Air Transport Services Group, Inc. (ATSG) Q4 2022 Earnings Call Transcript

Air Transport Services Group, Inc. (NASDAQ:ATSG) Q4 2022 Results Conference Call February 24, 2023 10:00 AM ET

Company Participants

Joe Payne - Chief Legal Officer

Rich Corrado - President & CEO

Quint Turner - CFO

Mike Berger - Chief Commercial Officer

Conference Call Participants

Grant Smith - Stephens Inc

Helen Becker - Cowen

Michael Ciarmoli - Truist

Frank Galanti - Stifel

Howard Rosencrans - Value Advisory

Operator

Good day, and convey you for opinionated by. Welcome to nan Air Transport Services Group Fourth Quarter 2022 Earnings Conference Call. At this time, each participants are successful a listen-only mode. After nan speakers position location will beryllium a mobility and reply session. [Operator Instructions] Please beryllium advised today's convention is being recorded.

I would now for illustration to manus nan convention complete to your speaker today, Joe Payne, Chief Legal Officer. Please spell ahead.

Joe Payne

Good morning, and invited to our 4th fourth 2022 net convention call. We issued our net merchandise yesterday aft nan marketplace closed. It's connected our website, atsginc.com.

Let maine statesman by advising you that during nan people of this call, we will make projections and different forward-looking statements that impact risks and uncertainties. Our existent results and different early events whitethorn disagree materially from those we picture here. These forward-looking statements are based connected information, plans and estimates arsenic of nan day of this call. Air Transport Services Group undertakes nary responsibility to update immoderate forward-looking statements to bespeak changes successful underlying assumptions, factors, caller accusation aliases different changes.

These factors include, but are not constricted to, unplanned changes successful nan marketplace request for our assets and services, our operating airline's expertise to support on-time work and power costs; nan costs and timing pinch respect to which we are capable to acquisition and modify craft to a cargo configuration; fluctuations successful ATSG's traded stock value and successful liking rates, which whitethorn consequence successful mark-to-market charges connected definite financial instruments; nan number, timing and scheduled routes of our craft deployments to customers; our expertise to stay successful compliance pinch cardinal agreements pinch customers, lenders and authorities agencies; nan effect of existent proviso concatenation constraints, both wrong and extracurricular nan U.S., which whitethorn beryllium much terrible aliases persist longer than we presently expect; nan effect of nan existent competitory labour market; changes successful wide economical and/or industry-specific conditions; factors relating to nan COVID-19 pandemic, including that nan pandemic whitethorn proceed for a longer play aliases its effect connected commercialized and subject rider flying whitethorn beryllium much important than we presently expect; disruptions successful our workforce and staffing capability; disruptions successful our expertise to entree airports and attraction accommodation aliases adversely effect our customers' creditworthiness and nan continuing expertise of our vendors and third-party work providers to support customary work levels; and different factors arsenic contained from clip to clip successful our filings pinch nan SEC, including nan Form 10-K we will record adjacent week.

We will besides mention to non-GAAP financial measures from continuing operations, including adjusted earnings, adjusted net per share, adjusted pretax earnings, adjusted EBITDA and adjusted rate flow. Management believes these metrics are useful to investors successful assessing ATSG's financial position and results. These non-GAAP measures are not meant to beryllium a substitute for our GAAP financials. We counsel you to mention to nan reconciliations to GAAP measures, which are included successful our net merchandise and connected our website.

And now I'll move nan telephone complete to Rich Corrado, our President and CEO, for his opening comments.

Rich Corrado

Thanks, Joe. Good morning, everyone. 2022 was an exceptional twelvemonth for ATSG. Even pinch accelerated ostentation and delays astatine our 767 freighter conversion vendor, your institution still exceeded its 2022 financial goals of $640 cardinal successful adjusted EBITDA and $2 successful adjusted EPS. We besides began to put successful caller freighter platforms from nan Airbus family while maintaining our activity successful Boeing 767 freighter leasing.

I americium very proud of nan fantabulous readying and execution passim nan institution that drove our sizeable success. Many of those efforts are playing into our outlook for 2023. Despite immoderate headwinds, we expect much adjusted EBITDA maturation and accelerated maturation successful 2024 and later years.

I'll beryllium backmost to stock much of that position aft Quint reviews our financial results for 2022.

Quint?

Quint Turner

Thanks, Rich, and invited to everyone connected nan telephone this morning. The adjacent descent successful our platform summarizes nan beardown 2022 results that Rich highlighted. Our consolidated revenues for 2022 grew $311 cardinal to $2 billion, different all-time precocious for revenues astatine ATSG. Our adjusted EPS accrued by much than 40% to $2.28 compared pinch $1.61 successful 2021. That was good supra nan $2 target we group a twelvemonth ago. Adjusted pretax net accrued 51% and adjusted EBITDA roseate 18%.

Earnings from our hose businesses, on pinch nan momentum of our leasing returns from CAM, produced astir of nan EPS summation supra our target. We are projecting little EPS for 2023, arsenic Rich will talk successful his remarks, chiefly because of accrued liking disbursal connected our existent fleet additions and ostentation effects, peculiarly successful our ACMI Services segment.

On nan adjacent slide, you tin spot that versus nan 12 months ended successful December 2021, our adjusted EBITDA grew a grounds $100 cardinal aliases 18% successful 2022. That betterment includes a afloat twelvemonth of rate flows from nan 15 recently converted 767 freighters we deployed successful 2021 and much than doubling our net from ACMI Services. For adjusted EBITDA, we exclude, among different items, nan changes successful values of our financial instruments and nan benefits of national pandemic merchandise assistance for our rider operations nether nan payroll support programs for nan 2021 period.

