Atlas Air Worldwide Holdings Inc (AAWW) 2005 Q4 法說會逐字稿

Good morning, ladies and gentlemen, and welcome to the Atlas Air Worldwide Holdings fourth-quarter 2005 conference call. At this time, all participants are in a listen-only mode. Following today's presentation, instructions will be given for the question-and-answer session. (OPERATOR INSTRUCTIONS). As a reminder, this conference is being recorded Thursday, April 13, 2006.

I would now like to turn the conference over to William Bradley, Vice President and Treasurer of Atlas Air Worldwide Holdings. Please go ahead, Mr. Bradley.

Thank you and good morning. I am Bill Bradley, Vice President and Treasurer of Atlas Air Worldwide Holdings. Welcome to our fourth-quarter and full-year 2005 results conference call. Today's call will be hosted by Mike Barna, our Senior Vice President and Chief Financial Officer. Jeff Erickson, our President and CEO, is unfortunately traveling and could not be here for the call.

Before I turn things over to Mike, I would like to remind you that in discussing the Company's performance today, we have included some forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements relate to future events and expectations and involve unknown risks and uncertainties.

Atlas Air Worldwide Holdings' actual results or actions may differ materially from those projected in the forward-looking statements. For a summary of specific risk factors that could cause results to differ materially from those expressed in the forward-looking statements, please refer to the Safe Harbor language in our recent press release and to the risk factors set forth in our Annual Report on Form 10-K filed with the SEC on June 30, 2005, as updated by our Form 8-K filed with the SEC on December 9, 2005.

Now in our discussions today, we also include some non-GAAP financial measures. You can find our presentation on the most directly comparable GAAP financial measures calculated in accordance with generally accepted accounting principles and our related reconciliation in our recent press releases, which are posted on our website at www.atlasair.com. You may access these releases by clicking on the links to Financial News in the Investor Relations section of the website.

At this point, I'd like to turn the call over to Mike.

Thanks, Bill. Good morning and welcome, everyone. As always, we greatly appreciate both your investment interest in our Company and this opportunity to discuss our strong 2005 results with you.

Bill will discuss our earnings details with you in a moment, but I would like to touch upon a few items before he does. Let me start by explaining why today is so special and unique.

For starters, today represents the first time that Atlas Air Worldwide Holdings has publicly reported full-year results since emerging from its restructuring, which is a milestone in and of itself. But more importantly, and as our earnings reports demonstrate, 2005 was a very strong year for Atlas Air Worldwide Holdings. In addition, we are on the cusp of achieving timely filer status, which, as you may recall, is a necessary precursor to having our common stock listed on a national securities exchange.

Last night, we filed all of our 2005 quarterly 10-Qs with the SEC, and I expect our 2005 10-K to be filed by close of business tomorrow. Upon the latter to occur, we will be deemed a timely filer, ahead of the schedule we had previously committed to. Once listed, we can then look forward to broadening our investor base and interest in AAWW through enhanced stock liquidity and what I think is a fair assumption to make, heightened interest from the analyst and general investment communities, both the buy and sell side.

Before delving into the 2005 details, I'd like to reiterate a key facet of our operating philosophy and one that really began around mid-2004. And it is this approach which lay much of the groundwork for our 2005 results. Starting back in mid-2004, we began a determined effort to maximize profit and minimize risk by actively managing the allocation of available capacity among our four service types in line with prevailing business opportunities and market conditions with the aim of generating the best overall profitability from our total pool of assets.

Along those lines, we restructured our scheduled service route network to focus more on our limited access route authorities in China and Japan and elsewhere and to reallocate aircraft to more profitable opportunities in other business segments.

The net impact of this strategy in 2005 was clear -- while total block hour activity increased by 2% compared with 2004, we saw a better quality of business in our Scheduled Service segment. And in that time, we saw relatively stronger bias in our business mix to ACMI and AMC military flying.

In addition, we saw full-year increases in unit revenues in each of our business segments. And that mindset to actively manage the fleet and constantly reevaluate the fleet and to focus on the quality of the block hours as well as the quantity of block hours continues today and is something I am going to come back to after the review of the actual numbers.

What that as an intro, let me turn it over to Bill to speak to the details on our fourth-quarter and full-year 2005 results.

Thanks, Mike. As you have seen in our press release today, we reported net earnings of 73.9 million or $3.56 per diluted share for the year ended December 31, 2005. Results for the year included a pretax insurance gain of 7.8 million or about 4.7 million on an after-tax basis. In addition, net income in the fourth quarter totaled 27.5 million or $1.32 per diluted share.

Total operating revenues in '05 increased approximately 14%, while operating revenues in the fourth quarter rose 10% compared with the fourth quarter of 2004. And these higher revenues for the full year reflected a 2% increase in total block hour activity that Mike has already referenced, improved unit revenues in all four of our service types, and both of which were accompanied by a shift in our business mix as we actively reallocated capacity from Scheduled Service business into our ACMI and AMC charter operations during the year.

Higher revenues in the fourth quarter reflected, again, improved unit revenues in all four of our service types, as well as a shift in our business mix due to the restructuring of Scheduled Service network and the reallocation of aircraft to more profitable opportunities in other business segments.

Total block hour activity in the fourth quarter, meanwhile, was nearly 10% lower than in the fourth quarter of 2004. The decline in activity was mainly due to the restructuring of the Scheduled Service network since total block hours for our other business segments were relatively flat year over year.

Within that mix, however, AMC charter block hours were up nearly 2000 hours, while ACMI block hours were down slightly more than that amount. At the end of the fourth quarter, there were approximately 17 aircraft from our operating fleet, including 10 400s and seven 200s supporting our ACMI operations. That compares with 19 aircraft composed of nine 400s and 10 200s on March 31, 2005.

And as we noted in our last conference call in December, over the course of 2005, we saw better opportunities for available 200s for our Classics on the charter side of our business, notably military charters, and we responded accordingly.

Higher unit revenues in ACMI during 2005 reflected a benefit from a mix shift towards relatively more 400 aircraft. In Scheduled Service, the improvement in unit revenue performance during the year was due to a number of factors, including the continued optimization of the network and the impact of higher fuel surcharge revenue.

In the AMC and Commercial Charter segments, improved block hour rates during 2005 reflected an increase in fuel prices. On the operating expense side in 2005, they were about 4% higher than 2004, mainly due to increases in fuel and labor expenses and an increase in aircraft rent.

These factors were partially offset by lower ground handling charges and landing fees, reflecting the changes made in the Scheduled Service segment; lower depreciation and amortization expense; a reduction in the pre-petition and post-emergent costs and the pre-tax gain. Both D&A and the aircraft rent were affected by fresh-start accounting adjustments.

