Air Transport Services Group Announces Second-Quarter Results

  Air Transport Services Group Announces Second-Quarter Results

            Revises 2013 Guidance to Reflect ACMI Services Outlook

Business Wire

WILMINGTON, Ohio -- August 8, 2013

Air Transport Services Group, Inc. (Nasdaq: ATSG), a leading provider of
aircraft leasing, and air cargo transportation and related services, today
reported consolidated financial results for the quarter ended June 30, 2013.

For the second quarter of 2013, compared with the second quarter of 2012:

  *Revenues decreased 9.5 percent to $138.9 million.
  *Net earnings from continuing operations decreased 38.4 percent to $6.9
    million, or $0.11 per fully diluted share. Net earnings include a non-cash
    federal income tax provision. The company does not expect to pay
    significant federal income taxes until 2016.
  *Adjusted EBITDA decreased 16.7 percent to $35.9 million. This non-GAAP
    financial measure is defined and reconciled to comparable GAAP results in
    a table at the end of this release. Second-quarter Adjusted EBITDA was
    negatively impacted by $4 million due to unanticipated regulatory
    certification and training requirements.

Joe Hete, President and Chief Executive Officer of ATSG, said, "Our second
quarter results include substantial lost revenue and additional operating
expenses in our ACMI Services operations, and in particular at Air Transport
International (ATI). While our core business with DHL and other customers
remains strong and profitable, we continue to face delays in achieving expense
and revenue goals at ATI following its merger with its former affiliate
airline in March. The losses were due in large part to unanticipated
regulatory certification and training requirements that delayed the deployment
of our Boeing 757 combi aircraft and reduced ATI's ability to provide flight
crews for both contracted and ad-hoc operations.

“The effect of these issues has eased since early July, when the deployment of
our first two 757 combis restored our combi fleet to full strength. We now
have sufficient aircraft assets to meet our customer commitments, and
anticipate achieving sequential improvement in our ACMI Services operations
during the second half, while our aircraft leasing and other businesses
continue to generate solid returns.”

First-half 2013 revenues decreased 5.6 percent to $282.2 million compared with
the same 2012 period. Pre-tax earnings for the half decreased 14.7 percent to
$24.7 million. Adjusted EBITDA, which excludes unrealized gains or losses on
derivative instruments, decreased 5.1 percent to $73.3 million.

Segment Results

CAM (Aircraft Leasing)

                                                  
CAM               Second Quarter           First Half
($ in thousands)   2013        2012         2013        2012
Revenues           $ 39,362     $ 38,067     $ 78,331     $ 75,918
Pre-Tax Earnings  17,214     16,667     34,087     33,485
                                                          

Fleet Developments:

  *On June 30, 2013, ATSG owned 48 aircraft in serviceable condition - 20
    leased to external customers and 28 leased to ATSG affiliate airlines. A
    table reflecting aircraft in service is included at the end of this
    release.

       *The in-service fleet consisted of forty-one Boeing 767 freighters,
         four Boeing 757 freighters, two DC-8 combis (combined passenger and
         main-deck cargo aircraft) and one 757 combi.
       *One 757 freighter and one 757 combi aircraft entered service during
         the second quarter. One DC-8 combi aircraft was retired during the
         quarter.
       *Since the second quarter of 2012, CAM has retired six older
         freighters; four 727s and two DC-8s.

  *Two Boeing 767-300s were in passenger-to-freighter conversion as of June
    30, 2013.
  *One other 757 combi entered service in July. Two more 757 combis will
    enter service in the second half, replacing the two remaining DC-8 combis.

ACMI Services

                                                 
ACMI Services            Second Quarter            First Half
($ in thousands)          2013        2012          2013         2012
Revenues
Airline services          $ 89,920     $ 101,020     $ 183,077     $ 197,362
Reimbursables             16,684      20,369       34,843       37,222    
Total ACMI Services       106,604      121,389       217,920       234,584
Revenues
                                                                   
Pre-Tax Loss             (9,093   )  (1,582    )  (14,497   )  (9,797    )
                                                                             

Significant Developments:

  *Airline services revenues decreased $11.1 million as a result of fewer
    aircraft in revenue service, delayed aircraft certification, and flight
    crew shortages due primarily to additional regulatory requirements.

       *ATI operated during late May and most of June with only two combi
         aircraft due to delayed 757 combi certification. As a result, ATI
         missed some scheduled combi flights and forfeited approximately $3
         million in associated revenue until late June, when the first 757
         combi entered revenue service. A second 757 combi entered service in
         early July, bringing the combi fleet to full strength at four,
         including two DC-8s.
       *Unanticipated additional training was mandated for flight crews and
         other personnel of former airline CCIA as a condition of CCIA's
         merger with ATI, resulting in the forfeiture of another $3 million in
         additional revenue due to the lack of available crews, and increased
         training costs. Synergy-related expense reductions from the merger
         were minimal for the quarter, and will remain so through the balance
         of the year.
       *The net effect of these certification delays and crew shortages on
         second-quarter pretax income was approximately $4 million.