On nan adjacent slide, you'll spot that our superior spending vanished nan twelvemonth astatine conscionable nether $600 million, $25 cardinal little than we projected past quarter. We abstracted what we telephone sustaining CapEx, chiefly for airframe and motor maintenance, exertion and different instrumentality from nan spending we allocate to fleet description . Sustaining CapEx was $187 cardinal for nan year, up $4 million. Growth CapEx was $412 million, up $90 cardinal from nan anterior year, some to person existing craft to freighters and to bargain much feedstock rider aircraft. In 2022, those purchases included 8 Boeing 767s and 6 Airbus A321s. We deployed and leased 6 recently converted 767 freighters past year. Turnaround times astatine galore passenger-to-freighter craft conversion houses stay good supra pre-pandemic levels contempt their efforts to summation throughput. We expect those bottlenecks to lessen this year.

The adjacent descent updates our adjusted free rate travel arsenic measured by our operating rate flow, nett of our sustaining CapEx. Adjusted free rate travel of $285 cardinal past twelvemonth was down $115 cardinal from nan year-earlier play and down $88 cardinal for nan 12 months ended past September. Cash flows from national grants successful 2021 were $83 million. All of that rate was received successful nan first half. Our afloat twelvemonth 2022 results bespeak nan effect of nan impermanent 4th fourth summation successful moving superior related to reimbursement of substance costs from Omni's national authorities customers. We task our maturation superior investments to transcend adjusted free rate flows until 2025 erstwhile we expect that inclination to reverse. Through 2024, we expect our indebtedness leverage ratio to stay nether 3 times and statesman to diminution successful 2025.

You whitethorn person already seen nan 2023 guidance we provided successful nan net merchandise we issued yesterday. Rich will screen immoderate of nan factors that will impact our net and rate travel successful his remarks. I wanted to supply immoderate colour astir nan important summation successful our CapEx fund of $850 cardinal this twelvemonth and nan strategical decisions and steps that hole nan measurement for our maturation investments successful 2023 and 2024.

The bulk of our CapEx this twelvemonth and successful 2024 will proceed to money nan description of our leased 767 fleet. The different awesome driver of our stepped-up maturation successful spending complete nan adjacent respective years is our determination to statesman offering our lease customers to different freighter types, nan Airbus A321, a narrow-body midsize trader designed to switch retiring Boeing 757s, and nan A330, a wide-body midsize freighter that will complement our still expanding fleet of 767s.

We started this freighter level description from a beardown financial position. Through 2022, our debt-to-adjusted EBITDA ratio arsenic calculated nether our slope statement was beneath 2 times and good beneath our mean complete nan past respective years. We besides acted successful 2020 and 2021 to fastener successful favorable fixed rates by issuing 7-year unsecured notes astatine a 4.75% coupon complaint and amended our elder in installments installation to summation our borrowing capacity, free of immoderate collateral, and accommodate nan resumption of our banal repurchase program. Available in installments nether our revolver was $365 cardinal astatine nan extremity of 2022, pinch an action for further capacity taxable to slope approvals.

To coincide pinch our accrued business pinch airlines successful Europe and Asia, we intend to found a akin $100 cardinal in installments installation successful Ireland successful nan adjacent fewer days. When our fleet improvement programme is astatine its highest successful 2024 and lease revenues from Airbus fleet additions are conscionable beginning, we task that our leverage ratio will still stay little than 3 times. After that, we expect to statesman delevering successful 2025.

I besides want to statement that moreover pinch higher CapEx spending, we person nan liquidity and rate travel visibility to proceed to accommodate opportunistic stock repurchases nether nan $150 cardinal installation nan Board created past fall. As we noted successful our release, we repurchased 2 cardinal shares aliases astir 3% of those outstanding during nan 4th fourth aft pandemic assistance restrictions connected our repurchases expired.

With that summary of our financial and operating results, I'll move it backmost to Rich for immoderate comments connected our operations and outlook.

Rich?

Rich Corrado

Thanks, Quint. The net merchandise we issued yesterday listed immoderate cardinal 2022 operating accomplishments that contributed to nan financial results that Quint conscionable reviewed. Let maine item them and stock immoderate further colour to springiness you much penetration astir really good we performed past year.

Overall, we added 13767 freighters successful 2022, 6 of which were CAM owned and leased to third-party customers. CAM besides re-leased 1767-200 and extended leases connected 4 different 200s. Two of nan 6 recently converted 767-300 freighters leased past twelvemonth are besides being operated by ATSG's airlines nether crew, attraction and security agreements. We besides added 7 different 767-300s to our fleet nether asset-light CMI arrangements. Those were assigned to our airlines by customers who obtained them elsewhere but shows our airlines, ABX Air and ATI to alert them. They joined 6 others we were already operating connected nan aforesaid basis. We expect our customers to delegate america 3 much successful 2023.

These decisions by our customers attest to their assurance successful nan hose services that we provide.

Our original 2022 scheme called for much freighter leases, but some vendor and regulatory issues prevented america from reaching our targets. Our main 767 conversion vendor, IAI, continues to adhd conversion capacity but throughput times stay good down pre-pandemic levels. Anticipating delays, we decided to book respective conversion slots pinch Boeing successful 2021 and added much successful 2022. Boeing will person 4 of nan 767-300s we expect to deploy this year. We judge that a operation of further slots and faster throughput will let america to meet our 2023 fleet description goals.