For the fourth-quarter operating expenses, they were about 12% higher than the prior year, mainly because of the higher fuel and labor costs and an acceleration of maintenance activity. As for the quarter, these items were partially offset by lower ground handling charges and landing fees, lower D&A and the significant reduction in the professional and legal fees associated with the pre-petition and post-emergence costs.

Total fuel expense rose 23% in 2005 compared with 2004, and it increased 30% in the fourth quarter compared with the fourth quarter of 2004. For the year, fuel prices were up 40%, rising to an average of $1.75 per gallon from $1.25. And for the quarter, they were up 46%, rising to an average of $2.25 from $1.54.

Fortunately, a reduction in fuel gallons consumed in each of the periods mitigated the impact of the higher fuel prices, with consumption falling 12% from 2005 on a 12% reduction in non-ACMI block hours and with the consumption falling 11% in the fourth quarter on a 10% reduction in non-ACMI block hours.

On the labor costs side for 2005, they were 14% higher than the previous year, while for the fourth quarter they were 26% higher than in the same quarter last year. About 40% of the increase in the year-over-year costs and 30% of the increase in quarter-over-quarter costs was attributable to crew salaries, wages and benefits, which reflected contractual pay raise increases. In addition, the full-year results reflected a $1.7 million charge in the third quarter for a retroactive crew salary and bonus items included in the new Polar labor agreement.

Other items that contributed to the increase in labor costs for the year 2005 included increased restricted stock expense, as well as profit-sharing and incentive compensation expense, which we did not accrue for in 2004 due to the losses incurred by the Company.

For the quarter, other items included provisions for profit-sharing for crew members and incentive comp expense totaling 7.2 million. Total maintenance expense in '05 was largely in line with '04 maintenance expense, but a step up in maintenance activity in the fourth quarter contributed to a rise in maintenance expense compared with the final quarter of '04.

Aggregate maintenance spending in the fourth quarter was up about 6 million or 12% higher than in the fourth quarter of 2004, principally due to an increase in the number of C and D airframe checks and an increase in the number of engine overhauls.

For the full year, our operating income totaled 193.3 million, which included the pre-tax gain of the insurance and post-emergent costs of 3.7 million. That was an increase of 149 million compared with our operating income of 44.3 million in 2004, which included 13.5 million of pre-petition and post-emergence costs.

For the quarter, we posted operating income of 61 million compared with operating income of 62.5 million in the fourth quarter of '04. Operating income in the latest quarter included 0.7 million of post-emergence costs, while OI in '04 included 3.7 million of post-emergence costs.

In addition, EBITDAR as adjusted, which excludes insurance gains and pre-petition and post-emergence costs and related professional fees, increased to 386.4 million in 2005 from 258.8 million in 2004. For the fourth quarter, meanwhile, EBITDA as adjusted totaled 108.8 million compared with 115.8 in the same period last year.

As a reminder, for those of you looking at the details, while interest expense for the year and for the quarter totaled 74.4 million and 19 million, respectively, but cash interest, however, was approximately 57.8 million and 15.1 million, respectively, the difference really being the amortization of the debt discount, which occurred as a result of fresh-start accounting.

For the year, our effective tax rate of 40.3 on pre-tax income of 123.8 million, and for the quarter, we have had an effective income tax rate of 38.6% on pre-tax income of 44.8 million.

Now if I could just jump to the cash positions, our cash and cash equivalents rose to almost $306 million by year end 2005 from 133.9 million at December 31, 2004. And our balance sheet debt declined to 689 million at year end 2005 from 762 million at year end 2004. So from a net debt standpoint, we really made significant progress this year, as well as all the success you've seen on the P&L side.

Finally, as Mike noted, we anticipate that we will file our Form 10-K Annual Report for 2005 with the Securities and Exchange Commission in the next couple of days. In addition, we expect to report our first-quarter results for 2006 around or about the middle of May. And I might add we'll file the accompanying 10-Q for the first quarter on a timely basis.

With that, I'd like to turn it back to Mike.

Thanks, Bill. Now let me talk about where we are heading. In the nearer term, among other things, we will continue to look at ways to begin phasing out our older aircraft and ultimately replace them with newer generation equipment and maximize our financial flexibility, which may include refinancing some of our existing debt or issuing new debt and/or equity securities.

Beyond that, we will be looking to potentially grow our fleet to take advantage of the expected growth in our industry. As we've said before, we intend to be on the leading edge of aircraft technology because that provides the latest operating efficiency and reliability that our customers desire. Both near and long term, our desire is to be an airline without all of the usual risks associated with traditional airlines, and for example, by shedding fuel and commercial risk where we can.

Now let me address some specific 2006 operational goals, which are really threefold. The first is what I would like to call our operational excellence program, which includes our previously discussed cost savings and revenue enhancement program and which is really aimed at transforming our operations into a more efficient and low-cost operating platform.

As most of you know, in late 2005 we announced a cost savings and revenue enhancement program that, if successfully implemented, could benefit the Company's operating performance by more than 100 million over the next several years. Approximately one-quarter to one-third of the potential benefits associated with these opportunities are expected to be derived from revenue enhancements, mainly through the development of a better Scheduled Service revenue and capacity management capability.

We expect that the benefits we aim to achieve on the cost side will be generated through improved procurement policies and procedures, especially with respect to outsourced maintenance, travel services for our crews, aircraft fuel and ground handling and trucking.

The benefits will also come from improved efficiencies and processes throughout our operation, where we will be looking to improve fuel efficiency, to reduce overhead through process improvement, reduce labor costs through increased crew productivity and increased maintenance efficiency by reducing downtime and improving maintenance intervals.

Implementation of our cost savings and revenue enhancement program began earlier this year, and we look forward to updating you about our progress in these areas as we go along. While it is still a little early to begin quantifying numbers within specific timeframes, we expect that the benefits that could be realized during 2006 and 2007 may be substantial.

That leads us to a discussion about our fleet renewal and transition efforts, which will be another key focus in 2006. We have embarked upon a multi-year strategic initiative designed to phase out our older aircraft and to replace them with newer, more efficient aircraft.

Initially, however, our fleet optimization efforts are likely to lead to a reduction in the total fleet size during 2006 as aircraft will start to come out of the fleet this year, but additions won't show up until after 2006. This transition will occur as we seek to eliminate the older and less efficient of our current aircraft, which are part of our 747-200 or Classic fleet.

Now, that doesn't mean that these older aircraft are bad aircraft -- on the contrary, depending upon the mission, these aircraft can be extremely valuable and effective producers, particularly in military service. We have found, however, particularly on the ACMI side, that many of our customers desire newer, more reliable and efficient aircraft.

