2LT
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- Aug 8, 2003
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ABX Air Notified of DHL Release of Aircraft
WILMINGTON, Ohio, Jul 25, 2006 (BUSINESS WIRE) -- ABX Air (NASDAQ:ABXA)
reported today that it has been notified by its largest customer, DHL, that 21
ABX aircraft (11 DC-9s and 10 DC-8s) will be released from dedicated service for
DHL effective in August 2006.
ABX Air had reported in November 2004 that DHL intended to remove 26 (16 DC-9s
and 10 DC-8s) of the aircraft that ABX Air operates on DHL's behalf by the end
of 2005 under terms of their aircraft, crew, maintenance and insurance agreement
("ACMI agreement"), some of which would be replaced by newer, larger, and more
fuel efficient Boeing 767 aircraft.
Seven aircraft (three DC-9s and four DC-8s) have been removed from active
service since that November 2004 announcement. The planned August 2006 reduction
of 21 aircraft will bring to 28 the total number of aircraft released from
service under the ACMI agreement since November 2004. During the same period,
ABX Air has added four Boeing 767 freighter aircraft into the DHL network, with
associated cash flow from depreciation more than off-setting the loss of
depreciation cash flow generated by the 28 removed aircraft.
After taking into account the release of 21 aircraft, ABX Air will continue to
provide 91 aircraft in support of the DHL network (59 DC-9s, 29 Boeing 767s and
three DC-8s), and will remain by far the largest provider of ACMI services to
DHL. DHL will continue to fund depreciation for eight of the DC-9s being removed
through their remaining depreciable life (until August 2010) in exchange for use
of their engines to support the remaining DC-9 fleet in service under the ACMI
agreement. Depreciation expense from the other 13 aircraft released in August
2006 will no longer be reimbursed under the ACMI agreement with DHL.
"This reduction of aircraft was not unexpected. DHL informed us in late 2004
that it anticipated being able to eliminate approximately 26 aircraft as it
streamlined its North American operations," stated Joe Hete, President and CEO
of ABX Air. "The consolidation of DHL's air hub operations in Cincinnati into
its main, ABX-managed hub in Wilmington last September eliminated multiple
duplicate air routes."
ABX Air projects that the annualized reduction in cash flows from operations
under the ACMI agreement should be approximately $2.1 million, consisting of
annualized depreciation expense associated with the 13 aircraft of $1.9 million
as well as the contractual mark-up on depreciation and other affected operating
costs (flight crew and aircraft maintenance expenses) of $0.2 million (less than
one-half cent per share earnings impact).
Net book value on the 13 released aircraft for which DHL will not continue to
fund depreciation will be approximately $4.8 million on August 1, 2006. Pursuant
to the terms of the ACMI agreement, the Company has certain rights to put to DHL
any aircraft that they request be removed from service. The decision to put
aircraft to DHL is at ABX Air's discretion, and will depend upon management's
evaluation of other available opportunities for the aircraft. These
opportunities include placing the aircraft with another ACMI customer, or
selling the aircraft in its entirety or in component parts.
In the event the Company elects to put aircraft to DHL, provisions of the ACMI
agreement stipulate that ABX Air will receive cash equal to the lower of fair
market value or book value of the released aircraft. Any excess of book value
over fair market value will be recorded as an operating charge in the third
quarter of 2006, and would not be subject to reimbursement under the provisions
of the ACMI agreement. Management expects to conclude its evaluation of whether
or not to exercise any of the put options during the next 30 days.
Except for historical information contained herein, the matters discussed in
this release contain forward-looking statements that involve risks and
uncertainties. ABX Air's actual results may differ materially from the results
discussed in the forward-looking statements. There are a number of important
factors that could cause the Company's actual results to differ materially from
those indicated by such forward-looking statements. These factors include, but
are not limited to, further reductions in the scope of services under the ACMI
agreement with DHL, the timing associated with any such reductions, the market
for air cargo transportation services, aircraft, aircraft parts and other
factors that are contained from time to time in ABX Air's filings with the U.S.
Securities and Exchange Commission, including ABX Air's 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 the Company's forward-looking
statements. These forward-looking statements were based on information, plans
and estimates as of the date of this release. ABX Air undertakes no obligation
to update any forward-looking statements to reflect changes in underlying
assumptions or factors, new information, future events or other changes.
