Atlas Air Worldwide Holdings Inc (AAWW) 2020 Q4 法說會逐字稿

Ladies and gentlemen, thank you for standing by, and welcome to the Fourth Quarter 2020 Earnings Call for Atlas Air. (Operator Instructions)

Please be advised that today's conference is being recorded. (Operator Instructions)

I would now like to hand the conference over to Atlas Air. Please go ahead.

Thank you, Sarah, and good morning, everyone. I'm Ed McGarvey, Treasurer for Atlas Air Worldwide. Welcome to our Fourth Quarter 2020 Results Conference Call. Today's call will be hosted by John Dietrich, our Chief Executive Officer; and Spencer Schwartz, our Chief Financial Officer. Today's call is complemented by a slide presentation that can be viewed at atlasairworldwide.com under Presentations in the Investor Information section.

As indicated on Slide 2, we'd like to remind you that our discussion about the company's performance today includes 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 they involve risks and uncertainties. Our actual results or actions may differ materially from those projected in any forward-looking statements.

For information about risk factors related to our business, please refer to our 2019 Form 10-K as amended or supplemented by our subsequently filed SEC reports. Any references to non-GAAP measures are meant to provide meaningful insights and are reconciled with GAAP in today's press release and in the appendix that is attached to today's slides.

(Operator Instructions)

At this point, I'd like to draw your attention to Slide 3 and turn the call over to John Dietrich.

Thanks, Ed, and hello, everyone. Welcome to our fourth quarter earnings call. I'd like to start by thanking all the frontline responders as well as all the essential workers around the world, including our more than 4,000 Atlas team members for their unwavering efforts throughout this pandemic. On behalf of all of us at Atlas, I want to express our sincere hope that you, your families and friends continue to stay safe as we work toward better days ahead.

We at Atlas take great pride in the role we're playing in keeping global supply chains and our customers' operating networks moving and in supporting COVID-19 relief efforts. From critical health care supplies like vaccines and other pharmaceuticals, medical equipment and PPE; as well as e-commerce; educational supplies; food; and other everyday consumer products, our team has worked tirelessly to keep our aircraft flying safely, so we can continue transporting the goods that matter most during this challenging time. Operating a global airline during a pandemic hasn't been easy.

Our performance is the result of the team banding together to navigate through a very complex regulatory and operating environment to, first and foremost, keep our employees safe, but also to provide high-quality service for our customers. The safety of our team is our top priority, and we'll continue to take extensive precautions to ensure we're able to safely carry essential items around the world.

And as we've said over the years, our resilient business model allows us to sustain during challenging market conditions as well as capitalize on opportunities during more favorable market conditions. We're continuing to leverage our unrivaled portfolio of assets and the scale of our global network. We're also diversifying our customer base and have entered into numerous long-term charter agreements that provide reliable and attractive revenue streams for the years ahead. Our long-term charter business provides exciting opportunities with strategic customers, such as Cainiao, Flexport and HP that have come to Atlas to secure our high-quality services for dedicated capacity of their own. These are savvy buyers of airfreight, and their commitment to Atlas is telling about their vision of the future and their interest for locking in capacity on a longer-term basis. In

addition to the significant reductions in passenger belly cargo capacity on long-haul trade lanes, COVID-19 is also causing congestion and delays at ocean ports worldwide. As a result, shippers are increasingly using airfreight to avoid bottlenecks in their supply chains, and that's driving even further near-term demand.

From a fleet standpoint, providing our customers with modern, fuel-efficient aircraft has been a long-standing priority at Atlas, and we're excited to have recently announced that we ordered 4 new 747-8 freighters from Boeing. Not only does this investment underscore our commitment to provide our customers with the best available aircraft, but it also furthers our commitment to the environment by investing in the latest technologies to reduce aircraft noise, emissions and fuel consumption. The Dash 8 is a great airplane. It provides 20% higher payload capacity and 16% lower fuel consumption than the very capable 747-400 freighter and has 25% higher capacity than the 777 freighter. In addition, the advanced engines on the Dash 8 reduce noise by approximately 30% compared to the previous generation of aircraft. As the world's largest 747 freighter operator, the Dash 8 is core to our business and complements our diversified fleet of 747-400s, 777s, 767s and 737s. We're expecting delivery of these new aircraft beginning in May and continuing through October of 2022, and they will play a key role in advancing Atlas' strategic growth plans for decades to come.

