ATSG Reports Results for Fourth Quarter 2012

  ATSG Reports Results for Fourth Quarter 2012

              Projects Improving Adjusted EBITDA Trend for 2013

Business Wire

WILMINGTON, Ohio -- February 27, 2013

Air Transport Services Group, Inc. (NASDAQ:ATSG), a leading provider of air
cargo transportation and related services to air carriers and other companies,
today reported financial results as follows:

  *Per-share net earnings from continuing operations of 19 cents in fourth
    quarter, 65 cents in 2012;
  *Adjusted EBITDA* of $42.6 million in fourth quarter 2012 exceeded our
    November 2012 guidance by 6 percent;
  *Adjusted EBITDA* Outlook: Baseline of $175 million to $180 million for
    2013, with improving trend after first quarter, and an 8-10 percent
    incremental growth opportunity above 2013 baseline under aircraft
    deployment goals.

Fourth-quarter and full-year financial results for 2012, as compared with
2011, are summarized below:

Summary GAAP Results
               Quarter Ended                  Twelve Months Ended
                December 31,                    December 31,
(in millions,
except per     2012     2011     Chg.        2012     2011     Chg.
share
amounts)
Revenues        $ 154.6  $ 166.5  $ (11.9 )   $ 607.4  $ 730.1  $ (122.7 )
Pre-tax
Earnings from   $ 18.4    $ 23.3    $ (4.9  )   $ 66.3    $ 40.9    $ 25.4
Continuing
Operations
Net Earnings
(Loss) from     $ 12.2    $ 13.5    $ (1.3  )   $ 41.6    $ 23.9    $ 17.7
Continuing
Operations
Earnings
(Loss) Per
Share from     $ 0.19   $ 0.21   $ (0.02 )   $ 0.65   $ 0.37   $ 0.28   
Continuing
Operations
Adjusted
(non-GAAP)                                                
Results *
Revenues
excluding       $ 137.3   $ 143.8   $ (6.5  )   $ 532.5   $ 569.5   $ (37.0  )
Reimbursed
Expenses
Adjusted
Pre-tax
Earnings from   $ 17.5    $ 22.7    $ (5.2  )   $ 64.4    $ 75.8    $ (11.4  )
Continuing
Operations
Adjusted
EBITDA from    $ 42.6   $ 48.1   $ (5.5  )  $ 163.2  $ 180.8  $ (17.6  )
Continuing
Operations
                                                                             

* More detailed financial results and changes in our aircraft fleet, including
a table defining and reconciling adjusted results to comparable GAAP measures,
are provided at the end of this release.

Joe Hete, President and CEO of ATSG, said, "We exceeded our target for
Adjusted EBITDA in the fourth quarter of 2012, and began 2013 with the best
aircraft fleet in our history, fewer capital commitments for our cash flow,
and a strong balance sheet. I am optimistic that we can grow Adjusted EBITDA
significantly this year from our current base of business alone, and will do
even better if we achieve our aircraft deployment targets.”

In 2011, ATSG's results included revenues and earnings from D.B. Schenker, a
global logistics provider that ATSG had supported via a dedicated air-cargo
network. Pre-tax 2011 earnings included $27.1 million in third-quarter
impairment charges stemming from the termination of that network. ATSG had no
Schenker-related revenues or earnings in 2012.

Operating Results

Aircraft Leasing

Pre-tax fourth-quarter earnings for Cargo Aircraft Management (CAM) were $17.7
million, up 6 percent from the year-earlier period. Revenues increased 2
percent to $39.5 million.

At the end of 2012, CAM owned 48 aircraft in serviceable condition, including
20 leased to external customers and 28 leased to its ATSG airline affiliates.
In the fourth quarter, CAM retired all of its DC-8 and Boeing 727 freighters,
and completed modification of one 767-300 freighter.

In 2013, CAM expects to complete modification of one 757 freighter and two
767-300 freighters. A previously modified 757 combi (combination
passenger/freighter) is completing certification testing. In December, CAM
agreed to purchase three additional 757 combis. The four 757 combis will
replace CAM's four DC-8 combi aircraft by mid-year, yielding an ATSG fleet
that will consist entirely of Boeing 757 and 767 aircraft.

The 757s and 767s are more fuel efficient and reliable than competing
freighter aircraft, share a common pilot type rating, and require only a
two-person flight crew. Standardization of the fleet, most of which has been
modified and modernized within the last five years, will reduce ATSG's
aggregate operating expenses and increase service reliability, crew assignment
flexibility, and maintenance efficiency. ATSG's aircraft fleet at year-end
2011 and 2012, and its current outlook for aircraft in service at the end of
2013, are summarized in the final table at the end of this release.