In conjunction with our fleet renewal and optimization strategy, we've just completed the sale of one of our Classic aircraft on April 7, 2006, reducing the size of our fleet to 41 Boeing 747 freighter aircraft. We expect to record a pre-tax gain of a little more than $2 million on the sale of that aircraft and its spare engines in our results for the second quarter of 2006.

Further optimization efforts regarding our Classics fleet will also likely have a bearing on our presence in the 747-200 ACMI market. It is an increasingly challenging and less profitable market in comparison to our 747-400 ACMI base, but it is one where we intend to reduce our presence over time. And depending on market conditions, we may accelerate the retirement of older aircraft in 2006.

This fleet renewal strategy is setting the stage for significantly enhanced long-term growth prospects and is something I'm very excited about. I would like to underscore, however, that fleet renewal is a multi-year process.

The third key component of our 2006 focus will be leveraging our three additional frequencies in China to drive profitability in our Scheduled Service segment. As you may recall, late last month, we increased our total weekly frequencies from nine up to 12 frequencies per week. As a limited access market, we believe this increase will contribute positively to Scheduled Service performance.

Those are the key areas of focus for 2006. But before we open this discussion up to Q&A, I am going to try to anticipate just a few of the questions you may have in advance.

First, I am sure in many of your minds is one on AMC flying -- that is the military flying segment of our business -- and the level of military flying that we're doing thus far in calendar year 2006. We have gotten off to a slower start in the monthly block hour numbers for AMC than we saw in 2005.

Ironically, on paper at least, the outlook for flying activity in 2006, based upon the military's estimated maximum awards to the principal CRAF, or the Civil Reserve Air Fleet program teams, for fiscal year 2006 looks good. Now, while AAWW and its CRAF team members are allocated a certain amount of AMC flying in a given year, it is important to remember that the amounts of ad hoc flying that we can do in excess of minimum awards and team allocations can vary from month to month, particularly with respect to the amount of military activity taking place in the Middle East.

Historically, the annual amounts of AMC flying that we have done has varied over the past several years, and I'm going to give you just a quick history here with some numbers. It ranged from approximately 18,000 block hours in 2002 to about twice that level in 2003, which happened to be a significant buildup year in the Middle East, then back to 22,000 or so hours in 2004 and rising to a little in excess of 29,000 hours in 2005.

Now although we stay in close contact with the military to monitor its ad hoc flying needs, visibility for this type of business is not good, as we have said before. And despite the suggested implication of the increase in the estimated maximum award for fiscal year 2006, at this point in time, I do not expect our AMC block hours for the current calendar year to equal 2005's.

Having said that, AMC flying is expected to continue to be a significant contributor to our 2006 business activity. And our cautious view regarding year-over-year trends today could change a month from now.

Another question I believe people may have on their minds is the ACMI block hours' year-to-date trend. Now first, let me remind you of what happened in 2005 to help put this all in context. In 2005, we purposely took capacity out of Scheduled Service versus 2004 and added it to both ACMI and to AMC, which was more profitable.

With respect to the ACMI side, our net additions versus 2004 were due to additional 747-400s. As we went through the course of 2005, and with AMC flying continuing to be strong, we added further to AMC by shifting aircraft from expiring Classic ACMI contracts into the military sector. Although we could have renewed certain of those Classic ACMI contracts, as I have indicated earlier, we are finding the Classic ACMI market generally less profitable and more challenging than the ACMI market for our newer 747-400 aircraft. That is why so many of you have heard me say, not all block hours are created equal.

I think overall that's a pretty good general overview for where we are and where we are heading. And I think, operator, at this time I would like to go ahead and open this call up to questions. So if we may have the first question?

(OPERATOR INSTRUCTIONS). Bob Labick, CJS Securities.

Congratulations on a good quarter and year and the eminent timely filing. First question -- I just wanted to follow up on the guidance you just gave, which was helpful. Start in a broad sense, and then I will drill down a little bit, but last year you had given guidance towards a pre-tax goal for '05 which you clearly blew away.

I was wondering if you could give us, on a global sense, types of guidance relative to '05 without putting out any specific numbers, but you believe your profitability, however you want to look at it, pre-tax or operating income, should be up or down versus '05. Or overall block hours, same kind of thing -- if you can give us just a little more global sense of your thoughts for the year.

I do thank you for that question. But for the qualitative statements that both Bill and I made, I think at this time we are really not prepared to give any further guidance.

Okay. Then let me just drill down and see if I can get a better understanding from the reported results. In terms of AMC revenue per block hour, we saw a big jump in Q4. And I think you've obviously pointed out that that's mostly fuel-related. Can you give us a sense if profitability is the same, and then also, looking forward, is that level of 17.9, I think, in Q4 a reasonable or sustainable revenue per block hour for this fiscal year for AMC?

I think to your last part of the question, the answer is yes.

So we should look at that going forward. And similarly, we've seen a growth in AMC revenue per block hour. It sounds like part of the drivers there are pulling out some of the Classics and getting a better mix shift with 400s. Are there any other drivers, or as contracts come up, are they being renewed at similar levels, higher levels? What kind of sense do we get there, and what should we expect from revenue per block hour in AMC for this year?

I think you mean ACMI.

ACMI, yes, sorry.

Well, I think as we have stated earlier, with respect to certain of ACMI contracts, which is typically on the newer aircraft, we have seen when those contracts have come up for renewal somewhat of a firming in pricing, as well as a somewhat longer tenure for the new contracts. Both I believe to be very favorable trends, again, on the 400 ACMI business.

Great. So the last few quarters, we've seen a trend of growth, to 6, I guess, for this last quarter. Is that number -- should that continue to grow, based on this firming in pricing?

Well, ACMI contracts in general are long term in nature. So you don't see a lot of change period to period, unless you do have expirations and/or renewals. So I think you can kind of look at recent history and go from there.

Okay, great, because you went from 5.3 to 6 during the course of the year. So that's a pretty strong growth over --

Yes, some of that was mix as well. Some of it was between the 200s and the 400s.

Okay, and I'm just trying to get a sense of do we continue to see a growth or is it leveling at 6, is really what I am trying to get a sense for.

Right. I think it is going to be directionally more towards leveling.

Great. Now just one more in the macro sense -- we've seen some announcements from competitors in terms of procuring, I guess, [feedstock], if you will, some 747-400s for conversion, as well as potential deals with UPS for leasing of planes and things. And both of these are potential areas of opportunity for you as well. Could you just give us a comment on the outlook for your feedstock and other deals -- just your outlook on the competitive nature of these two announcements?