WILMINGTON, Ohio, Jul 25, 2006 (BUSINESS WIRE) -- ABX Air (NASDAQ:ABXA)
reported today that it has been notified by its largest customer, DHL, that 21
ABX aircraft (11 DC-9s and 10 DC-8s) will be released from dedicated service for
DHL effective in August 2006.
ABX Air had reported in November 2004 that DHL intended to remove 26 (16 DC-9s
and 10 DC-8s) of the aircraft that ABX Air operates on DHL's behalf by the end
of 2005 under terms of their aircraft, crew, maintenance and insurance agreement
("ACMI agreement"), some of which would be replaced by newer, larger, and more
fuel efficient Boeing 767 aircraft.
Seven aircraft (three DC-9s and four DC-8s) have been removed from active
service since that November 2004 announcement. The planned August 2006 reduction
of 21 aircraft will bring to 28 the total number of aircraft released from
service under the ACMI agreement since November 2004. During the same period,
ABX Air has added four Boeing 767 freighter aircraft into the DHL network, with
associated cash flow from depreciation more than off-setting the loss of
depreciation cash flow generated by the 28 removed aircraft.
After taking into account the release of 21 aircraft, ABX Air will continue to
provide 91 aircraft in support of the DHL network (59 DC-9s, 29 Boeing 767s and
three DC-8s), and will remain by far the largest provider of ACMI services to
DHL. DHL will continue to fund depreciation for eight of the DC-9s being removed
through their remaining depreciable life (until August 2010) in exchange for use
of their engines to support the remaining DC-9 fleet in service under the ACMI
agreement. Depreciation expense from the other 13 aircraft released in August
2006 will no longer be reimbursed under the ACMI agreement with DHL.
"This reduction of aircraft was not unexpected. DHL informed us in late 2004
that it anticipated being able to eliminate approximately 26 aircraft as it
streamlined its North American operations," stated Joe Hete, President and CEO
of ABX Air. "The consolidation of DHL's air hub operations in Cincinnati into
its main, ABX-managed hub in Wilmington last September eliminated multiple
duplicate air routes."
ABX Air projects that the annualized reduction in cash flows from operations
under the ACMI agreement should be approximately $2.1 million, consisting of
annualized depreciation expense associated with the 13 aircraft of $1.9 million
as well as the contractual mark-up on depreciation and other affected operating
costs (flight crew and aircraft maintenance expenses) of $0.2 million (less than
one-half cent per share earnings impact).
Net book value on the 13 released aircraft for which DHL will not continue to
fund depreciation will be approximately $4.8 million on August 1, 2006. Pursuant
to the terms of the ACMI agreement, the Company has certain rights to put to DHL
any aircraft that they request be removed from service. The decision to put
aircraft to DHL is at ABX Air's discretion, and will depend upon management's
evaluation of other available opportunities for the aircraft. These
opportunities include placing the aircraft with another ACMI customer, or
selling the aircraft in its entirety or in component parts.
In the event the Company elects to put aircraft to DHL, provisions of the ACMI
agreement stipulate that ABX Air will receive cash equal to the lower of fair
market value or book value of the released aircraft. Any excess of book value
over fair market value will be recorded as an operating charge in the third
quarter of 2006, and would not be subject to reimbursement under the provisions
of the ACMI agreement. Management expects to conclude its evaluation of whether
or not to exercise any of the put options during the next 30 days.
Except for historical information contained herein, the matters discussed in
this release contain forward-looking statements that involve risks and
uncertainties. ABX Air's actual results may differ materially from the results
discussed in the forward-looking statements. There are a number of important
factors that could cause the Company's actual results to differ materially from
those indicated by such forward-looking statements. These factors include, but
are not limited to, further reductions in the scope of services under the ACMI
agreement with DHL, the timing associated with any such reductions, the market
for air cargo transportation services, aircraft, aircraft parts and other
factors that are contained from time to time in ABX Air's filings with the U.S.
Securities and Exchange Commission, including ABX Air's 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 the Company's forward-looking
statements. These forward-looking statements were based on information, plans
and estimates as of the date of this release. ABX Air undertakes no obligation
to update any forward-looking statements to reflect changes in underlying
assumptions or factors, new information, future events or other changes.
