S&P review their size up of Atlas Air
Standard & Poor's has revised its outlook on Atlas Air Worldwide Holdings Inc. to negative from stable. (7/18/2001)
The action follows Atlas's July 12 announcement that it plans to acquire Polar Air Cargo Inc. for $84 million and assume the leases on some of Polar's 747 freighter aircraft.
Polar operates scheduled services, a business described by S&P analysts as riskier than Atlas's leasing activities. "While the net purchase price appears attractive, acquisition of additional aircraft and assumption of more lease obligations during currently weak air freight market conditions, and entry into Polar's higher-fixed-cost, scheduled airport-to-airport heavy freight operations potentially increase credit risk for Atlas," S&P analysts Robert Schulz and Philip Baggaley stated in a report issued Tuesday.
"We remain convinced that this is an astute financial play," said Atlas spokeswoman Rachel Berry. "We are paying a very reasonable price for a debt-free restrucutured Polar Air Cargo with a resized fleet. The reception from the investment community has overall been positive."
In addition, S&P also affirmed its credit ratings of BB-for Atlas Air Worldwide Holdings and Atlas Air Inc., its principal operating unit. Atlas Air's senior unsecured debt has a B rating, while pass-through certificates issued over the past years have ratings ranging from AA to BBB.
The acquisition of Long Beach, Calif.-based Polar, an affiliate of GE Capital Aviation Services Inc., is expected to close during the fourth quarter of this year.
Polar currently operates several models of the large B747 freighter aircraft, but Atlas is expected to reduce this fleet to consist primarily of modern 747-400 freighters. Polar operates scheduled air freight service using attractive route authorities to and from Tokyo's capacity-constrained Narita airport and to other Asian destinations.
Polar also operates some charter flights, but its main business is scheduled freighter service. Its main customers are freight forwarders. In contrast, Atlas leases its aircraft to other carriers, also providing the crew, maintenance and insurance on the planes.
The S&P analysts said the ratings for Atlas reflect its low operating cost structure and profitable, multiyear contracts with international airlines for dedicated air freight transportation, offset by a somewhat concentrated customer base, a competitive industry environment, and high debt levels associated with its ongoing fleet growth.