Now turning to the fourth quarter results on Slide 4. We finished this unprecedented year on a strong note, with financial and operating results that exceeded our expectations. Everyone at Atlas stepped up to deliver an extraordinary peak season, and for that matter, the full year for our business and our customers. In the face of unrelenting operational challenges and complexities, driven by the COVID-19 pandemic, we added wide-body capacity and increased aircraft utilization to grow block hours and carry historic volumes.

Our fourth quarter results benefited from strong demand for our assets and services, higher commercial charter yields, the significant reduction of international wide-body passenger belly cargo capacity and lower aircraft rent and depreciation. In addition, we reactivated our fourth 747 converted freighter more quickly than we expected, further allowing us to capitalize on attractive opportunities. These benefits were partially offset by higher heavy maintenance expense related to additional engine overhauls that we had performed to take advantage of attractive vendor pricing and slot availability.

As well as higher pilot costs related to the premium pay, we've been providing our pilots for operating into certain areas that have been significantly impacted by COVID-19 as well as the 10% pay increase we provided to our pilots in May 2020, pending the completion of our joint collective bargaining agreement. We at Atlas are dedicated to keeping our business on a successful trajectory. This includes executing on our strategic plan, continuing to diversify our business as well as aggressively manage our cost and balance sheet.

We'll also continue to focus on ensuring that our assets and resources are allocated to those opportunities that generate the best returns. As Spencer will share with you in more detail during his remarks, these actions, coupled with our team executing on market opportunities, drove significant improvement in our balance sheet this year. We improved our cash position, enhanced liquidity and and reduced our net leverage ratio.

As a capital-intensive business, building and maintaining a strong cash position is vital for our long-term success and provides us with the financial flexibility to both endure more challenging market conditions as well as thrive in more favorable conditions. With respect to our pilot labor negotiations, our work continues to complete a new joint collective bargaining agreement in connection with the merger between Atlas Air and Southern Air. Scheduled negotiations with our pilots union have recently concluded, as provided in our respective collective bargaining agreements, and we're now moving on to binding interest arbitration to resolve all remaining open issues. This arbitration is scheduled to begin in mid-March.

Now moving to Slide 5. The strong demand for our aircraft and services has continued in the first quarter. As a result, we expect to fly approximately 85,000 block hours in the first quarter with revenue of approximately $820 million and adjusted EBITDA of about $150 million. In addition, we expect first quarter adjusted net income to grow approximately 60% to 65% compared with adjusted net income of $29.9 million in the first quarter of 2020. Our outlook also anticipates additional expenses driven by the pandemic, including premium pay for our pilots, costs for continuing to provide a safe working environment for all our employees as well as higher costs from the pay increase we provided to our pilots in May 2020. For the full year, we expect aircraft maintenance expense to be lower than 2020, with depreciation and amortization totaling about $270 million. In addition, core capital expenditures, which exclude aircraft and engine purchases, are projected to total approximately $110 million to $120 million, mainly for parts and components for our fleet. We also expect committed expenditures relating to acquiring aircraft and spare engines to be approximately $265 million in 2021. These expenditures include pre-delivery payments related to our 747-8 aircraft order, acquisition of spare engines and the purchase of several used 747-400 passenger aircraft that we'll use to both replace certain of our older passenger aircraft that are in service as well as others to part out for spare engines and components.

Due to the ongoing uncertainty related to the pandemic and the associated market dynamics, including ever-changing border restrictions, new variants of COVID-19, the pace of vaccine distribution and surges in cases globally, we are not providing a full year 2020 earnings outlook at this time, but we'll provide updates to you as the year progresses. This is a good point for me to ask Spencer to provide more details on our fourth quarter results. And after Spencer's remarks, I look forward to providing a few additional comments, and then we'll be happy to take your questions. Spencer?

Thank you, John, and hello, everyone. Our strong fourth quarter results are highlighted on Slide 6. On an adjusted basis, EBITDA increased to $279.7 million, with adjusted net income growing to $143.2 million. On a reported basis, net income totaled $184 million. Our fourth quarter adjusted earnings included an effective income tax rate of 23.9%. For the full year, we had an adjusted effective tax rate of 22.9%.

