(By Balaseshan) Aircraft leasing and air cargo transportation provider Air Transport Services Group Inc. (NASDAQ: ATSG) continues fleet modernization with the purchase of three Boeing (NYSE: BA) 757-200 "combi" aircraft.
The company's aircraft leasing subsidiary has reached agreement with National Air Cargo Group Inc., for the purchase of three Boeing 757-200 aircraft that have been modified for combi (combined passenger and main-deck cargo) service.
ATSG noted that, as a result of its decision to acquire one of the 757 combis in 2012, it has adjusted its previously disclosed guidance for aircraft-related capital expenditures in 2012 and 2013 to about $170 million and $95 million, respectively.
[Related -United Technologies Corporation (NYSE:UTX): How Pension Shift Will Drive EPS?]
ATSG anticipates that its subsidiary, Cargo Aircraft Management (CAM), will take delivery of one of the three 757 combi aircraft in December 2012, and the other two in early 2013. The 757 combis have a 34% lower fuel burn, ten more passenger seats and the same number of cargo pallet positions as the DC-8 combis they will replace.
The combis will be owned by CAM and leased to and operated by ATSG's airline unit Air Transport International (ATI), under ATI's contract with USTRANSCOM. Along with the three aircraft, CAM is also purchasing a spare 757-200 engine and some ancillary aircraft equipment from National.
[Related -The Boeing Company (BA): Why You Should Look At Boeing's Defense Business?]
As part of its fleet modernization program, prior to ATI's latest combi contract award from USTRANSCOM that took effect in October 2012, CAM purchased a Boeing 757-200 for combi conversion.
That aircraft is undergoing certification testing for the Federal Aviation Administration, and is due to complete that process and begin USTRANSCOM service early next year.
All three of the National combis were designed and modified to meet or exceed the same FAA and USTRANSCOM requirements, including ETOPS (Extended-range Twin-engine Operational Performance Standards) certification essential for service to USTRANSCOM's combi destinations.
Upon the retirements of the four DC-8 combis, ATSG's fleet will consist entirely of 757-200, 767-200 and 767-300 aircraft, all of which require only two crew members, and which share a common pilot type rating.
ATSG is trading up 6.40% at $3.99 on Tuesday. The stock has been trading between $3.38 and $6.88 for the past 52 weeks.