ACMI Services

Fourth quarter revenues for ATSG's airline operations were $103.6 million,
excluding fuel and other reimbursed expenses, down from $108.3 million in the
fourth quarter of 2011. A fourth-quarter pre-tax loss of $3.0 million was down
from a $1.8 million pre-tax profit in the fourth quarter of 2011.

As previously reported, D.B. Schenker's North American air freight network
agreements with ATSG ended in December 2011. The ACMI Services segment results
for the fourth quarter and all of 2012 primarily reflect the loss of the
Schenker business. Schenker's contribution to fourth-quarter 2011 airline
services revenues was $11.9 million excluding reimbursed amounts, and $85.7
million for all of 2011.

As throughout 2012, delayed aircraft deployments affected fourth-quarter
operating results for ACMI Services. Significant new-business operations did
not commence when anticipated, leading to lower than expected revenues.

By the end of the first quarter of 2013, ATSG expects to complete the merger
of Air Transport International (ATI) and Capital Cargo International Airlines
(CCIA), the airlines that had served Schenker. In anticipation of that merger,
some of their operations have moved to Wilmington, Ohio, and their staffing
levels have been reduced. The most significant operating savings from the
merger will occur in the second half of 2013.

In the fourth quarter of 2012, a new two-year service award for combi service
for the U.S. military took effect. In December, ATSG agreed to purchase three
Boeing 757 combis, one in the fourth quarter and two in the first quarter of
2013. All four 757 combis, including one 757 combi acquired earlier and
undergoing certification, are expected to enter service at mid-year.

Significantly, ATSG announced last month the deployment of four Boeing
freighters, including one 757 and three 767s, into DHL's domestic network.
Those aircraft replace Boeing 727 freighters that were retired at year-end.
ATI also extended agreements for three 767s operating in DHL's network in the
Mideast.

Fourth-quarter ACMI block hours were down 5 percent overall from a year ago,
but increased 2 percent excluding block hours operated for Schenker in the
fourth quarter of 2011.

Other Activities

Fourth-quarter revenues from ATSG's other businesses increased 9 percent, to
$30.5 million, before the elimination of inter-company results. Pre-tax profit
from other activities was $3.0 million, down 30 percent from the year-earlier
quarter.

During the fourth quarter, ATSG announced an agreement with the Clinton County
(Ohio) Port Authority for the lease of a new 100,000-square-foot hangar
facility the port authority will construct at the Wilmington Air Park.
Airborne Maintenance & Engineering Services will lease the new hangar on a
long-term basis, expanding its ability to provide maintenance, repair and
overhaul services to both ATSG and third-party aircraft, beginning in early
2014.

Outlook for 2013

ATSG projects that under current customer agreements and operating levels, and
with synergies from the merger of ATI and CCIA, it will generate between $175
and $180 million in Adjusted EBITDA in 2013, compared with $163 million in
2012. First-quarter 2013 EBITDA year-over-year gains are expected to be
consistent with the percentage gain for 2013 as a whole. ATSG also projects
that its Adjusted EBITDA could increase an additional 8 to 10 percent from the
2013 baseline range, assuming achievement of its aircraft deployment goals.

ATSG has no current plans to acquire aircraft in 2013 other than the
previously announced purchase of two Boeing 757 combis. As a result, we expect
capital spending to decline approximately $45 million from 2012, to
approximately $110 million in 2013.

Hete concluded, “The current market continues to complicate forecasting the
timing of aircraft deployments we are discussing with our customers. However,
if those programs move forward as current discussions would indicate, 2013
could turn out to be a very good year for our shareholders.”

Conference Call

ATSG will host a conference call on Thursday, February 28, 2013, at 10:00 a.m.
Eastern time to review its financial results for the fourth quarter of 2012.
Participants should dial 888-895-5271 and international participants should
dial 847-619-6547 ten minutes before the scheduled start of the call and ask
for conference pass code 34302564. The call will also be webcast live
(listen-only mode) via www.atsginc.com and www.earnings.com for individual
investors, and via www.streetevents.com for institutional investors.

A replay of the conference call will be available by phone on Thursday,
February 28, 2013, beginning at 2:00 p.m. and continuing through Thursday,
March 7, 2013, at 888-843-7419 (international callers 630-652-3042); use pass
code 34302564#. The webcast replay will remain available via www.atsginc.com
and www.earnings.com for 30 days.