Moving to the top of Slide 7. Operating revenue totaled $932.5 million in the quarter. ACMI revenue primarily reflected lower levels of flying, driven by the redeployment of 747-400 aircraft to Charter. This was partially offset by our ability to increase aircraft utilization and higher levels of CMI flying. Higher Charter revenue was primarily driven by increased flying, partially offset by a slightly lower average rate per block hour due to lower fuel costs. Block hour volume growth primarily reflected strong demand for our services, driven by the reduction of available cargo capacity in the market, the disruption of global supply chains, the redeployment of 747-400 aircraft from ACMI and a 777 from Dry Leasing as well as our ability to increase aircraft utilization. And Dry Leasing revenue primarily related to changes in leases and the disposition of certain nonessential aircraft during the first quarter of 2020.

Looking now at the bottom of the slide. Segment contribution totaled $267.6 million in the fourth quarter. ACMI earnings included higher pilot costs including premium pay for operating in certain areas and the 10% pay increase that we provided to our pilots in May 2020. Higher heavy maintenance expense, which includes additional engine overhauls to take advantage of availability and attractive pricing discounts and the redeployment of 747 aircraft to Charter. These items were partially offset by increased utilization and an increase in CMI flying. Higher Charter contribution was primarily driven by an increase in yields, excluding fuel, strong demand for our services and our ability to increase aircraft utilization. Charter contribution also benefited from lower aircraft rent and depreciation and the redeployment of aircraft from ACMI and Dry Leasing.

These benefits were partially offset by higher heavy maintenance expense and higher pilot costs as well as fewer charters for sports teams and fans as leagues canceled games. In Dry Leasing, lower segment contribution was primarily due to changes in leases, and the disposition of certain nonessential aircraft during the first quarter of 2020.

Also during the quarter, as we previously reported, on October 9, Amazon elected a cashless exercise with respect to approximately 3.6 million shares vested under a Warrant issued in 2016. As a result, Amazon acquired approximately 1.4 million shares of Atlas' common stock. And then in addition, on January 27 of this year, Amazon elected a cashless exercise with respect to approximately 4.2 million shares, also vested under Warrants issued in 2016. As a result, Amazon acquired approximately 1.3 million shares.

Now turning to Slide 8. As anticipated, our net debt and our net leverage ratio continued to improve during the fourth quarter. Our net leverage ratio declined another 4 ticks, finishing the year at 2.1x, down significantly from 4.4x, where we began the year. We ended the year with cash, including cash equivalents, restricted cash and short-term investments totaling $856.3 million compared with $114.3 million at the end of 2019. Our improved cash balance primarily reflected cash provided by operating activities and the funds we received through the CARES Act.

Net cash used for financing activities primarily related to payments on debt obligations, including our revolving credit facility, partially offset by debt issuances. Net cash used for investing activities primarily related to core capital expenditures, spare engines and engine upgrade kits, partially offset by proceeds from the disposition of certain nonessential aircraft and engines. As a reminder, our debt has a low weighted average coupon interest rate, which now stands at 2.98%, and the vast majority is secured by our aircraft assets, which have a value in excess of the related debt.

As John said, we are taking actions to mitigate the impact of any continuation or worsening of the pandemic and remain committed to a strong balance sheet. We're reducing costs, enhancing liquidity and strategically allocating resources.

Now I'd like to turn it back to John.

Thank you, Spencer. Moving on to Slide 9. 2020 certainly was an unprecedented year, and we finished it on a strong note. The higher demand for our aircraft and services has carried into the first quarter, and our team continues to step up and execute amid the ongoing operational challenges from the pandemic. We will continue to take every precaution to protect our world-class team of employees and our operations to ensure that we can continue to transport the goods the world needs most. At this point, operator, may we have the first question, please?

(Operator Instructions) Our first question comes from the line of Bob Labick with CJS Securities.

Congratulations on just terrific execution and a fantastic year. I wanted to start the discussion with talking about the Dash 8. It's a pretty exciting opportunity for you to get 4 more of them. Can you talk a little bit about the demand environment out there? Have you talked to customers? Are there inquiries? When would you expect to tell us about customers, I guess? And will these be going into ACMI, Charter, or have you decided on that yet?

Yes. Look, Bob, I think we're excited about the acquisition. As you know, we like the aircraft very much, has performed exceptionally well for us and we expect there will be continued demand for that aircraft. What we find, in good times and in tougher times, the best most efficient aircraft are the ones that remain flying. And the Dash 8 will certainly be that.