Sure. I think really all we are prepared to say about ourselves is that we are in discussions with multiple parties, and we're making progress.

Great. And then just last question -- with the announcement of Jeff's retirement, could you just give us a sense of who you're looking for, characteristics of the next CEO and the potential timetable for when you would bring someone in?

I think the way I would like to leave that, Bob, is, you know, we are making good progress on that front. And all of you will be the first to know when we have gotten to the end of that process.

Great. Well, congratulations on a very good year.

Craig Peckham, Jefferies & Co.

Good morning, gentlemen, and congrats on the achievement here. I wanted to -- understanding, of course, that there's not any real specific guidance on 2006, wondered if you could perhaps hypothesize for us whether the Company is able to grow EBITDA and net income in 2006 in the event of certainly a smaller fleet and fewer block hours, given the effect of some of these changes in mix.

Well, like I said earlier, we're not prepared to give specific guidance. But I will reiterate some of what I have said in the past. We are making decisions for overall profitability for this Company on a regular basis. And to the extent we take down the number of aircraft in our fleet, there will be a commensurate amount of costs that can be driven down as well. And pursuant to my comment that not all block hours are created equal, I think when you put those two pieces of the puzzle together, it can provide for a favorable result.

A bit of a housekeeping question. The Classic aircraft that was sold -- I believe it was last week -- was that plane included in the operating fleet in the 39 airplanes year to date?

Yes, it has been included in the operating stats. And just because we have had a couple of folks looking at it, it has not done a tremendous amount of flying because we have had to keep it available for prospective buyers. But we have been treating it up through the sale as in the operating fleet.

Okay. And the filings that we read this morning indicated that that aircraft was sold for about $8 million. Can you comment on how indicative that is in terms of the underlying value of the remaining Classic aircraft?

I think that is a very -- relatively low number. The attributes of that aircraft were not at the high end from a technical standpoint. I believe, and maybe Mike can remember, it was a Pratt-powered plane. It may have had a slightly lower [take -- MTO]. It was a Pratt.

So I don't think you can call that sort of indicative of Classics. We have heard of some other Classics going at significantly higher levels in the market.

And I think just to add to that, to Bill's point, if you don't understand or have access to or transparency to the details of the status of an aircraft, where it is in its maintenance life and its historical performance and all of those factors, its very hard to draw a conclusion from simply a sale price.

Okay, fair enough. Last question I wanted to ask you about, and I will let some others ask here -- as we think about the additional frequencies in China, could you give us a sense for how rates in the China routes compare to, say, what you were generating in 2005 in your Scheduled Service business to the extent we can normalize for fuel prices?

I think how we would answer that is we are benefiting by the increased mix coming out of China. I would also remind you that we are at the seasonal low point of the calendar year. First quarter is a low quarter.

And that same degree of seasonality would obviously be relative to this activity in and out of China as well?

Directionally, yes.

Okay. And then I guess just to drill a little bit further in here, as we think about the impact potentially of the additional frequencies on a Scheduled Service business, can you estimate how much of 2005 Scheduled Service revenues or block hours were related in part to the Chinese market?

I think the closest we can get to that is when we do a regional cut, which I believe you'll find in our statements with respect to Asia -- we don't take it down to China. But clearly, as I think I stated earlier, the additional frequencies in China starting in the very recent past we believe will be a positive contribution to Scheduled Service performance over the year.

And just a last question and I will get out of the way here -- when is the next increase in frequency available to you?

At this time, we don't foresee any additional increase in frequencies.

Bill Fogel, JL Company.

Just a few questions. I don't mean to beat a dead horse on this, but obviously you guys gave a bunch of positive potential variances versus last year. And you're not going to give us the bigger picture. But just in terms of ACMI, with all the shifts and changes that are going on there in your fleet and pricing and yield, could you give us any feel for whether you expect that to be more or less profitable in '06 versus 05, not for the entire entity, but just ACMI?

Again, we're not prepared to give any further guidance. But again, reiterating sort of what we have already said, you can tell by our comments that the mix between Classic and 400 ACMI will be changing and has already changed. And again, because not all block hours are created equal, and assuming you can take out associated costs with fleet declines, it is very possible you could come out ahead.

Are you saying -- were you losing money on the planes you're taking out in your ACMI? Or it just depends on the --

We were not being that specific, Bill, sorry.

Okay. And just another question -- why won't you guys be more specific in terms of guidance and/or expectations just on a more global sense for the Company in '06? Is it because -- I mean, I get the sense, and you've commented on this, that you have a lot of positives going on in terms of cost-cutting and redoing your fleet and things of that nature, but there's I guess a big variable that's very difficult to forecast, which is the military business, which is very profitable.

I get the sense that the reason why you're not giving broader guidance is because you don't quite know how that is going to pan out. Is that in fact the case? Or is there another reason why you're not just there yet in terms of giving us a sense of profitability?

Bill, I think your instincts serve you well. I think we have a number of positive things that are in development. But it's still fairly early in the seasonal cycle that this business has. And we are constantly looking at the future. So I guess I'll leave it at that for now.

Okay. And then you also made comments in your initial comments that you made that you are seeking kind of less risk and more certainty in terms of your business. Could you elaborate on that at all?

Well, I think, as we have said in the past, the ACMI business provides for just those two objectives. And to the extent we can leverage more of our business into what I will refer to as ACMI-like business, that's a positive result.

Okay. So -- but does that connote the potential for some sort of potential partnership, the sharing of your route rates, or things of that nature? Are those the sorts of things you are evaluating?

Again, as we have said in the past, Bill, we have conversations with lots of various people. And to the extent we find a way to put something together that makes sense for both parties and beyond, we would absolutely take that very seriously.

And just one more question. Why exactly do you expect the military business to be down this year? Obviously, the first couple of months have been negative. But have you heard anything specifically or gotten any additional information that you could share with us?

No, I think we're just looking at the facts as they lay on the table. And as you all know, January and February were down from last year. So we are being cautious. As we always say, we have not a lot of visibility in the AMC market, and therefore we're looking at the numbers and we are saying, well, can we make it up? We don't know.

Do you know on a whole for the first couple of months what sort of volumes the military did and what sort of percent did you get? I guess my question is were military volumes down across the board or just down in terms of you guys and your expansion flying?

From what we can tell, I think what we saw was representative across the board.

Thank you very much and good luck on your various initiatives.

Adam Zirkin, Libertas Partners.

Congratulations again on the year. A couple of questions for you. Mike, you made an interesting comment that you expect the size of the fleet to go down essentially before it goes up. And I'm wondering, is that -- obviously, you have the choice to replace some of the 200s when you might be taking new aircraft online. So are you kind of reaching the conclusion today that you are more profitable with 36, 37, 38 aircraft than with 41 and 42?