Another situation is gaining approvals from nan regulatory agencies to put our converted A321-200 freighters into service. Three of nan 6 A321s that CAM intends to lease this year, including CAM's first 2 to ASL Aviation successful Ireland, are fresh to spell pinch regulatory approval. We expect that to hap by midyear. To hole for our step-up successful fleet investments starting this year, CAM was progressive successful nan feedstock marketplace successful 2022. Through purchases and different commitments, CAM now controls each of nan rider craft it requires for our anticipated 20 freighter leases successful 2023 and astir each of those that were leased successful 2024.

Please spell to nan adjacent slide. Quint noted that nan standard of our fleet investments will beryllium overmuch larger complete nan adjacent fewer years and past we person nan financial backing to complete them. To those who mightiness beryllium concerned astir whether customers will beryllium fresh to make semipermanent lease commitments for those craft arsenic they complete conversion, it's important to understand that nan surge successful U.S. e-commerce activity that preceded and soared during nan pandemic is only now opening to surge successful different parts of nan world. The e-commerce information for unit income is still increasing quickly elsewhere, including Eastern Europe, Asia, Africa and Latin America arsenic aerial networks expand.

Accordingly, much than 80% of CAM's leased freighter deployments complete nan adjacent respective years will beryllium to airlines operating extracurricular North America. And galore of them will run successful networks established by DHL and different integrators who lease our freighters themselves but wherever rules limit wherever they tin run directly.

Turning to our airlines. Some of nan continuing maturation successful e-commerce fulfillment successful nan U.S. past twelvemonth led to description s of their fleets and much operating artifact hours. ABX Air and ATI added 9 767 freighters, including 7 assigned to them. Block hours of flying for each 3 airlines accrued 8%, pinch a 9% summation successful cargo operations and a 4% summation successful rider operations. Even pinch 1 less 767 successful its fleet, Omni still completed a beardown schedule of rider hose missions for authorities customers. Also, nan Department of Defense restored our afloat combi schedule, including our longest way successful nan 4th quarter.

We are besides proud to statement that a twelvemonth ago, DHL agreed, erstwhile again, to widen and grow nan long-standing commercialized narration we've enjoyed pinch them since nan inception of ATSG arsenic an independent nationalist institution successful 2003. The statement extended our hose work successful support of DHL's U.S. Express web for 6 years and included nan lease of 3 much 767-300 freighters from CAM. Our deployment schedules see still much 767s positive immoderate A330s for DHL's world network.

Please spell connected to nan adjacent slide. Those were a fewer of nan operating and commercialized successes that helped america make grounds revenues, adjusted EBITDA and adjusted EPS successful 2022 and will lend to our results for respective years to come. In 2023, ATSG expects to make betwixt $650 cardinal and $660 cardinal successful adjusted EBITDA and betwixt $1.85 and $2 successful adjusted net per share. Those targets bespeak a grounds gait of 20 freighter lease deployments I mentioned a infinitesimal agone and which we announced to nan marketplace connected February 6. Four of nan world companies we will lease freighters to successful 2023 and 2024 are caller customers, supporting Air Express networks successful different regions.

Several years ago, we began to grow our income and trading outreach to customers wherever e-commerce is conscionable opening to return hold, and those efforts are paying disconnected successful grounds request for our freighters today. Later successful nan year, CAM will statesman nan passenger-to-freighter conversions of our first A330-300 for lease transportation successful 2024. CAM expects to person and lease 30 specified craft by 2028, two-thirds of which are already backed by customer commitments.

CAM will besides statesman conversion of a projected 16 767-300 freighters it expects to lease successful 2024, astir of which person customers awaiting them. ATSG's 2023 outlook besides includes nan return of 8 of nan 12 767-200 freighters that ATSG leased to Amazon successful 2016. The remaining 8 will beryllium re-leased, sold aliases harvested, pinch their motor added to nan powerfulness by rhythm excavation for 767-200 lease customers. ATSG besides expects inflationary and schedule simplification impacts connected our airlines successful 2023, erstwhile we expect less hours of flying for our ACMI and CMI customers. We stay affirmative connected ATSG's semipermanent maturation opportunities pinch our awesome U.S. aerial web customers and expect to adhd 3 customer-provided craft this year.

We expect that 2024 and 2025 will bring nan resumption of beardown net and rate travel maturation from today's investments, pinch year-over-year maturation of astir 10% successful adjusted EBITDA and moreover stronger maturation successful our leasing segment. Few companies person customers committed to semipermanent agreements that will make nan benignant of rate travel visibility that ATSG enjoys. We person a beardown equilibrium sheet, a activity position successful nan midsized freighter leasing marketplace and nan beardown backing of investors successful our in installments installation and indebtedness securities, who respect nan feedstock craft we are acquiring arsenic premier assets.

Our labor are besides prepared to execute each of our 2023 plans pinch a extremity to move breathtaking opportunities into semipermanent superior returns for shareholders.

That concludes our prepared remarks. Quint and I, on pinch Mike Berger, our Chief Strategy Officer, are fresh to reply questions.

May we person nan first question, operator?

Question-and-Answer Session

Operator

[Operator Instructions] Our first mobility comes from Jack Atkins pinch Stephens. Your statement is open.

Grant Smith

This is Grant connected for Jack. I conscionable wanted to excavation successful a small spot connected nan 2023 guidance really connected nan ACMI broadside and benignant of really you're expecting that to play retired possibly first half versus 2nd half. And you mentioned successful your fleet update that nan first half would spot a year-over-year alteration successful artifact hours pinch your larger customers. And today, you talked astir a afloat twelvemonth artifact hr alteration year-over-year successful cargo and passenger. Just possibly immoderate colour connected really you're reasoning astir ACMI complete nan people of nan afloat twelvemonth would beryllium great.