And in terms of where we're going to place them, we're going to continue to evaluate that. We have ongoing discussions in every segment. And we're going to do what makes best for the organization once that time comes on delivery, but we're excited about the opportunities.

Okay, super. And then just kind of following up on that. You mentioned the $265 million of aircraft parts and purchase commitments, including the PDPs for the Dash 8, but you also just mentioned the -- I don't know if this is the right word, but the obscene amount of cash, the $850 million plus on the balance sheet. So what are the other uses of cash given the just the fantastic cash generation this year and what we expect next year and going forward?

Yes. Thank you, Bob. So we have a capital allocation strategy. It remains disciplined and balanced. Our focus continues to be on growing the business while generating returns above our cost of capital and maintaining a strong balance sheet. There are a number of things that we continue to look at. We look at each opportunity kind of on its own. We evaluate each opportunity when it comes to deploying capital, we set pretty aggressive return targets.

And as John said, balance sheet strength and continuing to maintain low levels of leverage remain our top priority. But beyond that, we will continue to evaluate investments like we did for the DASH 8.

Our next question comes from the line of Chris Stathoulopoulos with Susquehanna.

John, Spencer, I appreciate -- yes, I understand you not wanting to give guidance around COVID due to uncertainty. But I think it's important here for investors at least to help us frame about getting through this year against what is clearly a tough comp on EBITDA and a really unique operating environment. So on the international side or the long-haul wide-body side, you have your competitive capacity effectively sidelined, let's say, for 2 to 3 more years. I would expect AMC and Commercial Charter flying to improve as the vaccine is more distributed. And you also have opportunity. I don't know if you want to speak to this, but the 11 new Amazon planes that they purchased in January, whether you're looking to bid on those. So just putting those together, and even if we assume that we have a labor deal sometime in the back half of this year, thoughts around getting through this environment? And then maybe a Part B and sort of related to that, John, you've been in this seat now here for a year. I'm curious if there's anything you've learned about kind of running this airline with an operating playbook that really doesn't exist because of COVID. And whether there's any new opportunities here that you realized in terms of cost savings or then per block hour basis or network productivity?

Thanks, Chris. And I'll start with that last question in terms of what I've learned, it's been a great, exciting 14 months almost. And the one thing I've learned is that we've got the best team of employees in the business, and we've been able to execute in a remarkably complex and challenging environment on every front that's just about every regulatory challenge, operational challenge, throw in some weather challenges along the way as well, spikes in demand, and this team has stepped up and executed on all cylinders in every front, and that's the strength of our team and our resilient business model that we've talked often about.

And Chris, you've been following us a long time. We have often said that we are well positioned both in more challenging times, but as we're seeing now well positioned to capitalize on opportunities. And working together, we've delivered and executed. In terms of kind of new opportunities or other things that we're looking at or have learned or developed, the new customer base. We talked about some of our long-term charter customers. We've really developed a new customer base for our aircraft and our services. And that's really exciting. Spencer has talked about often, these are ACMI-like agreements. And I think we'll serve the market well, serve our customers well, expanding the customer profile beyond just the historical and typical ACMI customers we served in the past.

That's really exciting. So more immediately, we have a lot of work ahead of us on the immediate horizon. As I said, we look forward to keeping you informed when we're in a better position to give more tangible guidance. But we're following the market. We're following the activities, what's happening with COVID, and we just look forward to continuing to deliver, and we'll keep you posted when we can.

Okay. The follow-up. Charter utilization was really strong here, 12.6 hours. I'm curious at what point there's a limit there in terms of having to pull additional aircraft from ACMI or potentially lease in other aircraft?

So we're reviewing our fleet and our allocation of resources every day, and between our ACMI customers and our Charter customers, and from a network standpoint, linking customers together at times to provide full utilization of the aircraft. So it runs the whole gamut in terms of -- we've got our core ACMI customers. We've got our Charter customers, but there are oftentimes opportunities where a customer may say, " You know what, I'm interested in capacity, but I may not need it full-time for the full operation. Can you join us with somebody else?" So our marketing team does a great job of bringing customers together to ensure we're maximizing utilization of the aircraft and also maximizing the trade lane. So it's a combination of all those things that go into building our total network, which is comprised of a number of sub networks.