Well, I think if you take all of our previous comments together, I think your insight, again, probably is well-served.

Got you. Okay. When I look at you selling the 200, was that a decision that was made primarily because you said, okay, this is just slowing a little bit. Maybe we should lose the plane. Or was it just that the bid on the aircraft was particularly good, given the condition -- the advanced condition of the plane?

I think I would bring you back to the longer-term strategy for this Company. We have said -- in fact, I said just a few minutes ago -- our long-term objective is to be -- to have a fleet of leading-edge technology aircraft. Our key customers, especially in the ACMI market, desire and in fact will demand that going forward because the more technologically advanced aircraft that we can provide them with enables them to themselves be more profitable in their cargo operations.

So in fact, our long-term strategy is to, again, be on the leading edge. So when we look at the Classic fleet, they really play in a sort of a different subsegment of the marketplace. And that is not our long-term objective. So as we see opportunities to reduce and get out of, as well as replace and refresh, we will jump on that all day long.

Just out of curiosity, what was the debt that was against the plane you sold? Was that in [AFL3], or--?

No, that aircraft was unencumbered.

That aircraft was unencumbered. Bill, you have the flexibility with the bank facilities and the various private lenders to sort of move in and out of planes as you like? Or are there rules that tie you down a little?

When you say move in and out, are you talking about within our existing fleet, sort of [re-inleaning]? Or are you just talking about acquiring new aircraft and financing it with additional debt?

More in terms of the Classics, right? That if a great bid comes around for some of those planes, can you --

Yes, absolutely. The credit agreements will allow for the asset sales. It's not an issue.

Just sort of moving on, in terms of new fleet types, I know there have sort of been rumors in the marketplace that you were considering non-747 aircraft, thought about maybe expanding into the passenger ACMI business. Can you comment on any of that?

Well, I think with respect to new fleets on the cargo side, we are looking at all possible combinations going forward. And in fact, we are prepared for the possibility of having multiple fleet types in the future.

With regard to passenger ACMI, we still think there's a very interesting niche opportunity there, although we don't see that as something that is going to make headlines in the very near future.

And then if I can just ask for maybe a little more than housekeeping purposes -- can you comment on how the cash balance has moved during the first couple months of the year?

No, Adam, people ask that I guess quite a lot on these calls. But we just report the cash balance through what we've just reported. We don't provide any additional color on that. You'll have to wait until -- but it's only going to be until --

Wait until May, right?

Wait until May, right.

Andrew Carlino, [Takati] Advisors.

Nice quarter and nice finish to the year. Quick question on resource allocation. You guys have 200 400s -- or I'm sorry, 20 400s in the fleet. What is the allocation currently of the 400s between the different service types?

You know what, Andy, I think probably the best way to do it is maybe just to talk a little bit about sort of where we ended up in sort of the fourth quarter. I can kind of speak to that. And I guess if you looked at it, on the 400s or so we had about on average about 10 of them in the ACMI and we had the five Polar running Scheduled Service. And we had some sort of smattering of other charter business.

And then with respect to the Classics, for the fourth quarter on average we had approximately -- and again, this is the average for the quarter, not just what was running at the end of the quarter -- we had about six on the Classic doing ACMI, about 10 at the AMC level and three or so in Scheduled Service, and the balance was in Commercial Charter.

And guys, if you look at the routes that you guys are flying on the scheduled side, are there routes that you can only fly with a 400 from a capacity or range perspective?

I think it's more a question of preferred to fly. In other words, virtually any lane could be flown by a Classic. But you may end up incurring more costs due to additional tech stops.

I think, for example, I believe Northwest still flies a lot of 200s to Asia, but they have to stop in either Alaska or the state of Washington, or someplace to refuel, whereas with a 400 you don't have to do that.

Right. I usually like to tell people that. When our flight leaves right behind the Northwest flight out of China, headed for Chicago, we get there first because we don't have to make a stop.

You guys commented a little bit on rates on the 200s were under a little bit of pressure. Conversely, I don't know if you implied it, or if you can comment on it -- what about rates in the 400? Have rates in the 400 also been expanding? Obviously, rates in the 400 are better. But have you seen rate growth on that particular platform?

Well, I think I have said actually just a few moments ago to another caller, I think when 400 ACMI contracts have renewed, we have generally seen some firming and improved escalation. The 200 segment -- I guess I don't know that pressure is perhaps the right word. The market is weaker. The plane is somewhat less capable. It is certainly less fuel-efficient.

It requires an extra person.

It requires, exactly, a flight engineer. So it has some shortcomings when compared to a state-of-the-art 400 freighter. So, again, it is a question more about your strategy in terms of what business segment with what fleet are your objectives.

Appreciate it. Good quarter.

[JT Wright, Kroft Asset Management].

Good quarter and a great year. I guess my first question is a little more minutiae about it. I just kind of noticed on a modeling perspective, jet fuel -- generally in the first two quarters, the discrepancy between kind of what I could find out there on the spot market versus your reported was between $0.03 and $0.05 difference, whereas in the last two quarters, there was pretty good variation. In the third quarter, you all were significantly under sort of the spot I could find. And in the fourth quarter, you were kind of equally significantly over. Is the volatility increase during the last part of the year, is that --

It is really a function of two things. One, you are aware that even though you see in our P&L a big fuel expense number, you are aware that we've got sort of a lock in with the military, right?

Right. I understand that. I tried to kind of back out the --

So a large chunk of that is the lock on the military. And then we fly all over the world and to a lot of nether regions. So you will have geographical differences around the world. You just can't go to a Reuters screen and look at where the spot rate is.

I just wondered if maybe -- are you buying gas in more remote regions now? I mean, is your flight mix changing such that in general, fuel costs -- on a per gallon basis, you're having to pay a little more than where you had been flying in the past?

I don't think as a rule of thumb that is necessarily true. But we do have some unusual differences around the world depending upon who is the only available fuel provider, and if it is the local government and they say, here is the price, and it's the only way you can do it.

Another thing I noticed is kind of the increase in salaries in the fourth quarter. And I realize that -- some contract renegotiations. But my main question is -- is that level of salaries, I think it was 68 million in the fourth quarter -- is that kind of can be expected going forward next year? Has it been kind of a permanent step up, or is that due to a lot of bonuses and things that --

I think what you have seen is primarily driven by the variable component or incentive compensation and profit-sharing.

And as far as also aircraft rent, I noticed that had gone up as well, not significantly, but it stayed fairly consistent the prior three quarters. Is that kind of the new level where -- going forward?