  *During the second quarter, one 757 freighter entered service with ATI, and
    four 767 freighters remained underutilized.
  *Block hours decreased 17 percent during the second quarter, compared to
    the prior-year period. The decline in block hours was greater than the 11
    percent decline in airline services revenues primarily because of fewer
    longer-range international operations this year.

Other Activities

                                         
Other Activities  Second Quarter           First Half
($ in thousands)   2013        2012         2013        2012
Revenues           $ 26,951     $ 26,682     $ 53,205     $ 55,103
Pre-Tax Earnings  2,607      3,228      4,788      5,229
                                                          

  *Pre-tax earnings reflect a reduction in aircraft maintenance operations
    for third parties, but stronger results from management of U.S. Postal
    Service sorting facilities.

Outlook

ATSG's baseline outlook for Adjusted EBITDA for the second half of 2013 is a
range of $82 to $87 million, which is consistent with a range of $155 to $160
million for the full year. This outlook includes approximately $10 million in
reduced revenues and higher costs this year that will not recur in 2014, that
are due to delays in ATI's combi transition program and regulatory delays
affecting flight crew availability. The outlook does not include potential
results from new business that may develop during the remainder of the year.

Hete said, "Our fundamental business strategy of acquiring and leasing out
cargo aircraft remains sound, and our customer relationships are strong. We
expect our aircraft leasing and other businesses to continue to generate good
returns in the second half. We also anticipate restoring the profitability of
our ACMI Services business in 2014 as we capture the full benefits of our 757
combi fleet investment and airline merger. We remain optimistic about the
improving trends in the domestic and international markets we serve and will
remain focused on rapidly completing all of the regulatory requirements we
face, and deploying all of our available aircraft as markets improve."

Conference Call

ATSG will host a conference call on Friday, August 9, 2013, at 10:00 a.m.
Eastern time to review its financial results for the second quarter of 2013.
Participants should dial 888-895-5479 and international participants should
dial 847-619-6250 ten minutes before the scheduled start of the call and ask
for conference pass code 35347362. 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 Friday, August
9, 2013, beginning at 2:00 p.m. and continuing through noon on Friday, August
16, 2013, at 888-843-7419 (international callers 630-652-3042); use pass code
35347362#. 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 two 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.; 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 to customers, achievement of the benefits we anticipated from the
merger of two of our airline businesses, our operating airlines' ability to
maintain on-time service and control costs, 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          Six Months Ended
                         June 30,                   June 30,
                         2013         2012          2013         2012
REVENUES                 $ 138,904     $ 153,554     $ 282,183     $ 299,060
                                                                   
OPERATING EXPENSES
Salaries, wages and      41,964        44,570        85,273        91,674
benefits
Fuel                     12,440        14,084        26,801        27,924
Maintenance, materials   25,005        25,270        47,139        48,384
and repairs
Depreciation and         21,765        21,514        42,685        41,814
amortization
Rent                     6,791         6,244         13,570        11,974
Travel                   4,772         5,566         9,499         11,544
Landing and ramp         1,972         3,880         6,037         7,946
Insurance                1,396         1,826         2,907         3,836
Other operating          8,630        8,998        17,690       18,560    
expenses
                         124,735       131,952       251,601       263,656
                                                                
OPERATING INCOME         14,169        21,602        30,582        35,404
OTHER INCOME (EXPENSE)
Interest income          18            38            39            66
Interest expense         (3,554    )   (3,671    )   (6,686    )   (7,218    )
Unrealized gain on       452          202          742          662       
derivative instruments
                         (3,084    )   (3,431    )   (5,905    )   (6,490    )
                                                                
EARNINGS FROM
CONTINUING OPERATIONS    11,085        18,171        24,677        28,914
BEFORE INCOME TAXES
INCOME TAX EXPENSE       (4,170    )   (6,952    )   (9,261    )   (11,033   )
                                                                
EARNINGS FROM            6,915         11,219        15,416        17,881
CONTINUING OPERATIONS
                                                                   
LOSS FROM DISCONTINUED   (1        )   (160      )   (2        )   (390      )
OPERATIONS, NET OF TAX
NET EARNINGS             $ 6,914      $ 11,059     $ 15,414     $ 17,491  
                                                                   
EARNINGS PER SHARE -
Basic
Continuing operations    $ 0.11       $ 0.18       $ 0.24       $ 0.28    
Discontinued             —            (0.01     )   —            —         
operations
NET EARNINGS PER SHARE   $ 0.11       $ 0.17       $ 0.24       $ 0.28    
                                                                   
EARNINGS PER SHARE -
Diluted
Continuing operations    $ 0.11       $ 0.17       $ 0.24       $ 0.28    
Discontinued             —            —            —            (0.01     )
operations
NET EARNINGS PER SHARE   $ 0.11       $ 0.17       $ 0.24       $ 0.27    
                                                                   
WEIGHTED AVERAGE
SHARES
Basic                    64,050       63,431       63,931       63,431    
Diluted                  64,859       64,393       64,692       64,383    
                                                                             