Chris, I'll just briefly add -- it's Spencer, just briefly add, as you pointed out. 747-400 utilization in Charter was up 51% quarter-over-quarter. The -- primarily driven by really strong demand, but I'd just point out, as John noted earlier, this is in the midst of the most challenging operating environment, I think, that we've ever seen. So it hasn't come easy. But our organization has just continued to step up to make sure that everyone is safe and that we can continue operating as much as we have.

Our next question comes from the line of Scott Group with Wolfe Research.

So I want to ask, last quarter, you guys talked about $60 million of lower maintenance costs this year. Is that still the right way to think about it? And then just separately, of the 33 aircraft in Charter, how many of those are now in long-term charter?

Sure. Let's see. The first part of it was with regard to maintenance. So we did say previously, during the last call that about $60 million of heavy maintenance expense was incurred in 2020 that was related or would have been incurred in 2021. So that statement is still out there. But as far as maintenance expense overall for '21, we're still evaluating that. We'll update that as the year progresses. We gave first quarter outlook for heavy maintenance expense because we wanted to make sure that everyone had that. It's pretty close in.

But as far as the rest of the year, we'll update you as the year progresses.

And then with regard to the long-term Charter question, we now have so many of these. It's -- the thing about these is it's not necessarily utilization of an entire aircraft. It may be one flight per week or something like that. Sometimes, it's a couple of rotations. Sometimes it is the full utilization of the full aircraft.

So it's slightly different. But we have now entered into so many of these contracts. They are amazing. There are just a few of them that currently terminate at the end of this year, but most go into 2022 or '23. And now some have even been extended into 2024.

And Scott, if I could, that ties in with the comments I was just making about our marketing team linking customers together. So those one-off charters or maybe one a week okay, what's that aircraft doing the rest of the week, and that ties in with selling same tails to multiple customers on a long-term basis as well in addition to the fully dedicated aircraft deals.

(inaudible) a very significant portion of our business.

So I suppose with more of this longer-term charter, you've got more visibility and this situation with semis is clearly going to help this airfreight environment stay stronger. I mean, I know you're not giving guidance, but directionally, do you think there's an opportunity to grow earnings this year?

So like we said, we're not -- so we're -- like I said, we're not giving guidance at this point other than what we've shared. And we look forward to getting back to you as soon as possible. We've got a lot of important work ahead of us, including following what the market is doing and continuing to allocate our resources. So we'll look forward to giving you an update on that.

One thing I'd just add to that, Scott, as you know, yields were incredibly high in the second quarter of last year. So that's a very important thing to keep in mind. Yields have continued to be above historical yield levels, but we have not seen levels like April and May of last year, we have not seen that since.

Our next question comes from the line of Helane Becker with Cowen.

So I wanted to ask a question about the leverage because Spencer, you pointed out that it's down quite a bit, right, at 2.1. Where do you think the business runs best? What level should -- are you aiming for? Or how should we think about growth beyond the 4 747s that are coming and balance that against the balance sheet?

Yes. So you know that we made a commitment to reduce our leverage. And as you've seen, as you said, our net leverage and our net leverage ratio have really declined. And then we're going to take on some debt next year with the Dash 8s before enjoying the earnings from the Dash 8s. So that will presumably increase our net leverage ratio a little bit.

Ideally, we would like -- we've always kind of targeted somewhere between 3% and 4%, really much closer to the 3% part of that range. So ideally, we think the business is right somewhere around there. And we're happy that it's down at these levels. But it's probably right somewhere around 3%. And again, when we take on the Dash 8, we'll take on debt before enjoying the earnings. So it will take a little bit of time to catch that back up. Just the way the calculation works.

Right, exactly so. So are you thinking of -- how are you thinking of financing those actually? Maybe is the right question.

Yes. We have a number of opportunities to finance those, and we're looking at all of them. We think that the bank markets are open and available to us. We think there are some potential other opportunities with, whether it be ECAs or public debt facilities. We think we have a bunch of options, and we'll pursue all of those.

Okay. That's very helpful. And I just had a maintenance-related question. I missed the kind of (inaudible). The $117 million you're forecasting for the first quarter, is that -- should we say -- I mean, you said '21 less than '20, and I think Scott pointed out $60 million less just because you pulled that maintenance forward. Is this the high watermark then? I mean, normally, you would do all your heavy maintenance in the first quarter anyway, so should we think about this as being like the high watermark for the year?