About ATSG

ATSG is a leading provider of aircraft leasing and air cargo transportation
and related services to domestic and foreign air carriers and other companies
that outsource their air cargo lift requirements. ATSG, through its leasing
and airline subsidiaries, is the world's largest owner and operator of
converted Boeing 767 freighter aircraft. Through its principal subsidiaries,
including three airlines with separate and distinct U.S. FAA Part 121 Air
Carrier certificates, ATSG provides aircraft leasing, air cargo lift, aircraft
maintenance services and airport ground services. ATSG's subsidiaries include
ABX Air, Inc.; Airborne Global Solutions, Inc.; Air Transport International,
Inc; Cargo Aircraft Management, Inc.; Capital Cargo International Airlines,
Inc.; and Airborne Maintenance and Engineering Services, Inc. For more
information, please see www.atsginc.com.

Except for historical information contained herein, the matters discussed in
this release contain forward-looking statements that involve risks and
uncertainties. There are a number of important factors that could cause Air
Transport Services Group's ("ATSG's") actual results to differ materially from
those indicated by such forward-looking statements. These factors include, but
are not limited to, changes in market demand for our assets and services, the
costs and timing associated with the modification and certification testing of
Boeing 767 and Boeing 757 aircraft, the timing associated with the deployment
of aircraft among customers, ATSG's effectiveness in restructuring its airline
operations affected by D.B. Schenker's restructuring of its U.S. air cargo
operations, and other factors that are contained from time to time in ATSG's
filings with the U.S. Securities and Exchange Commission, including its Annual
Report on Form 10-K and Quarterly Reports on Form 10-Q. Readers should
carefully review this release and should not place undue reliance on ATSG's
forward-looking statements. These forward-looking statements were based on
information, plans and estimates as of the date of this release. ATSG
undertakes no obligation to update any forward-looking statements to reflect
changes in underlying assumptions or factors, new information, future events
or other changes.

AIR TRANSPORT SERVICES GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
(In thousands, except per share data)
                                                  
                         Three Months Ended          Year Ended
                         December 31,               December 31,
                         2012         2011          2012         2011
REVENUES                 $ 154,552     $ 166,465     $ 607,438     $ 730,133
                                                                   
OPERATING EXPENSES
Salaries, wages and      48,817        48,338        184,644       188,884
benefits
Fuel                     13,966        19,858        53,928        150,003
Maintenance, materials   22,405        19,503        97,540        86,929
and repairs
Depreciation and         21,606        22,198        84,477        91,063
amortization
Landing, ramp, rent      13,337        14,602        49,659        57,140
and insurance
Travel                   5,521         7,532         22,683        28,335
Other operating          7,911         8,525         35,819        38,006
expenses
Impairment of
aircraft, goodwill and   —            —            —            27,144    
acquired intangibles
                         133,563       140,556       528,750       667,504
                                                                
OPERATING INCOME         20,989        25,909        78,688        62,629
OTHER INCOME (EXPENSE)
Interest income          32            51            136           179
Interest expense         (3,497    )   (3,237    )   (14,383   )   (14,181   )
Unrealized gain/(loss)
on derivative            923           556           1,879         (4,881    )
instruments
Write off of
unamortized debt         —            —            —            (2,886    )
issuance costs
                         (2,542    )   (2,630    )   (12,368   )   (21,769   )
                                                                
EARNINGS FROM
CONTINUING OPERATIONS    18,447        23,279        66,320        40,860
BEFORE INCOME TAXES
INCOME TAX EXPENSE       (6,236    )   (9,749    )   (24,672   )   (16,995   )
                                                                
EARNINGS FROM            12,211        13,530        41,648        23,865
CONTINUING OPERATIONS
                                                                   
LOSS FROM DISCONTINUED   (198      )   (599      )   (774      )   (673      )
OPERATIONS, NET OF TAX
NET EARNINGS             $ 12,013     $ 12,931     $ 40,874     $ 23,192  
                                                                   
EARNINGS PER SHARE -
Basic
Continuing operations    $ 0.19       $ 0.21       $ 0.66       $ 0.38    
Discontinued             —            (0.01     )   (0.02     )   (0.01     )
operations
NET EARNINGS PER SHARE   $ 0.19       $ 0.20       $ 0.64       $ 0.37    
                                                                   
EARNINGS PER SHARE -
Diluted
Continuing operations    $ 0.19       $ 0.21       $ 0.65       $ 0.37    
Discontinued             —            (0.01     )   (0.02     )   (0.01     )
operations
NET EARNINGS PER SHARE   $ 0.19       $ 0.20       $ 0.63       $ 0.36    
                                                                   
WEIGHTED AVERAGE
SHARES
Basic                    63,525       63,336       63,461       63,284    
Diluted                  64,244       64,109       64,420       64,085    
                                                                             