Well, if you are looking at it on a comp basis, we had had one more aircraft come back to us that had been dry-leased out. So that's -- on a comp basis, that was largely the driver of the quarter over quarter. And I think that's the main explanation.

And I guess you mentioned that you might over '06 sort of decrease your fleet. Are the planes that you would be decreasing the ones that would reduce aircraft rent?

If you look at our fleet, most of our Classics are actually debt financed. And so they are on balance sheet and we own them, but they've got a lien on them.

Right. So that would be a more of an interest expense type reduction?

That's correct.

That makes sense. And then finally, I also kind of noticed the decrease in D&A. Is that kind of the new level going forward, about 8.5 million? Or is that due to some sort of [technical difficulty] with the sale of the plane?

It will definitely be lower. Certainly it will be impacted by fleet reductions and variables. So you will see some variability to it.

David Campbell, Thompson, Davis & Company.

On the fuel price at $2.25 in the fourth quarter, I understand the geography has an impact. Aside from that, is that a level that would normally continue in this year, assuming fuel prices were the same?

I'm sorry, David. I missed the first part of that.

The $2.25 is so much more than the third quarter. Is that a --

You know what that is? No, that is largely the step-up in the military because the military is on their own fiscal year. And so therefore, what they did going into the fiscal year '06, which started in the fall, they bumped up the fuel price that we were locking into, and commensurately they raised the revenue. So that Q3 to Q4 step-up is largely just the government contract kicking in, or just the new fiscal year and the new [peg] price. So again, I'd just like to underscore the fact that you see that huge step-up on that expense line, but there is a step-up on the revenue side as well.

Of course. So the D&A you just said will probably go down?

Certainly, to the extent that we have a smaller owned fleet, you would see less with respect to depreciation. I mean, there could be some variability. We certainly include inventory depreciation through there. So you can see some variances from quarter to quarter.

And the Scheduled Service, increased Scheduled Service in China, where does the capacity come from, the additional flights? I assume they are using the 400 series aircraft there.

Essentially, what we did there, David, is we were able to optimize the schedule to essentially fly the additional frequencies with the same fleet.

So just an increase in block hours utilization. And they are 400s, correct?

Yes.

Correct.

Steven Ruggiero, CRT Capital.

Congratulations on the filing ahead of schedule. A few questions. First of all, are you negotiating shorter ACMI contracts with your 400s?

Well, typically we don't comment on specifics. But I think directionally I've said that they have actually gone the other way.

Okay. And for 2006, what can we expect for the effective tax rate, and importantly, what can we assume for your tax deferred, or your deferred taxes, I should say?

I think with regard to '06, Steven, we are not going to go there yet.

Can you comment on the deferred taxes?

I think similarly, we're not ready to divulge that kind of stuff specifically.

That's fine. Also, with regards to your AMC block hours in 2005, can you give us a sense of what percentage were ad hoc?

I want to say -- well, more so than the majority.

Yes, it was I would say definitely a majority of the overall block hours. Typically --

A significant majority? I mean, can you couch it a little further?

I don't think we're willing to draw such a fine line there. But clearly, the ad hoc drives the majority of the business segment.

Okay. And related to your timing for taking aircraft out of service in 2006, can you give us a sense for what we will see in the first half versus the second half? Is there any acceleration as we go through the year?

I think all we can really say there is that is a decision that is made literally tail by tail, based on market opportunities, where that aircraft is in its maintenance lifecycle and what we think the longer-term prospects are. So it is something that we essentially continuously analyze month to month.

Last question, gentlemen, and that's going back to the fuel cost question. We realize, recognize that AMC is billing out at $2.20 per gallon. Our calculations indicate that if you take that out of the equation, it's about $2.29 per gallon for Scheduled Service in the fourth quarter. Is that an accurate level for Scheduled Service? Is that an accurate calculation and would you expect that that is going to remain elevated because of your Asian business growing?

I think that is close. I think that is close in terms of the [multiple speakers]

And would you expect that to continue in that direction, all else equal in the fuel markets?

I think going forward, you know, we monitor the same indices that you are probably looking at. So in some cases, you may be equally informed to be able to guess where it is headed.

Kenneth [Vidoz], Highland Capital.

Good morning and congratulations on a great year and getting all your filings published. A couple of generic kind of questions. I remember seeing an article in the February Wall Street Journal talking about some price-fixing allegations. And I don't remember if you guys got caught up in that taint or not. But I haven't heard anything more about that. Is that still an issue? If so, is there any impact on you guys, or what is going on with that?

Our Polar business, which we generally refer to as the Scheduled Service operation, was notified and has in fact been cooperating fully, that is, giving information. That operation is a sort of small player in the world game there. But we are fully cooperating. Really no news to report.

And no significant potential liability there?

We don't believe so.

And then help me with understanding the issues in the AMC business. When you guys had all the -- when you gave us that litany of block hours with the peak in 2003 of 36,000 hours, does that kind of imply -- help me understand it -- all the rhetoric we are reading in the paper recently is that we are going to start having troops pulled out. So when you got that peak in 2003, was that more related to, like, materiel flying into Iraq and all the buildup, or was it troops as well? So what I'm getting at is, if we are pulling out troops, is that detrimental to you all, or how does that kind of work?

Well, we fly only materiel. We do not fly troops. So in effect, that 2003 peak year was in fact a buildup year, but both for Afghanistan and Iraq, I believe. So generally, if there are fewer troops overseas in areas that are not U.S. bases, you would assume that their needs internationally would go down, right? That is sort of more or less common sense. To the extent troop levels increase in other parts of the world, again, where we do not have bases, obviously that would pose well for this business segment.

That make sense to me now. What about -- there was some discussion I think from a quarter or two ago about -- that CR -- I think you mentioned that civilian fleet, reserve fleet or whatever, the military was going to increase the number of people to get involved in that in terms of -- maybe the colloquial term is teams. There was previously two and now there's three, or maybe there was three and now there's four. Does that dilute you at all in terms of your opportunity to provide that service?

I think it ultimately depends on how it plays out. It certainly could. But actually, every year there is a bit of jockeying among the team members. So from year to year, it sort of evolves because clearly from a military standpoint, the more participants, the better for them, again, just sort of generally.

However, a lot of players sign up and actually never even provide the service. So then, in fact, there's sort of I guess an aftermarket where people can sell points or essentially their allocations to other parties. So there's a lot whole lot of moving sands around that. But generally, yes, every year in and year out there is a bit of movement.

And then just lastly, just to help me -- back in the late '90s, there was all that talk about all the cargo ships or container ships would always bring them full and they came from East to West and then they would be empty when they went back. A lot of discussion on this call that you're talking about your Chinese new routes.