Well, we're not going to provide maintenance outlook beyond the first quarter today, but we did say that we expect it will be lower this year. And so yes, the first quarter is -- the first quarter of this year is higher than the first quarter of last year. We have an incremental C check, we have an incremental D Check, which is driving that. But we're not really going to comment beyond that. But yes, if the first quarter is higher and the full year is lower, obviously, there will be some catch-up. We think there will be catch-up between the first quarter and the end of the year.

Our next question comes from the line of David Ross with Stifel.

Just a real quick clarification question on the pilot talks. You said binding arbitration starts mid-March. Is that a 90-day process? And so by that, do you expect the resolution by the end of 2Q?

So it is not a 90-day process. The scheduled hearings are to start in mid-March and go through the end of March. And then there are some procedural things that take place on typically what happens is the arbitrator seeks what's called post-hearing briefs. And it's kind of a summation of both sides' arguments in their case and then he takes those matters under advisement.

I think the duration, how long it takes, we have, under the agreements, under the collective bargaining agreements, there's an expedited request to the arbitrator to have the decision made as soon as possible. But there's no defined time line that's binding on the arbitrator. I think a lot of it depends on how many open issues remain to be resolved. The more issues open, the longer it may take for the arbitrator to render a decision.

That all said, nothing prevents the company and the union from continuing to have discussions to try and narrow the scope of issues, both before, during and after arbitration and pending the ultimate outcome. So a lot of variables go into that, just like any kind of court proceeding, there's no defined time lines, per se.

But I know both sides are committed to move forward. We certainly are, and we're looking to get it done as soon as reasonably possible.

Excellent. And then, Spencer, there's been a big change in the unallocated expense line. Can you talk a little bit about that and where we should think about that for a run rate this year?

Yes, sure. So what's included, the biggest change that's included in unallocated is the CARES Act grant income. So we received that money. And then as we pay qualifying nonexecutive U.S. salaries, wages and benefits, then we record the grant income in unallocated. So when you're looking on a period-over-period basis, that's the item that will stand out.

So is the $28 million a good run rate to use for the next several quarters? Or when does that expire? How do you think about that?

There's about $41 million of CARES Act grant income to be CARES Act -- that will be recognized as grant income in the first quarter of this year. So we expect that, that will then be fully utilized after the first quarter. So it won't be an issue as we head into the second quarter. And then you'll see sort of more normalized unallocated expenses.

Our next question comes from the line of David Campbell with Thompson, Davis.

We heard some background noise, operator. So maybe it's not quite working. Maybe we move on to the next one and come back to David.

Certainly. Our next question comes from the line of Barry Haimes with Sage Asset Management.

I had 2 really. One, relative to the new planes you're buying, I'm wondering if you look at conversion opportunities. I would think there's a lot potentially available with flying being done so much commercially. And I'm just curious how that stepped up and how you thought about that? And then second question, could you just remind us -- I believe under the government CARES Act situation, you're precluded from buying your stock back for the moment. Could you tell us when net restriction eases up?

Yes, I'll take the first one with regard to the new plans and the conversion opportunities. Absolutely. I mean we're looking at all opportunities. On the 747 platform, however, really, the conversion market no longer exists. The freighters that are in the marketplace will be phased out over time because they're older and the economic viability of doing 747 conversions at this time, while, I guess, possible, highly unlikely at this point.

And -- but other gauges, we're looking at every opportunity. As you see from our history, we're very active in the 767 conversion market for our growth with Amazon. We went out and acquired and converted those airplanes. We're also operating the 737-800 conversions that Amazon took on, on lease on their own. And for us, we view both of those aircraft types as still very attractive.

We're also being very active and interested in the marketplace and how COVID has impacted the passenger side of the business to see what opportunities are out there. Our Titan organization, along with our Titan JV, is looking closely at all opportunities in the marketplace, so whether conversion or otherwise. So we look forward to continuing to advance the Titan opportunities as we go forward, both from a leasing, Dry Leasing standpoint, but an operating standpoint as well.

The 777 was recently announced as a conversion candidate. We're still looking at that one as well. Nothing imminent on the horizon, but I just wanted to share that we're constantly looking at fleet opportunities. And on the CARES Act, Spencer, maybe you can give some guidance on the expiration of that commitment on share repurchases.