AIR TRANSPORT SERVICES GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)
                                                               
                                                  December 31,    December 31,
                                                  2012            2011
ASSETS
CURRENT ASSETS:
Cash and cash equivalents                         $ 15,442        $  30,503
Accounts receivable, net of allowance of $749     47,858          42,278
in 2012 and $434 in 2011
Inventory                                         9,430           8,906
Prepaid supplies and other                        8,855           9,785
Deferred income taxes                             19,154          31,548
Aircraft and engines held for sale                3,360          9,831      
TOTAL CURRENT ASSETS                              104,099         132,851
                                                                  
Property and equipment, net                       818,924         748,913
Other assets                                      20,462          18,579
Intangibles                                       5,146           6,396
Goodwill                                          86,980         86,980     
TOTAL ASSETS                                      $ 1,035,611    $  993,719 
                                                                  
LIABILITIES AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES:
Accounts payable                                  $ 36,521        $  48,360
Accrued salaries, wages and benefits              22,917          23,226
Accrued expenses                                  8,502           10,291
Current portion of debt obligations               21,265          13,223
Unearned revenue                                  10,311         12,487     
TOTAL CURRENT LIABILITIES                         99,516          107,587
                                                                             
Long term debt obligations                        343,216         333,681
Post-retirement liabilities                       185,097         185,562
Other liabilities                                 62,104          54,212
Deferred income taxes                             46,422          42,530
                                                                  
STOCKHOLDERS’ EQUITY:
Preferred stock, 20,000,000 shares authorized,
including 75,000 Series A Junior Participating    —               —
Preferred Stock
Common stock, par value $0.01 per share;
75,000,000 shares authorized; 64,130,056 and      641             640
64,015,789 shares issued and outstanding in
2012 and 2011, respectively
Additional paid-in capital                        523,087         520,613
Accumulated deficit                               (107,185    )   (148,059   )
Accumulated other comprehensive loss              (117,287    )   (103,047   )
TOTAL STOCKHOLDERS’ EQUITY                        299,256        270,147    
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY        $ 1,035,611    $  993,719 
                                                                             

AIR TRANSPORT SERVICES GROUP, INC. AND SUBSIDIARIES
PRE-TAX EARNINGS AND ADJUSTED PRE-TAX EARNINGS SUMMARY
FROM CONTINUING OPERATIONS
NON-GAAP RECONCILIATION
(In thousands)
                                                  
                         Three Months Ended          Year Ended
                         December 31,                December 31,
                         2012         2011          2012         2011
Revenues
CAM Leasing              $ 39,492      $ 38,534      $ 154,565     $ 140,469
ACMI Services
Airline services         103,587       108,342       404,053       444,778
Reimbursables            17,264       22,669       74,940       160,683   
Total ACMI Services      120,851       131,011       478,993       605,461
Other Activities         30,467       28,042       112,343      105,284   
Total Revenues           190,810       197,587       745,901       851,214
Eliminate internal       (36,258   )   (31,122   )   (138,463  )   (121,081  )
revenues
Customer Revenues        $ 154,552    $ 166,465    $ 607,438    $ 730,133 
                                                                   
Pre-tax Earnings
(Loss) from Continuing
Operations
CAM, inclusive of        17,680        16,726        68,499        59,982
interest expense
ACMI Services            (2,960    )   1,768         (14,503   )   6,576
Asset impairments        —             —             —             (27,144   )
Other Activities         3,048         4,330         11,650        11,331
Net, unallocated         (244      )   (101      )   (1,205    )   (2,118    )
interest expense
Net gain (loss) on       923           556           1,879         (4,881    )
derivative instruments
Write off of
unamortized debt         —            —            —            (2,886    )
issuance costs
Total Pre-tax Earnings   $ 18,447      $ 23,279      $ 66,320      $ 40,860
                                                                   
Adjustments to Pre-tax
Earnings
Add Asset impairment     —             —             —             27,144
charges
Less Net (Gain) Loss
on derivative            (923      )   (556      )   (1,879    )   4,881
instruments
Add Write-off of
unamortized debt         —            —            —            2,886     
issuance costs
Adjusted Pre-tax         $ 17,524     $ 22,723     $ 64,441     $ 75,771  
Earnings
                                                                             

Notes: During the first half of 2011, the Company refinanced its long-term
debt, recorded charges to write-off unamortized debt origination costs
associated with terminated credit agreements and recognized losses for certain
interest rate swaps which had been designated as hedges of the previous debt.
Reimbursable revenues include certain operating costs that are reimbursed to
the airlines by their customers. Such costs include fuel used, landing fees
and certain aircraft maintenance expenses. The decline in reimbursable
revenues during 2012 compared to 2011 reflects the discontinuation of D.B.
Schenker's air network in the fourth quarter of 2011.