Do you see that same type of situation today? Or are we, are your yields -- and I guess I don't know how you measure it, but I would call it yield in terms of your cargo -- are you seeing the same dynamic? Or is it more balanced, that you're flying a lot of stuff both ways and not just empty planes one way and full planes the other way?

Well, I think the way I would characterize it is the planes are certainly not empty going back. In fact, we do our best to proactively manage how we return that aircraft to the Far East. But your question directionally is accurate. There is more product coming out of Asian than going back into Asia. And although Asian imports from other parts of the world are actually increasing at a healthy clip, they're not increasing in excess of their exports. So sort of the general imbalance continues.

So when you were saying you were optimizing the fleet moving your aircraft around, when you are taking that into account, because you're going to the bigger airplanes, the 400s, as you mentioned, or maybe they're just -- they can carry more fuel, the thinking there is even though you are admitting you're going to add more costs just because you're going to be able to capture whatever that increase in volume is on both directions to make it profitable, that is kind of the calculus involved?

Yes, I think that's --

More or less, I think that's fair, yes.

But obviously, when we look at the net worth, you've got to look at a bunch of the legs together. You can't just look at a return trip from Asia and say it is wildly profitable. You've got to figure out positioning and sort of the all-in costs of getting it there and back.

Those are fair answers. Thank you, and again, congratulations [multiple speakers].

Helane Becker, Benchmark Capital.

Two questions -- one, with respect to the 747-400s, have you sourced your aircraft or do you have your eyes on where you can get the new aircraft? How should we be thinking about that, if it all?

Again, I said during the scripted version that we are in discussions with multiple parties.

Did you indicate timing of that, or --

No, not specifically.

Okay. And then my other question with respect to the revenue -- the fuel component of revenue, do we think of that as in every line item, there's some fuel reimbursement?

What do you mean by every line item?

Well, for an example, we know there is a fuel component in AMC.

Okay, no, that's an easy one. With respect to AMC, you will not -- those revenues from a P&L standpoint you won't see it in the revenue. That's just either a net receivable or net payable. On the stock Commercial Charter, currently it's just built into your revenue, so you'll see it in revenue, and likewise on Scheduled Service, the surcharge you would see in revenue. But the military is not a -- the swings in the price are not in the P&L. It's really a net payable or a net receivable.

Okay, fine. And then my last question is with respect to labor and the salary line. Are there labor cost increases relative to contractual increases we should be thinking about that come due in '06?

I mean, I guess there are the -- this is sort of the standard -- more or less quasi-standardized step increases, I would call them, I guess, for the pilots, right?

That is what I was trying to find out.

I don't know what that number is off the top of my head.

[Blair Jordan], Credit Suisse.

Actually, it's Evan Ratner. I have to be a little bit quicker because most of the questions have been answered. Just one housekeeping item -- can you maybe update us on what expectations are for CapEx for '06?

Yes, I think we can probably say 30 to 40.

And second, regarding -- you allude to -- you talk about some step-up of the maintenance activity in the fourth quarter. Can you give us a feel for directionally the timing of maintenance '06 versus '05? And how we should be thinking about -- I know the stuff moves around from -- whether it's month to month or quarter to quarter -- just give us maybe some color on that?

Evan, I think I have to respond, as I have on a few others, that we're really not ready to get to that level of specificity. Maintenance -- the more flying you do, the more maintenance you're going to have. There is some flexibility regarding exact timing. So in other words, if you can defer maintenance while you have a heavy flight schedule to a timeframe when you have a lesser flight schedule, obviously that is good for everybody.

And in late 2005, we saw an opportunity to catch up due to some of the heavy flying that we did during the calendar year. So you always attempt to schedule it when it will impact your revenue generation ability the least.

Okay. I will follow up with some other questions after.

Mike Lanier, American International Group.

I just had a question about the fleet. It's clear you'd like to grow the 400s, and you're talking to people about growing them. Are you considering any brand-new 400s?

I believed all brand-new 400s that will be coming off the line over the next couple of years are previously spoken for. But with respect to new aircraft, we are absolutely looking at all potential airframe types.

What's the timing? When will the conversions begin? Are you looking at that angle?

We are. We have a contract for four firm and six option conversions, which are back in the sort of 2008 timeframe, plus or minus. But that is what we have announced today.

And so on those four plus six, what do you think the likely way you will finance them when they arrive?

I think that will be based on market conditions and the opportunities that present themselves.

We have talked to a lot of people about a lot of things, whether it be some of the big traditional leasing entities who play in this field, whether it be debt financed, whether we do it with cash from our balance sheet. We've looked at it a bunch of different ways.

But just out of curiosity, as far as -- I mean, there must be some people who would be willing to sell you a 400 right now -- five-year-old, 10-year-old, whatever. What kind of -- I know there's a lot of variables on engine type and when the next D check's due, but what is a 400 -- what is a five-year-old 400 -- what's the market range in market value these days?

Well, in all honesty, I actually think your assumption is incorrect at this point in time. 400 freighter aircraft are very heavily utilized throughout the global network. And I'm not -- I would not bet that there are parties out there who would be interested in parting with one, regardless of some price differentials or whatever.

I think these are the workhorses of the industry. They are the creme de la creme of the heavy freight intercontinental haulers. So they are not aircraft that people would part with easily. They're pretty much a scarce item today.

So really, the next time there will be a chance to add lift, at least on the 400 level, is when these conversions start rolling a couple of years from now? Aren't you -- you're pretty much first in line for these conversions, right?

We are fairly early in the process. I mean, directionally, you are right. There's always the chance that something -- some exogenous event could drive somebody to make a different decision. Our Company is now well-positioned to be opportunistic if and when such an event were to occur. But that is not something that you can sort of look into the crystal ball and say it's going to happen fourth quarter of this year or anytime soon.

But the current state of the market is it's not offered?

400 freighters are held pretty tight to the vest. They are a very popular, a very productive asset.

And yet 200s are fairly easy to come by? I mean, you've made a point that the customers pay quite differently for the 400s versus the 200s. It just seems they're very similar in what they do. But I got the impression if you parted with one for 8 million and new 400s, I guess they list for 175, they probably really go for 125 or whatever, but it just seems like a monumental gap between the two platforms.

I think when you think about the cash flow generation capability of those two aircraft, they diverge very quickly once you start looking out several years.

So again, on the surface, when you look at them on the ramp, there aren't a whole bunch of physical differences between them. But when you add up the fuel efficiency, the range, the cost of the crew, that being the 400 freighter only has a captain and a first officer versus the 200 having a flight engineer, and then you look at the capacity differences -- I mentioned the range or the stage length -- once you start operating those two aircraft, they tend to diverge pretty quickly in terms of what they return.

