Cargo and charter airline Air Transport Services Group (ATSG 0.68%) missed on quarterly earnings and announced its former CEO is returning to the cockpit. Investors are heading for the emergency exits, sending shares of Air Transport Services down 25% as of 10:30 a.m. ET.

An overhaul after an unexpected miss

Air Transport Services provides aircraft leasing and cargo services via a fleet of aircraft including the world's largest Boeing 767 freighter fleet. The company came close to hitting analyst expectations for revenue in the quarter, but profitability took a dive due to "macro and operational pressures."

Air Transport earned $0.32 per share in the quarter on revenue of $523 million compared to Wall Street expectations for $0.49 per share in earnings on sales of $528 million. The quarter started on track, according to management, but in September "our passenger airline operations experienced service-related issues that drove significant unplanned travel and flight crew costs."

The company also announced that Joe Hete, the current chairman of the board who served as CEO for 17 years, would return as chief executive. Hete succeeds Rich Corrado, who was named CEO in May 2020.

Down 25% in a single day, is ATSG a buy?

Air Transport has the reputation as being one of the better-run cargo and charter operators, but the CEO overhaul felt inevitable. The company's shares are down 46% from their highs for the year on investor concerns that Air Transport has been aggressively committing capital toward fleet expansion at a time when airfreight demand is softening.

That strategy appears to be shifting. The company trimmed its 2024 capital expenditure plan to $505 million, $100 million less than what it announced back in September, due to weaker demand for cargo aircraft. Air Transport also warned it will likely earn just $1.50 to $1.70 per share in 2023, significantly short of the consensus $1.90-per-share estimate.

Air Transport is a long-term survivor, but the CEO change and strategy shift suggests the company expects turbulence ahead. Investors who are considering buying in now should buckle up and expect a bumpy ride.