AIR TRANSPORT SERVICES GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)
                                                              
                                                 June 30,        December 31,
                                                 2013            2012
ASSETS
CURRENT ASSETS:
Cash and cash equivalents                        $ 20,932        $ 15,442
Accounts receivable, net of allowance of $601    43,840          47,858
in 2013 and $749 in 2012
Inventory                                        8,491           9,430
Prepaid supplies and other                       7,584           8,855
Deferred income taxes                            19,154          19,154
Aircraft and engines held for sale               2,716          3,360       
TOTAL CURRENT ASSETS                             102,717         104,099
                                                                 
Property and equipment, net                      855,954         818,924
Other assets                                     20,419          20,462
Intangibles                                      5,021           5,146
Goodwill                                         86,980         86,980      
TOTAL ASSETS                                     $ 1,071,091    $ 1,035,611 
                                                                 
LIABILITIES AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES:
Accounts payable                                 $ 39,455        $ 36,521
Accrued salaries, wages and benefits             18,893          22,917
Accrued expenses                                 8,797           8,502
Current portion of debt obligations              23,426          21,265
Unearned revenue                                 10,408         10,311      
TOTAL CURRENT LIABILITIES                        100,979         99,516
Long term debt obligations                       365,330         343,216
Post-retirement liabilities                      169,858         185,097
Other liabilities                                60,592          62,104
Deferred income taxes                            56,806          46,422
                                                                 
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; 64,672,632 and     647             641
64,130,056 shares issued and outstanding in
2013 and 2012, respectively
Additional paid-in capital                       523,706         523,087
Accumulated deficit                              (91,772     )   (107,185    )
Accumulated other comprehensive loss             (115,055    )   (117,287    )
TOTAL STOCKHOLDERS’ EQUITY                       317,526        299,256     
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY       $ 1,071,091    $ 1,035,611 
                                                                             

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          Six Months Ended
                         June 30,                    June 30,
                         2013         2012          2013         2012
Revenues
CAM Leasing              $ 39,362      $ 38,067      $ 78,331      $ 75,918
ACMI Services
Airline services         89,920        101,020       183,077       197,362
Reimbursables            16,684       20,369       34,843       37,222    
Total ACMI Services      106,604       121,389       217,920       234,584
Other Activities         26,951       26,682       53,205       55,103    
Total Revenues           172,917       186,138       349,456       365,605
Eliminate internal       (34,013   )   (32,584   )   (67,273   )   (66,545   )
revenues
Customer Revenues        $ 138,904    $ 153,554    $ 282,183    $ 299,060 
                                                                   
Pre-tax Earnings
(Loss) from Continuing
Operations
CAM, inclusive of        17,214        16,667        34,087        33,485
interest expense
ACMI Services            (9,093    )   (1,582    )   (14,497   )   (9,797    )
Other Activities         2,607         3,228         4,788         5,229
Net, unallocated         (95       )   (344      )   (443      )   (665      )
interest expense
Net gain on derivative   452          202          742          662       
instruments
Total Pre-tax Earnings   $ 11,085      $ 18,171      $ 24,677      $ 28,914
                                                                   
Adjustments to Pre-tax
Earnings
Less Net Gain on         (452      )   (202      )   (742      )   (662      )
derivative instruments
Adjusted Pre-tax         $ 10,633     $ 17,969     $ 23,935     $ 28,252  
Earnings
                                                                             

Adjusted Pre-tax Earnings is defined as Earnings from Continuing Operations
Before Income Taxes less derivative gains. 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        Six Months Ended
                             June 30,                 June 30,
                             2013        2012         2013        2012
                                                                    
Earnings from Continuing
Operations Before Income     $ 11,085     $ 18,171     $ 24,677     $ 28,914
Taxes
Interest Income              (18      )   (38      )   (39      )   (66      )
Interest Expense             3,554        3,671        6,686        7,218
Depreciation and             21,765      21,514      42,685      41,814   
Amortization
EBITDA from Continuing       $ 36,386     $ 43,318     $ 74,009     $ 77,880
Operations
Less Net Gain on             (452     )   (202     )   (742     )   (662     )
derivative instruments
                                                                 
Adjusted EBITDA from         $ 35,934    $ 43,116    $ 73,267    $ 77,218 
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 less derivative gains.

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.

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

Aircraft Types
            December 31,               June 30,                   December 31,
             2012                        2013                        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     7       5       2           7       5       2           9       7       2
B757-200     3       3       —           4       4       —           4       4       —
B757 Combi   —       —       —           1       1       —           4       4       —
DC-8 Combi   4       4       —           2       2       —           —       —       —
Total
Aircraft     54      48      6           54      48      6           57      51      6
In-Service
                                                                                     
Owned Aircraft In Serviceable Condition
             December 31,                June 30,                    December 31,
             2012                        2013                        2013 Projected
                                                                                     
ATSG                 28                          28                          30-31
airlines
External             20                          20                          20-21
customers
                     48                          48
                                                                                     

Contact:

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