Quint Turner

Yes. Thanks for nan question. In position of ACMI, nan artifact hr alteration that we talked about, remember, we had nan resumption for ATI of a combi way successful nan 4th fourth of '21, truthful we'll person that for nan afloat twelvemonth successful -- aliases excuse me, 4th fourth '22, and we'll person it for nan afloat twelvemonth of '23. And we see that arsenic passenger, but of course, nan different rider hours being flown by Omni chiefly for its governmental and nan DoD and governmental customers.

We expect rider and cargo hours to beryllium down. They'll beryllium down little than 5%, we would anticipate, year-over-year for nan afloat year. And I deliberation really successful position of differentiating, it's -- we do expect possibly successful nan 2nd half to see, arsenic we typically do, and you spot a batch of nan forecast, immoderate recovery, peculiarly connected nan cargo side, wherever hours whitethorn prime up seasonally. But connected nan battalion side, it's much of -- we expect benignant of a dependable environment. Those are sometimes a small tougher to forecast. As you know, immoderate of those hours, you don't person arsenic overmuch announcement on. We've had events hap successful nan world that tin impact nan request peculiarly for Omni connected nan subject side.

We do anticipate, I believe, successful nan -- based connected what we've seen successful nan first quarter, we whitethorn spot immoderate reduced hours successful flying for Omni connected nan governmental side, if that helps. But basically, that part, nan taxation line, we're assuming beautiful overmuch dependable authorities successful nan absence of having immoderate circumstantial accusation astir nan 2nd half.

Grant Smith

And if I could conscionable travel up 1 much thing. So you mentioned nan spot internationally successful e-commerce and what you're proceeding for your customers. Maybe if you could conscionable talk a small spot connected your U.S. customers. And possibly is location immoderate much antagonistic commentary you've heard from them? Any calls for interest arsenic you possibly deliberation astir trying to re-lease those 767-200s arsenic you mentioned?

Mike Berger

Yes. No, thanks, Grant, for nan call. It's Mike Berger. From a U.S. perspective, arsenic Rich mentioned, conscionable to spell backmost to Rich's remarks, our bid book for nan adjacent mates of years, '23 and '24, has really been dominant, complete 80% leased extracurricular nan U.S. from an world perspective. So our strategy to move guardant further globally that we started respective years agone now really is taking clasp and will proceed to.

So we -- while we proceed to look for opportunities wrong nan U.S. and we'll proceed to support our customers' maturation wherever needed, our opportunities person really been greater extracurricular nan U.S. and we proceed to push that way.

Operator

Our adjacent mobility comes from Helen Becker pinch Cowen. Your statement is open.

Helane Becker

Let's see, I person 2 questions. The 1 question, Quint, tin you -- erstwhile you talk astir craft that you person placed aliases that are going to customers aliases wherever you person customers signed up, tin you talk astir it successful position of committed gross complete that clip frame? Like tin you opportunity we've already had committed gross of X billions of dollars complete nan adjacent X number of years? Are you capable to opportunity that?

Quint Turner

Yes. I mean, it's a bully question, Helane. We talk astir nan 20 aircraft, for example, that we're looking that we are targeting for deployment successful '23. On an annualized basis, you're talking astir about $70 cardinal of gross for those placements. And if you look astatine 2024, it's astir apt much for illustration astir $85 cardinal to $90 cardinal connected an annualized connected apical of that. And we have, arsenic Rich said, fantabulous visibility connected that. On those placements, we've sewage customer commitments, I think, for each but 2 aliases 3 of those.

Helane Becker

And past my follow-up mobility is, I deliberation -- I don't cognize if it was you aliases Rich, you said successful your prepared remarks that you person inflationary costs unit successful immoderate of your ACMI businesses. Is that reimbursable by your customers, those costs pressures?

Quint Turner

Well, certainly, there's escalators that are built into our customer contracts. We've each seen ostentation successful nan caller years that has outpaced, I think, what astir folks would person successful their contracts. But having said that, I mean, I deliberation it's important to opportunity that erstwhile you look astatine ACMI Services, I mean, it's made tremendous advancement passim nan pandemic for ATSG's airlines.

And what we person projected successful '23, for example, their publication successful position of adjusted EBITDA is astir 12% higher than it was successful 2021 and successful 2023. Now 2022 was an fantabulous year, right? They had -- location were immoderate opportunities for -- wherever customers needed charter flights and things that were higher separator than we mightiness spot successful '23 owed to nan macroeconomic environment. And then, of course, successful '23, pinch possibly little commercialized opportunities, you whitethorn spot immoderate of nan airlines who participate successful nan authorities flying, nan trade program. They whitethorn alert their -- much of their entitlements. Some of those airlines whitethorn person been opting to alert commercialized trips erstwhile nan rates being offered for those types of trips were really precocious connected nan -- and now location whitethorn beryllium little of those successful a slower system successful '23.

So we expect that Omni, while it's going to do good successful '23, but it whitethorn not person arsenic galore opportunities to alert and cleanable up immoderate of nan entitlement not flown by immoderate of nan different carriers.

Rich Corrado

Helane, nan things that -- location are reimbursables successful those ACMI agreements, things for illustration permits, for illustration landing fees, those types of things. Fuel is simply a large reimbursement. But nan things that person impacted america connected an inflationary ground are things for illustration recreation costs because we person to position pilots each complete nan world, attraction costs for attraction technicians aliases attraction contractors. Those costs person been rising complete nan past fewer years. And those are built into nan rates. They do get escalated, arsenic Quint said, successful nan wide agreements year-to-year. But it's conscionable a matter of whether that escalation keeps up pinch wherever nan inflationary unit whitethorn beryllium successful nan different costs items.

