Bain Capital to invest in Atlas Air’s aircraft leasing unit

Atlas Air plane flying above the clouds

Investment firm Bain Capital Credit will invest an initial $360 million in a joint venture with Atlas Air Worldwide Holdings (Nasdaq: AAWW), a major provider of outsourced all-cargo aircraft operations and other aviation services, to lease freighter aircraft, the companies said Wednesday.

Under the agreement, Atlas’ leasing subsidiary Titan Aviation Holdings Inc. will contribute $40 million of equity towards the portfolio, which ultimately could have a value of $1 billion with additional commitments to acquire aircraft over the next several years. The number and type of planes to be acquired are still to be determined. Titan will identify and source aircraft, as well as provide lease-management services to the venture.  

The new company will be called Titan Aircraft Investment, Dan Loh, Atlas’ vice president of investor relations, told FreightWaves. “The parties are working expeditiously to complete and implement all elements of the joint venture,” he said.

Since its inception in 2009, Titan has grown to become the third-largest freighter lessor globally by fleet value with over 30 aircraft and a book value of over $1.5 billion.

Titan provides aircraft to airlines, which put them under their own operating certificate and then fly, maintain and insure them. Contracts are usually long term.

The dry leasing business represents about 15% of the Atlas Air parent company’s revenues.  It also owns Atlas Air and Southern Air, and is a majority owner in Polar Air Cargo, all of which operate aircraft on behalf of other airlines,or charters for logistics companies,charter brokers and the military. Atlas Air, for example, is a contractor for Amazon Air’s dedicated network.

“We have long admired Atlas and Titan as a best-in-class industry leader and are excited to join forces for a constructive and lasting partnership,” said Matt Evans, a director at Bain Capital Credit, in a Dec. 18 statement. “We look forward to supporting the company’s next phase of growth as it continues to leverage its deep relationships within the global airfreight community.”

The Bain Capital equity will help Titan expand at a time when the parent company is highly leveraged and would have difficulty borrowing more money. AAWW has almost $2.4 billion of debt on its balance sheet, according to its third quarter financial statement, equivalent to four times its earnings before interest, taxes, depreciation and amortization. Atlas borrowed the money to add aircraft when it became a transport supplier to Amazon in recent years.

“This is a way for them to grow this dry leasing business with some outside money,” Kevin Sterling, senior equity research analyst at Seaport Global Securities said in an interview.

It’s been a challenging year for AAWW. Profits have sunk along with a weak airfreight market and the Atlas Air and Southern Air units are embroiled in a long-running pay dispute with pilots, who have tried to pressure the company by working to the rule. The work slowdown made it difficult to fly airplanes on time, which has damaged relations with Amazon.