Global flyer stays grounded in Purchase
After a year of record earnings and with demand rising for international air freight service, executives at Atlas Air Worldwide Holdings Inc. have reason to be sky-high about their business”™ future. Yet they”™ll stay grounded in Westchester County while their company”™s new fleet of larger, more efficient and more profitable aircraft fly a global weave of trade lanes over the next decade.
That air traffic will be directed from an around-the-clock operations center tucked away in a gleaming-white office building on Westchester”™s Platinum Mile corridor of office parks.
Atlas Air Worldwide President and CEO William J. Flynn on June 8 was joined by Westchester County Executive Robert P. Astorino in announcing the company”™s decision to renew its lease for its 120,000-square-foot corporate headquarters at 2000 Westchester Ave. in Purchase. The roughly 747,600-square-foot office building sits on a 107-acre property and was designed as headquarters for Texaco Inc.
About 460 of Atlas Air”™s 1,400 employees work in New York, including 430 in Purchase, Flynn said. Those employees were said to be both elated and relieved when told of the company”™s leasing decision before the public announcement.
Flynn said the company will create 50 new full-time positions in the state, some of those at John F. Kennedy International Airport in Queens.
“We”™ve hired 200 people in the last 18 months, so we”™re growing,” the CEO said in an interview with the Business Journal prior to the company announcement.
Atlas Air exercised a five-year renewal option on its 10-year lease with landlord and co-tenant Morgan Stanley. Morgan Stanley acquired the building in 2002, two years after Atlas moved its corporate headquarters from Colorado to Purchase. Flynn said the company plans to exercise a second five-year option and has made a 10-year commitment to New York and Westchester officials.
That commitment will be sweetened by $8.5 million from the state in Excelsior Job Program benefits over the next decade and $442,000 in sales tax exemptions from the Westchester County Industrial Development Agency over three years. The company also is eligible for energy credits valued at $480,000 over 10 years.
Still, “The driving decision wasn”™t really economic,” Flynn said. After 12 years in Westchester, “We think it”™s the right place to be. It”™s right for our company and it”™s right for our employees.” He said the company”™s success has been built by “a great team” of employees.
Flynn said the company looked at 60 cities as potential locations for its headquarters and narrowed the field to five choices. Atlas Air received “aggressive” incentive offers from several suitors.
Astorino said he learned earlier this year that Atlas Air “was being wooed by several states.” He called Gov. Andrew Cuomo”™s office and asked state officials to get involved in the effort to keep the employer and more than 400 jobs in Westchester. Kenneth Adams, president and CEO of Empire State Development Corp. and state economic development commissioner, “fought very hard to make sure Atlas was a priority,” the county executive said.
The company”™s decision followed months of discussion between his administration and Flynn”™s executive team, Astorino said.
Launched with one aircraft in 1993, Atlas Air now operates a fleet of 30 freighter aircraft ”“ the world”™s largest fleet of Boeing 747 freighters ”“ in addition to four Boeing-owned large-cargo freighters and two customer-owned passenger planes. The company expects delivery this year of the first in its next-generation fleet of 12 Boeing 747-8F aircraft.
That $2.1-billion investment is expected to drive profits and growth in Atlas”™ largest leasing service, ACMI or wet leasing, which provides long-term contract customers with aircraft, crew, maintenance and insurance. Those customers include such leading international airlines as British Airways, Emirates, Qantas and Panalpina.
“We might be one of the few U.S. companies to whom foreign companies are actively outsourcing,” Flynn said.
Atlas Air has secured financing for the first three supersized Boeing freighters. “Our lenders, European banks, like the aircraft,” he said. “They believe as we do that this is the next step” in international freight service.
Among its diversified services, Atlas Air has flown cargo for the U.S. Air Military Command since the start of the war on terror in 2001. In May, it launched a military passenger service, a business expected to grow as demand for military cargo flights is reduced with troop pullouts from combat areas, Flynn said. Since 2008, Atlas Air also has provided training for U.S. Air Force One pilots in Miami.
The company in 2010 began providing crews, maintenance and insurance for customer-owned aircraft, or CMI leasing. One of its initial two customers is Boeing, for which Atlas Air mans four Dreamlifter aircraft, an oversized cargo freighter that carries assembly parts from U.S. and foreign suppliers for Boeing”™s 787 Dreamliner manufacturing program. The company also provides CMI passenger service between Houston and Africa for SonAir, a subsidiary of the multinational energy company of Angola, flying oil-industry executives from the United States-Africa Energy Association.
Except for the commercial charters it operates under short-term leases, fuel costs for Atlas Air flights are paid by its outsourcing customers. Under Flynn”™s five-year leadership, the company has minimized its exposure to volatile fuel prices.
“Avoiding fuel risk is key to our business model,” he said. “We”™re not going to expand into businesses where there”™s a lot of fuel risk.”
The company last year operated approximately 17,000 flights to 249 destinations in 89 countries. “There are not many U.S. carriers that operate in that large a global market,” he said.
“If there”™s a runway long enough, we”™ve probably been there,” said Kevin Sarubbe, Atlas Air vice president of system operations. Inside tightly secured company headquarters in Purchase, Sarubbe directs its global operations center, where employees at computer stations manage 30 to 32 aircraft navigating global routes at any time.
The operations center is staffed by 30 to 35 employees. “It”™s a small team,” Sarubbe said. “We”™re a lean organization personnel-wise, but that”™s what keeps us on top, we like to think.”
While Atlas Air and other carriers look to Asia to drive future market growth ”“ about one-half of international air freight originates there, said Flynn ”“ demand for air-freight service increased worldwide last year.
“They were all strong markets in 2010 coming out of this recession,” he said. “Because of who our customers are, we were pretty much involved in all of it.”
It was a record year for Atlas Air and its shareholders. Net income increased to $141.8 million in 2010, or $5.44 per diluted share, up from $77.8 million, or $3.56 per diluted share, in 2009. On an adjusted basis, company earnings rose to $150 million, or $5.75 per diluted share, from $74.3 million, or $3.40 per diluted share, in 2009.
With its new fleet and diverse businesses serving a growing global market led by China and its Asian neighbors, Flynn said Atlas Air has entered “an era of transformative growth.”
“It”™s an exciting business and it”™s a lot of fun. It”™s a great company and a great team.”