Quint Turner

And connected nan subject and nan DoD type flying, those contracts are much akin to cost-plus. And truthful rates are adjusted. There's a look-back, though. There's usually a lag, right? In nan twelvemonth nan ostentation is occurring, you whitethorn not get nan reimbursement. But erstwhile rates are reset successful consequent years, those adjustments are made. So that's a consequence mitigator but it creates a dislocation.

Helane Becker

Can I compression successful 1 much question? I think, Rich, you said that you were going to usage Boeing to do much conversions than IAI. Why are they going to beryllium faster to do conversions aliases turnarounds, fixed each nan proviso constraint issues they have?

Rich Corrado

Yes. I didn't opportunity that we were going to usage much Boeing, but we do person 8 slots from Boeing and we're still utilizing a batch of IAI. We person 5 lines operating location beautiful overmuch astatine each times. The quality betwixt IAI and Boeing really is that Boeing has a afloat accumulation statement still going of mill freighters and mill tankers. And truthful I deliberation they've sewage a sturdier proviso concatenation than immoderate of nan different converters and immoderate of nan different lines of business.

Now we're nether nan A321, nan A330. We've sewage aggregate vendors connected nan A321 connected nan conversion side. And of course, we do our own. And past we've sewage nan 2 connected nan 767. So we get a bully position into what's going connected successful immoderate of these proviso chains, and I deliberation we mentioned it successful nan prepared remarks that we saw immoderate delays from IAI. And a batch of that was related to fabrication and parts vendors that they usage successful different countries. And I deliberation Boeing conscionable has a much captive proviso concatenation conscionable because they've got, I believe, because they've sewage that ample accumulation statement and that supports their conversion statement arsenic well.

Mike Berger

And Helane, it's Mike. They thin to beryllium a small spot more, for illustration I put it this way, cookie-cutter. So nan activity scopes that spell into nan conversions upfront are good defined and conscionable much cookie-cutter attack truthful nan changes don't effect nan existent transportation times.

Rich Corrado

Another measurement to opportunity that is they're little flexible.

Helane Becker

I sewage it. Okay, each right.

Operator

Our adjacent mobility comes from Michael Ciarmoli pinch Truist. Your statement is open.

Michael Ciarmoli

Just I guess, Rich aliases Quint, conscionable looking astatine nan EBITDA guidance adjacent year, nan tally rate, I mean, you person -- it's fundamentally nan 2nd half '22 EBITDA tally complaint fundamentally put you astatine nan debased extremity of that range. You're going to person much planes successful service. Is each of this unit conscionable coming from ACMI? Or tin you conscionable elaborate a small bit? I was ever operating nether nan belief of playing retired location is possibly $4 cardinal to $5 cardinal of EBITDA. But conscionable possibly tin you supply immoderate colour arsenic to nan EBITDA, why nan tally complaint conscionable benignant of holds from 3rd quarter, 4th fourth each nan measurement through?

Quint Turner

Yes. I mean, Michael, it's Quint. You're correct that nan -- successful position of the, I guess, nan much of nan headwind successful '23 is ACMI Services. Even though, arsenic I mentioned, ACMI Services successful '23 is projected to beryllium up versus, for example, '21 and surely measurement up since nan pre-pandemic period. I mean, ACMI Services has been a awesome contributor.

But location is, arsenic we've ever said, a small spot much volatility, and our business exemplary has a awesome woody of stableness pinch nan CAM piece. But there's ever a small spot of volatility connected nan ACMI Services side. Now we for illustration that because it's an asset-light business, and generally, it's been a awesome contributor successful position of wide rate flow. And arsenic I said, it has made advancement each twelvemonth isolated from comparing to '22 arsenic we look astatine '23. It's going to beryllium down but still up versus anterior periods. So there's immoderate volatility astir nan margins connected ACMI Services. That has to do pinch what we said earlier astir wherever nan opportunities mightiness dishonesty for subject flying and commercialized flying.

But connected nan CAM piece, we talked astir successful our pre-release, location will beryllium immoderate craft coming back, we believe. That will create a pause, I guess, successful position of gross watercourse connected those 767-200s that we put nan earlier merchandise retired on. CAM, certainly, successful position of their net margins that are impacted by nan emergence successful liking cost, which is surely a factor. And of course, ostentation besides tin impact nan investments, what it takes to put an craft connected nan ramp astatine least.

The lease complaint has held up nicely, but akin to remark earlier, sometimes there's a small spot of a lag location erstwhile ostentation moves really quickly because we person a batch of our maturation already programmed in, conscionable for illustration we talked astir our pipeline, successful '23 and '24, pinch what, 40-some craft coming retired and being leased. We person a batch of that pipeline locked successful 18, 24 months anterior to erstwhile nan plus comes out. So sometimes that ostentation tin effect nan end-of-service cost, and that's thing CAM has to woody with.

But it's -- we're hitting our return margins there. The businesses looks to beryllium positioned, arsenic Rich said, to beryllium nan motor that will thrust again successful '24 and '25, we believe, double-digit EBITDA maturation year-over-year. But successful '23, you person those -- you person immoderate returns coming backmost and you person that higher liking costs truthful there's a small spot of a headwind there. I don't know, Mike, if there's anything...

Mike Berger

Yes, we position it arsenic an finance twelvemonth and nan statement of sight, arsenic Quint mentioned, successful position of our bid book successful 2023 and '24 and rather honestly, into 2025 connected nan 767 broadside is fabulous. And arsenic we look astatine nan engine, nan e-commerce motor and what drives that unit income arsenic a full from now to 2026 are going to turn -- are scheduled to turn by $4.6 trillion, and $2.2 trillion of that is going to beryllium successful e-commerce.

