:

Joe Payne -- Chief Legal Officer

Rich Corrado -- President and Chief Executive Officer

Quint Turner -- Chief Financial Officer

Mike Berger -- Chief Commercial Officer

Jack Atkins -- Stephens -- Analyst

David Ross -- Stifel -- Analyst

Helane Becker -- Cowen and Company -- Analyst

Stephanie Benjamin -- Truist Securities -- Analyst

Christopher Stathoulopoulos -- Susquehanna International Group -- Analyst

Steve O'Hara -- Sidoti -- Analyst

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