And then last, kind of a little bit of a housekeeping question -- with the WTC guys, when you guys negotiated in the reorg, there was an equity kicker if business did really well, and I think business is doing really well. Was that '08 when that would come out?

You are referring to the adjusted monthly lease rental or the AMLR, which is subject to a number of preconditions being satisfied before kicking in, one of them being what are the market rates for 400s, as well as the financial performance of the Company. And the first look on that is in 2008. And quite honestly, although it is sort of an early payment, it really actually slows down to the underlying notes on the six leveraged leases within the WTC structure.

Whatever the calculation comes out with, it goes into the top of the waterfall, right?

It actually really goes toward the notes, yes.

Right. And is that, from your recollection, is that a beginning of '08 or an end of '08 test?

It is in May of '08 is the first opportunity where it could be applied.

And I don't know if it was you, or maybe it was Evan. I just wanted to clarify something earlier I think I said on CapEx. I think with respect to the '06 look on CapEx, it's probably more like the mid-40s.

And that would be all the C and D checks and everything?

No, C and D checks are really not on the CapEx side. It's more like rotables, inventory, information technology is really the CapEx side.

And as far as the C and D checks, you do those opportunistically, right?

Well, you do them opportunistically. Typically, we will try to do them more on the slow season or before the peak season happens. From a P&L standpoint, those get expensed. But I want to be clear -- the '06 number for CapEx is probably more along the lines of the mid-40s.

[Norma McNeil, Kenyon Capital.]

What was CapEx for '05, please?

I want to say net CapEx for '05 was about 30-ish or so million. And we can check on that with you right now, if you will hold on one second.

Sure. And I'm wondering, what's the big jump from this year to the next?

Yes, okay, it's 29 or 30 million was the '05. I think some of the increase relates to some small scheduled payments that we would make with respect to our conversion option agreement. Some of it is related to IT. Some of it is to some of the larger themes that Mike has been talking about earlier, just true CapEx on Classics, which are not C or D checks, but just inventory-related etc., as well as some work on engines, which is capitalized as opposed to getting expensed.

And did you say that in terms of refleeting and taking Classics out of the system, these are owned planes, or they are leased planes coming to maturity of the lease?

I don't think we were that specific. I think we noted that of our Classics, the majority of them are owned, and the majority of those are debt financed. We have some that are leased. We have some that are unencumbered. But the majority of them are debt financed. And I don't think -- we're not targeting specific tail numbers.

And I think one of the points I think we should underscore here is that this is sort of an opportunistic thing. And we have been looking at the ACMI market on the 200s. It's not just something that we're waking up to. We are sort of opportunistically going to be scaling back our presence in that sector.

And depending upon market conditions and who we're talking to on the aircraft, some guys have a preference for one type of aircraft or another, even within the 200s. So I can't tell you, yes, we are going to go right after two AFL3 aircraft or we're going to go after a leased aircraft and try to get out of that, or we're going to go out and sell an owned aircraft. It's not like that.

Right. But obviously, the analysis is look at the rate you're getting paid, the variable cost, the financing cost, and look at whether there's a potential offer on the plate and make a decision on an ad hoc basis. Is that sort of the process?

I think that sounds reasonable.

And last detail -- do you have the balances on your different tranches of debt [multiple speakers]?

I will be happy to give you -- now, I'm going to give them to you, though, without -- because of fresh-start accounting, we had the -- with fresh-start accounting, if you actually go to our balance sheet, and this is just a primer for everyone, we had to do a mark-to-market. So when you go to our balance sheet and you look at the debt payable, it's after giving effect to this mark-to-market haircut.

I'm going to give it to you before the haircut, if you will, because that's how I definitely look at it. And let me just rattle off quickly a number of the items.

The Deutsche Bank aircraft credit facility at year end, approximately 37 million. AFL3, three approximately 126 million. The 2000 AATCs, which is 409, about 81 million. The 99 AATCs, it's about -- I want to say 80 million, and it's about 164 million. I want to say the 1998 AATCs is about, let's see, 60 -- it looks like it is about 220 million. And we have a number of miscellaneous notes. So that should add up to approximately the aggregate amount of 689 million that I referenced earlier on the call.

Scott Tillman, Harbinger Capital Partners.

I would like to echo everyone else's sentiments on a fantastic year. Just a couple quick questions. One is just the CapEx budget -- to the extent that you guys do end up getting rid of some 200s, would it be safe to assume that that CapEx would come down commensurately?

Some. I think some. I think that, again, it depends on which aircraft you sell. I think it's too hard to say definitively right now.

Okay, fair enough. And my other question, which I'm sure you can't really comment on directly, but there's a lot of talk in trade magazines about you guys and potentially getting involved in deals. And I guess without going into specifics, could you guys kind of lay out your philosophy on -- be it acquisitions, dispositions, and how you would view the world in that way?

Well, Scott, I think, as I have said in the past, the Company having come out of a restructuring was pretty well bound up by some of its credit agreements. We made considerable progress last year when we struck a significant amendment with our bank facility. So we are in a much better position to be opportunistic going forward.

This sort of question ties in with the discussion we had on new aircraft or aircraft additions. To the extent there are interesting opportunities out there, we absolutely look at them from time to time. We have a very concise view on what our long-term strategic objectives are.

So there's a lot of noise out there. And you have to kind of wade your way through all the noise. But to the extent there are opportunities out there that makes sense strategically for this Company, you better believe we will be all over them.

Ladies and gentlemen, this does conclude our question-and-answer session. Gentlemen, please call in with any closing remarks you may have.

Well, I guess I would like to start off by saying thank you to everybody for participating in this call. And I guess just to sort of bring us back to some of the comments that we made earlier is, we at Atlas Air Worldwide Holdings are focused on capitalizing pretty much a premier reputation for excellence in the heavy cargo intercontinental freight business. We are very excited about how we have been able to position the Company post the restructuring, as well as the work in progress we made through calendar year 2005.

We are ready to move this Company forward to the next level. We think we have considerable momentum. We feel very confident in our strategy going forward. And we're actually just very excited about the future of this Company. So I guess, again, thank you all for your participation today and for your investment interest in this Company. Hold on tight, because I think it is going to be a fun ride going forward.

And again, remember, when you think of air cargo, think of market leadership, think of Atlas Air Worldwide Holdings. And I hope you can tell that we are truly very excited about the future of this business. So again, thank you. Goodbye until next time.

Ladies and gentlemen, this does conclude the Atlas Air Worldwide Holdings fourth-quarter 2005 conference call. You may now disconnect. And thank you for using AT&T teleconferencing.