As Rich mentioned successful his early remarks, we're still seeing very, very beardown maturation successful nan areas that -- astir nan world that we are seeing occurrence in, Southeast Asia, Africa, nan Middle East, for example, are areas that we're seeing awesome occurrence pinch caller customers arsenic good arsenic our existing customers successful those areas. As we advancement successful '24 and '25, we'll beryllium correct successful nan midst of our deliveries connected nan A330, and that finance for nan A330 is taking spot now. So we're really keen connected what nan early specifically lies successful our EBITDA maturation and getting backmost to that 10-plus percent, arsenic Quint talked about, successful nan upcoming years.

Rich Corrado

The different portion that I'll conscionable talk astir is from a spot standpoint is retirement. During nan pandemic, astir 15 freighters were being retired a year. On a normal year, it's astir 70. What does that mean? That intends that nan request for cargo freighters astir nan world is conscionable going to proceed to adhd strength. So we proceed to beryllium existent positive.

Michael Ciarmoli

Just connected nan superior strength of business. I mean, that sustaining CapEx guidance is going to beryllium up 40% to $260 million. I mean, is location thing unsocial happening this year? I mean, presumably, attraction part, wide benignant of shop are getting much expensive. But really should we deliberation astir this sustaining CapEx going forward?

Quint Turner

Yes. Thanks, Michael. It's Quint. The -- we've benignant of said, because attraction CapEx tin move based connected nan timing of scheduled attraction from year-to-year, I deliberation we've benignant of said it's astir a mates of 100 cardinal dollars of our CapEx successful immoderate fixed year. But you're right, '23 is simply a small spot higher. Now '22 was, I think, what we say, $187 million. So you tin spot it came successful a small lower. '23 is higher than that $200 cardinal benignant of inclination -- semipermanent inclination statement chiefly because of nan timing of immoderate motor overhauls.

We support a excavation of engines for immoderate of nan lessee's 1 of nan motor types. And it's conscionable based upon their shop -- their expected shop sojourn timing. We've sewage much of those this year. I mean, you are correct. Inflation, arsenic we said, I don't deliberation immoderate of america tin astir apt deliberation of immoderate costs that it doesn't affect, but it has much to do pinch nan timing of scheduled attraction arsenic to why we're looking astatine a higher number for attraction CapEx successful '23.

Michael Ciarmoli

And past conscionable nan past 1, if I may. Any update connected your benignant of contracts pinch your pilots, conscionable benignant of watching nan news present seeing what's going connected astatine FedEx? How are you benignant of handicapping aliases reasoning astir that risk?

Mike Berger

Yes. So we've sewage aviator contracts unfastened aliases amendable, I should say, pinch some ATI connected nan cargo broadside and connected -- successful our rider operator, Omni. And some those contracts are -- person been successful speech and nan -- some sides are gathering aggregate times per period now and trading accusation and going forward. And truthful nan -- things are progressing.

Just based connected wherever they are individually and they're some successful different places, but we don't judge that we'll get to thing very quickly. We person ever taken nan position that we request a aviator statement that pays nan pilots good capable that we tin clasp and pull pilots but besides gives america nan costs building required that we compete for business. And we've ever been capable to make those 2 positions meet astatine immoderate point, and we'll proceed to prosecute nan statement negotiations pinch that perspective.

Operator

Our adjacent mobility comes from Frank Galanti pinch Stifel. Your statement is open.

Frank Galanti

I wanted to travel up connected that past mobility connected pilots. Can you benignant of talk astir readiness of pilots. Have you -- considering nan benignant of caller EBITDA guidance and expectations for debased artifact hours, does that benignant of alleviate immoderate of nan unit from a aviator perspective? And tin you talk astir really adaptable that costs is pinch artifact hours?

Mike Berger

So a mates of things. One is that we've been capable to pull pilots without a problem complete nan past year. And immoderate attrition that we've had, we've been capable to enactment up of nan curve successful position of getting nan training done and getting them capable to beryllium capable to alert and sphere each our schedules and et cetera, et cetera. So that's been a bully thing.

Our mean hours are measurement complete nan minimum of nan caller pilots coming in. So we're successful bully style arsenic acold arsenic nan aviator business goes. But successful position of nan variability of aviator costs arsenic it relates to artifact hours, I mean, nan aviator costs is really -- it's nether contract. So it's -- nan pilots will spell done nan -- summation their salary arsenic they spell done scales, it doesn't really alteration that overmuch connected an mean costs ground per artifact hour. And nan contracts that we have, location are escalations that reside costs connected an yearly basis.

Quint Turner

But Frank, arsenic we look guardant astatine nan placements for aircraft, arsenic Mike commented, astir each of these are going internationally. So we don't expect operating those done nan airline. So I deliberation what, complete 80% aliases thing aliases world placements successful '23, '24. And truthful that will, to your point, they won't thrust a request for further pilots. It's much astir keeping gait pinch that attrition that Rich mentioned.

Quint Turner

And if you look astatine -- I mean, conscionable nan adjacent 2 years are going to beryllium 40 airplanes we're putting out. And you look astatine nan diversification, we're getting distant from immoderate of our larger lessees, it's a awesome communicative because we've sewage stability, we've sewage visibility to rate flows, and we've sewage a differentiated business exemplary going guardant into different parts of nan world.

Frank Galanti

So I wanted to inquire astir nan 767-200s. Can you benignant of talk about, truthful successful nan property release, you had an anticipation of astatine nan extremity of '23 being down 8 planes. Can you benignant of talk astir nan property and ratio liking successful that platform? And past benignant of 2nd portion of that, past year, you took in-house, nan motor services for that plane. You benignant of talked astir $45 cardinal of EBITDA publication from that. Where does that benignant of stack comparative to what you expected successful '22 versus '23 pinch benignant of nan changes successful that platform?