Sure. And Barry, before I talk about the CARES Act, just to add to John's comments, there hasn't been a 747-400 passenger to freighter conversion in about a decade. And as John said, we just don't expect that, that's going to happen. As far as the 777-300 passenger to freighter program, it will deliver its first aircraft in 2024. So it's still a number of years away.

With regard to the CARES Act, the share repurchase restriction ends in October of this year. I think that was your question there.

(Operator Instructions) We do have a follow-up question from the line of Chris Stathoulopoulos with Susquehanna.

Spencer, what was free cash flow ex any revenue from refunds and PSP1 funds?

Are you talking about during the quarter or the full year?

Both if you have those handy?

Okay. So let's see, as far as the fourth quarter of the year, free cash flow, which we calculate as operating cash flow less core capital expenditures, was 100 -- just short of $189 million. For the full year, it was about $926 million. And amazingly, for the full year, we had a new threshold, operating cash flow greater than $1 billion. So we're very excited about that.

And then you were asking about the refund of excess rent. And so for the fourth quarter, that was about $6.6 million. And for the full year, that was about $37 million, $38 million -- $39 million, sorry.

Okay. Has any of the airlines applied for PSP2?

We have not. No.

Okay. And just going back to the topic of cash deployment here, which -- I mean, this is a very unique place for Atlas to be all things considered. Even if I don't know, we put on 400 a tail for these 747s you're taking next year and assuming you finance half of those and very modest assumptions around EBITDA for next year, this year and next year, I mean there's still here a lot of cash exiting or going through kind of early innings of the recovery. So should we think about that the priorities are going to be more on the aircraft side? I know twin aisles are expected to be weaker than single aisles, given what's happening on the long-haul international travel side. Could we see something along perhaps an acquisition via a smaller airline? You haven't done anything, I think, since 2016. Or perhaps something downstream in a logistics or sort of complementary side of things? Any color there, helpful.

So Chris, from my perspective, from an operating standpoint, my focus is more on the larger wide-body aircraft. While we value all our fleets, our strength and our kind of core business starts with the larger wide-body aircraft. From a leasing standpoint, all opportunities are on the table.

But again, I think our Titan platform is more freighter-centric or aircraft that can become freighters on the conversion from a feedstock standpoint. That's one of the core philosophies of Titan. But if there are other opportunities in the marketplace that have attractive returns, everything is on the table.

In terms of beyond that, M&A and all the other things, for which we could deploy our capital, I just would say this, everything is on the table from our standpoint, and we want to be sure that we are judicious during this volatile period of time through COVID. I've a couple of times now stressed the operating environment and some of the challenges that have been presented to the team. These results -- and I'm not saying this in a boastful way, but these results don't just happen. There were extraordinary workarounds on the international scale to continue to operate into foreign locations that had some varying and very restrictive quarantine, testing requirements, access to hotels, restaurants, the basics of food and shelter. I'm not overstating that.

So we want to be sure that, that we get through this period. I think better times are ahead with the vaccine. But if you follow the media, everything has been slower than people thought. So it's important for us to be responsible and prudent with our cash in the near term. But it's a long-winded way of saying everything is on the table in the longer term.

Okay. And John, to your point there, maybe if you could help us frame here, you addressed it in your prepared remarks and certainly in the press release about some repositioning expense or headwinds due to COVID. So just maybe if you could give us departures for fourth quarter, not block hours, but departures or absolute year-on-year and maybe sequentially? And then also, where are we with the AMC movement restrictions? And what are we seeing there with utilization on the related aircraft?

Yes. So I'll talk on the AMC piece. Spencer, I don't know if you have information on departures or whether that's anything we're in a position to provide at this point. But on the AMC, you're right, and particularly in the early part of 2020, when COVID hit, the military put a stop movement order in place, which affected certainly the passenger demand significantly and also had ripple effects on cargo demand. And that remained in place until mid- to later part of 2020. That stop movement order has since been lifted, but the demand on the passenger side has not yet fully recovered, but we expect that to get to more normalized levels as we move through the year, and especially as the vaccine starts to roll out and get more traction.

Okay. And anything on the departures?

The only thing I would say on departures is that they've really been growing year-over-year-over-year. Our departures continue to grow. We typically -- well, from an operational standpoint, we look at all of it, but I typically focus a bit more on the hours that we operate or the charter flights that we operate. That's how we bill our customers.

Okay. If I could just get one last one here. The 11 planes that Amazon purchased in January, I don't think I've seen anyone pick up the CMI leases. Are you bidding on those?