Adjusted Pre-tax Earnings is defined as Earnings from Continuing Operations
Before Income Taxes plus derivative losses, less derivative gains, plus the
write-off related to the termination of certain credit agreements in
conjunction with the refinancing of the Company's debt. Management uses
Adjusted Pre-tax Earnings from Continuing Operations to assess the performance
of its operating results among periods. Adjusted Pre-tax earnings from
Continuing Operations is a non-GAAP financial measure and should not be
considered an alternative to Earnings from Continuing Operations Before Income
Taxes or any other performance measure derived in accordance with GAAP.

AIR TRANSPORT SERVICES GROUP, INC. AND SUBSIDIARIES
UNAUDITED ADJUSTED EARNINGS FROM CONTINUING OPERATIONS BEFORE INTEREST, TAXES,
DEPRECIATION AND AMORTIZATION
NON-GAAP RECONCILIATION
(In thousands)
                                                  
                           Three Months Ended        Year Ended
                           December 31,             December 31,
                           2012        2011         2012         2011
                                                                   
Earnings from Continuing
Operations Before Income   $ 18,447     $ 23,279     $ 66,320      $ 40,860
Taxes
Interest Income            (32      )   (51      )   (136      )   (179      )
Interest Expense           3,497        3,237        14,383        14,181
Depreciation and           21,606      22,198      84,477       91,063    
Amortization
EBITDA from Continuing     $ 43,518     $ 48,663     $ 165,044     $ 145,925
Operations
Add Asset impairment       —            —            —             27,144
charges
Less Net (Gain) Loss on    (923     )   (556     )   (1,879    )   4,881
derivative instruments
Add Write-off of
unamortized debt           —            —            —             2,886
issuance costs
                                                                
Adjusted EBITDA from       $ 42,595    $ 48,107    $ 163,165    $ 180,836 
Continuing Operations
                                                                             

EBITDA and Adjusted EBITDA from Continuing Operations are non-GAAP financial
measures and should not be considered as alternatives to Earnings from
Continuing Operations Before Income Taxes or any other performance measure
derived in accordance with GAAP.

EBITDA from Continuing Operations is defined as Earnings from Continuing
Operations Before Income Taxes plus net interest expense, depreciation, and
amortization expense. Adjusted EBITDA from Continuing Operations is defined as
EBITDA from Continuing Operations plus asset impairment charges, plus net
derivative losses, less derivative gains, plus the write-off related to the
termination of certain credit agreements in conjunction with the refinancing
of the Company's debt.

Management uses EBITDA from Continuing Operations as an indicator of the
cash-generating performance of the operations of the Company. Management uses
Adjusted EBITDA and Adjusted Pre-tax Earnings from Continuing Operations to
assess the performance of its operating results among periods. EBITDA and
Adjusted EBITDA from Continuing Operations, and Adjusted Pre-tax Earnings
should not be considered in isolation or as a substitute for analysis of the
Company's results as reported under GAAP, or as an alternative measure of
liquidity.

Note: A reconciliation of the forward-looking Adjusted EBITDA projections
presented in the text of this release is not provided, because of the number
of variables in our projected GAAP financial components.

AIR TRANSPORT SERVICES GROUP, INC. AND SUBSIDIARIES
IN-SERVICE AIRCRAFT FLEET

Aircraft Types
            December 31,               December 31,               December 31,
             2011                        2012                        2013 Projected
                           Operating                 Operating                 Operating
             Total   Owned   Lease       Total   Owned   Lease       Total   Owned   Lease
B767-200     40      36      4           40      36      4           40      36      4
B767-300     3       2       1           7       5       2           9       7       2
B757-200     3       3       —           3       3       —           4       4       —
B757 Combi   —       —       —           —       —       —           4       4       —
DC-8         3       3       —           —       —       —           —       —       —
DC-8 Combi   4       4       —           4       4       —           —       —       —
B727-200     4       4       —           —       —       —           —       —       —
Total
Aircraft     57      52      5           54      48      6           57      51      6
In-Service
                                                                                     
Owned Aircraft In Serviceable Condition
             December 31,                December 31,                December 31,
             2011                        2012                        2013 Projected
                                                                                     
ATSG                 31                          28                          30-32
airlines
External             21                          20                          19-21
customers
                     52                          48
                                                                                     

Contact:

ATSG Inc.
Quint O. Turner, Chief Financial Officer, 937-382-5591