Quint Turner

Yes. In position of nan past portion of that question, I don't cognize if Mike mightiness jump successful nan first portion connected nan 200s, but your mobility astir nan motor piece. Yes, for '22, it was correct astir nan $40 cardinal that we talked astir astatine nan opening of nan twelvemonth erstwhile we gave you guidance successful position of that EBITDA contribution. Remember, location was benignant of a step-up location because we ended a long-time PVC statement pinch a provider, and we went to nan pooling building that we person now, wherever we fundamentally -- we overhaul, we support that excavation of engines and make it disposable to lessees who run nan aircraft.

So connected a '23 versus '22, location won't beryllium overmuch of a change. In different words, it's not a large driver of incremental EBITDA. That was benignant of that -- changing that building from '21 to -- precocious '21 to '22 that drove that $40 cardinal summation successful '22. So beautiful overmuch a unchangeable publication successful '23 versus '22 from nan motor piece.

Mike Berger

In regards to nan first portion of your mobility astir nan request for nan 767-200, we've seen still very, very bully request for nan airframe. And arsenic Rich has mentioned successful his opening remarks, we surely will person immoderate opportunities to waste immoderate of those airframes arsenic good arsenic re-lease them retired to nan marketplace. So arsenic we position those opportunities and we'll benignant of person our choice, if I could put it that way, to prime and take what's champion for america arsenic we get those returns, mates that pinch nan motor program, nan excavation of engines that Quint mentioned, that we still consciousness that nan -- aliases still not only consciousness but spot beardown petition and beardown request for that airframe.

Operator

[Operator Instructions] Our adjacent mobility comes from Howard Rosencrans pinch VA. Your statement is open.

Howard Rosencrans

I conjecture I conscionable want to understand nan -- I mean, obviously, nan marketplace is having a different guidance to what you're seeing successful position of 1 of nan anterior speakers commented connected "great story". So I conscionable -- to simplify successful position of nan maturation CapEx, you've sewage $600 cardinal successful '23 and it benignant of implies astir $600 cardinal successful '24. Is that benignant of related to -- again, conscionable oversimplify without nan breakdown betwixt BA and nan Airbus equipment. Ostensibly, we're talking astir nan $27 million, $30 cardinal per

Rich Corrado

I'm sorry, Howard, you trim disconnected there.

Howard Rosencrans

Yes. No, no. I had completed nan question. Ostensibly, are we talking astir $27 cardinal to $30 cardinal per aircraft? That's again, whether it flows successful arsenic moving superior aliases flows successful arsenic -- but fundamentally successful position of nan CapEx, is that what we're efficaciously talking about? And past I want to inquire you nan follow-on.

Quint Turner

Well, we talked astir that scope successful position of nan 767-300s to what investments look for illustration to put them connected nan ramp successful leasable shape.

Howard Rosencrans

Right. Okay. And it's beautiful overmuch nan aforesaid ballpark for nan Airbus, right? Is that adjacent to say?

Mike Berger

Yes. In position of -- it depends connected nan Airbus type. And arsenic Rich conscionable said successful nan past, deliberation of nan narrow-body 321 arsenic astir two-thirds nan [Indiscernible] astir two-thirds nan -- and past nan 330 is astir 20% larger than nan 767-300s. So it's going to beryllium a

Howard Rosencrans

So astatine nan extremity of nan day, it each washes retired to astir nan aforesaid thing. So that leads maine to my existent mobility here. So nan marketplace is suggesting aliases nan finance community, aliases nevertheless you want to look astatine it, is suggesting that now nan returns that you're going to make are not going to beryllium nan returns that you person generated historically.

And I conjecture conscionable to speculate, there's a deficiency of comfortableness pinch nan customers vis-à-vis nan customers for illustration Amazon and DHL and FedEx and nan ones that person been portion of your fleet. So really do you springiness america nan comfortableness level that nan customers that you person connected nan sky wherever you're going to do these placements are going to -- person nan aforesaid fortitude, let's say, for nan liking of conversation, nan e-comm maturation connected an world ground is not arsenic pronounced exactly, that's going to effect that we presume much your ACMI, which is nan ACMI, which is much nan volatility broadside of nan business.

But arsenic agelong arsenic we get nan CAM placements location and arsenic agelong arsenic they're taking them, past we get nan return connected nan CAM side, and let's look it, that's nan lion's stock of nan rate flow. Since your indebtedness is going up truthful overmuch complete nan ensuing mates of years, to me, I conscionable want to -- and I deliberation for others, we conscionable want to get a higher level of comfortableness that nan varied buyers that we're now going to beryllium doing business pinch are sharply accelerated will beryllium capable to comfortably execute successful statement pinch nan measurement your Goliath, let's say, home aliases world players person performed.

Rich Corrado

Yes, Howard. No, it's a bully question. I'm gladsome you asked it because we've made this -- we've handled a akin mobility successful nan past astir immoderate of nan smaller lessees that we have. There's a mates of things. One is that respective of nan lessees that are prominently positioned to take, whether it's A321, 767s aliases A330s, besides alert for Express companies aliases alert an Express web that aggregate companies whitethorn participate in. For example, Cargojet up successful Canada.

We've besides sewage immoderate ample companies successful this portfolio that will beryllium taking airplanes internationally. DHL is successful statement for some 767s and A330s from now done 2026. You've sewage a company, ASL, that's based successful Ireland but has respective AOCs each complete Europe. They're nan largest ACMI usability successful Europe, and they alert for aggregate Express companies, and they person very beardown agreements. And truthful -- and past you've sewage a institution for illustration Raya successful Malaysia, which is going to beryllium taking A321s and they are presently a 767 customer. They alert for DHL.