We're going to be competing for every aircraft that our customers have to offer. So you're right, there's nothing been reported, but we're going to do everything we can to secure as much business as we can from Amazon and all our customers.

We do have a follow-up question from the line of Scott Group with Wolfe Research.

Just quickly, how should we think about excess rent refunds this year?

Sure, Scott. There is a -- just a tiny amount left, a small amount left. We have one last tranche of it in May of this year, and it should be about $4.5 million. And then that program should be completed.

Okay. Very helpful. And then when you guys first started buying the Dash 8s almost a decade ago, you guys talked about pretty significant initial earnings accretion per plane per month with the maintenance holidays. Is there any reason to think the math would be any different for the next 4 that you guys are taking?

Yes. We provided that information back then because the planes were late. And so we had included the earnings from those planes in our guidance. And then when the planes were late from Boeing, we let everyone know that just that amount of earnings would not be happening in that period of time. But it was never meant to really be a sort of forecast going forward for those earnings.

But clearly, in the early days of the aircraft, the early years of the aircraft, they don't need maintenance. There are warranties and things like that, that are available on the aircraft if there are any sort of maintenance issues. So they're absolutely more profitable in their early years.

And we'll see what the overall market is like. This is a strong market. As John said, we hope to place them with a great customer at a great rate, and we'll just have to see how the profitability is. We have pretty good expectations.

Yes. The other thing I'd add to that, just from an operational standpoint, and this is true of aircraft that are in production for a while. The longer the aircraft are in production, generally speaking, the better the aircraft perform, meaning the likes of Boeing and GE get the kinks out over time. These aircraft are likely to be somewhat lighter than some of the other Dash 8s and the engines performing at their peak performance compared to the earlier deliveries. So we're excited about that and think that's a great value proposition to our customers as well as they review the opportunity.

Our last question comes from the line of David Campbell with Thompson, Davis.

I had to step off the phone for a while, so I may have missed something that I'm asking about. But as you know, January and February every year are distorted by the changes in the Chinese New Year. And this year, we have also the problem of the port congestion on the West Coast, which was added to your business in January and February, I guess.

But what about March? March is a seasonal peak, as you know. And I was wondering if you'd seen or had any discussions with your customers about demand and the -- in the month of March this year.

Yes. I think that's reflected in our first quarter guidance. A lot of the variables that we talked about, which favored airfreight in 2020 continued into 2021 Q1. Lunar New Year, for example, because of COVID and the desire of the Chinese government to limit travel, we saw a unique environment where factories, many of them stayed open during Lunar New Year, which was unprecedented. You also see the demand for international passenger air travel continuing to be down, which is a favorable environment. That's not going to last forever. The passenger carriers, I expect, will have a tremendous appetite to get their aircraft back up in the air as quickly as possible. But then, then what? Will people be willing to travel? So that remains to be seen. But I think March is a reflection of what we saw in January, February, adding to a couple of comments I just made.

And my second question is related to Amazon. Amazon adding aircraft all the time, it seems. Correct me, if I'm wrong. These are primarily aircraft destined for domestic use in the United States, I think. And if not, if they're not using them for international cargo, is that because they need operating rights and they don't have operating rights, the bilateral rights into these countries?

Yes, David, I can't speak for Amazon. They're going to do what they're going to do with those airplanes. Generally speaking, the type of aircraft they're acquiring are more regional, not long-haul, wide-body international. But that's their call where they're going to deploy them. And I don't think they're public with that yet.

But they don't have any restrictions internationally by not having authority?

I can't speak to Amazon. I mean they don't operate their own air operating certificate at this time. So that I do know. They would deploy those aircraft to carriers, I suspect, that would be able to operate them wherever they want to operate them. But they themselves as Amazon, to date, do not have their own air operating certificate, which by definition means they don't have air route rights.

This concludes today's question-and-answer session. I would now like to turn the call back to Atlas Air for closing remarks.

Okay. Thank you, operator, and thanks to all of you for your great questions. On behalf of all the employees, Spencer and I would like to thank you for your interest in Atlas Air Worldwide. We appreciate you sharing your time with us today, and we hope you and your families remain safe, and we look forward to speaking with you again soon. So thank you all so much. Thank you, operator.

Ladies and gentlemen, this concludes today's conference call. Thank you for your participation. You may now disconnect.