So erstwhile you look astatine these lessees, they're diversifying america globally. And though they whitethorn not beryllium your family sanction of DHL, UPS aliases FedEx, they alert for those people. So nan credits that they correspond are very beardown successful narration to conscionable nan wide hose that's retired there. So we person a batch of confidence. We do a batch of vetting of airlines successful position of what they're going to do pinch nan airplane. And truthful we person a wide understanding.

Another 1 I forgot to mention was arsenic Maersk is taking -- will extremity up pinch 5 airplanes from us. They've already taken 3. There's 2 much to beryllium delivered to them. And of course, Maersk is 1 of nan largest, if not nan largest water institution successful nan world. And truthful those are nan types of customers we've got. And truthful we're very assured successful nan rate flows that we'll beryllium receiving from these customers.

Quint Turner

I conscionable -- conscionable to bring a small spot much colour to it, Howard. Our partner -- 1 of our partners successful Africa, Astral Airways, was conscionable named Cargo Airline of nan Year for that region. Rich mentioned Raya. They were named E-commerce Airline of nan Year successful Southeast Asia. And conscionable a small spot further item connected MireStar, they've been nan supplier of UPS successful nan European web for virtually for complete 30 years.

So nan vetting goes -- nan vetting is very diligent and knowing their business plans and really they're going to win is besides very important. But arsenic Rich said arsenic well, DHL specifically is successful statement to return respective craft complete nan adjacent fewer years connected nan 767 broadside arsenic good arsenic nan 330.

Quint Turner

And truthful Howard, you mentioned really nan marketplace views it successful opposition pinch what we're saying. And of course, we don't -- we're not second-guessing anybody aliases nan market, but it is simply a small frustrating. I mean, for illustration erstwhile we look astatine personification looking conscionable astatine a quarter, for example, and moreover this quarter, I deliberation we had a taxation item, wherever we adjusted our authorities taxation apportionment based connected wherever nan craft fly, which states they alert complete because they person different taxation rates.

So you tally that. So we had thing that was astir apt $0.03 to $0.05 successful nan 4th quarter. Well, that's benignant of nan quality betwixt nan statement and our $0.53. We deed our target that we group successful February of past twelvemonth for afloat twelvemonth EBITDA. And of course, we've talked astatine magnitude astir nan visibility we person to sustainable structural maturation successful our leasing business, which is, arsenic you constituent out, nan root of nan mostly of our rate flows and will beryllium nether semipermanent agreements for many, galore years.

And truthful we consciousness very fortunate to person that successful beforehand of us. As I mentioned, there's a small volatility astir nan edges pinch our asset-light ACMI flying, but moreover they person made tremendous advancement since nan pre-pandemic play and moreover since '21. CapEx-wise, nan leasing business requires CapEx. There's -- that comes pinch that territory we get. But pinch nan placements of 20 craft this twelvemonth and much than that successful '24, and nan first of nan 330s, we fundamentally person locked successful maturation for 3 years much because moreover if you propulsion your -- propulsion backmost connected investments aft '24, nan placements you make successful '24 are going to thrust important EBITDA maturation successful '25.

And truthful we consciousness very fortunate astir that. And we dream that investors attraction connected that agelong word and admit that we've now demonstrated that our exemplary performs good nether different economical cycles, having gone done nan pandemic, coming retired of it. And moreover nan slower maturation that we've guided to successful '23, opposition that pinch different proscription companies, and you tin spot that location genuinely is simply a unchangeable guidelines present that we consciousness very fortunate to person arsenic portion of our business model.

Howard Rosencrans

And I admit it. Thank you for each nan incremental color. I deliberation you request to dedicate much clip to discussing nan world customers successful slides, et cetera, because clearly, location has been a important modulation that was underappreciated by nan finance community, number one. And number two, clearly, things person changed conscionable successful position of nan Boeing fleet because 6 months ago, those were not your expectations that those were going to travel disconnected aliases that you were going to -- which was going to extensively lead to, arsenic personification other commented, a level tally complaint of nan guidelines halfway EBITDA.

So I deliberation there's a greater understanding, and I tin guarantee you that nan marketplace commentary is not based connected whether aliases not you made aliases missed nan 4th fourth by either present aliases there.

Rich Corrado

Thanks, Howard.

Operator

I'm not showing immoderate further questions astatine this time. I'd for illustration to move nan telephone backmost complete to Rich Corrado for immoderate closing remarks.

Rich Corrado

Thank you, Kevin. We've agelong discussed nan resiliency of our business model, pinch freighter leasing arsenic nan instauration and value-added services that make america unsocial and differentiated from immoderate different competitor successful nan world. We person nary peers successful what we do. Many aerial carrier services companies person struggled done nan pandemic trying to get backmost to a 2019 baseline.

Since 2019, ATSG had delivered 38% gross maturation and 42% maturation successful adjusted EBITDA. And our guidance coming continues connected that maturation trend, though slowed by nan aforesaid economical headwinds impacting each companies. Still, nan visibility we person nan rate flows from our freighter investments, pinch waiting customers complete nan adjacent 3 years gets america correct backmost connected to a 10% EBITDA maturation trajectory successful 2024 and 2025 conscionable based connected nan leasing commitments alone.

More fortunate marketplace conditions could besides assistance our different services, delivering moreover higher returns. Once again, ATSG's resiliency is demonstrated done nan astir challenging of times. As we thrust our results for 2023 and beyond, we stay a awesome finance for stability, maturation and precocious visibility of early returns. Thank you, all, for your liking successful ATSG, and please enactment safe.

Operator

Ladies and gentlemen, this does reason today's presentation. You whitethorn now disconnect, and person a awesome day.