Air Transport Services Group, Inc. (ATSG): PESTLE Analysis [Nov-2025 Updated]

You need to know where Air Transport Services Group, Inc. (ATSG) stands externally, and the 2025 outlook is a study in contrasts: a massive private equity deal is closing, but global air cargo growth is stalling. The Stonepeak acquisition is the clear flight path, but geopolitical volatility, new tariffs, and a projected cargo growth rate of just 0.7% are the headwinds. We need to map the whole PESTLE (Political, Economic, Sociological, Technological, Legal, and Environmental) picture to see the clear action items for your portfolio.

Political Headwinds and Tailwinds

The political environment for Air Transport Services Group, Inc. is defintely a source of uncertainty, mainly due to shifting US trade policy. New tariffs on imported aircraft and parts are a real risk, and if they hit, they'll raise fleet maintenance costs immediately. Plus, geopolitical volatility is creating uncertainty for international air cargo routes, forcing a more cautious approach to long-term route planning.

Still, the US government remains a stable, high-value customer. Government contracts, especially with the U.S. DoD (Department of Defense), provide a consistent revenue stream that acts as a reliable floor beneath the more volatile commercial operations. You need to watch for new US administration policies in 2025 that could shift labor and immigration laws, directly impacting your operational workforce strategy.

Diversification away from volatile routes is key.

Economic Reality: Acquisition and Slowing Growth

The economic story for Air Transport Services Group, Inc. in 2025 is dominated by two numbers. First, the pending acquisition by Stonepeak is expected to close in the first half of 2025, which should provide capital stability and a clear ownership structure. Second, global air cargo growth is projected to slow significantly to only 0.7% in 2025, down from the post-pandemic boom, so don't expect a massive volume tailwind.

Here's the quick math on debt management: EBIT (Earnings Before Interest and Taxes) interest coverage is forecast to improve to around 2x in 2025. That's a healthier cushion, but it still shows the capital-intensive nature of this business. Moderating jet fuel prices are a welcome relief, expected to average around $86 per barrel in 2025, helping to manage operating expenses.

What this estimate hides is the significant capital expenditure (capex) forecast at $300 million to $400 million for 2025, mostly for fleet modernization. That's a big spend, but it's necessary for long-term efficiency.

Sociological Shifts and Labor Risks

The biggest sociological risk is the persistent labor shortage across the entire aviation sector, which is driving up operational costs. You can't fly planes without pilots and mechanics, and the competition for talent is fierce. This shortage is compounded by generational shifts increasing demand for flexible work and advanced training programs-a cost you have to absorb to retain staff.

Also, the corporate focus on Environmental, Social, and Governance (ESG) is no longer optional. It drives community and employee programs, and it's a non-negotiable for institutional investors. Increased public scrutiny on corporate ethics and supply chain transparency means you must invest in clear, verifiable reporting. Honesty and transparency are your best defense here.

Invest in your people or pay the price later.

Technological Edge: The New Fleet

Air Transport Services Group, Inc.'s technological strategy is focused on fleet diversification and optimization. The most concrete opportunity is the delivery of the first four converted Airbus A330 freighters expected in 2025. These A330 Passenger-to-Freighter (P2F) conversions offer greater range and capacity than the current workhorse Boeing 767s.

Plus, the company is investing in AI (Artificial Intelligence) and automation for predictive maintenance and flight optimization. Using new flight planning software reduces fuel consumption and carbon emissions, saving money and helping the environment simultaneously. The A321 P2F conversions are also key, offering an efficient short-haul solution for the booming e-commerce market.

New planes mean lower operating costs.

Legal Landscape and Regulatory Hurdles

The primary legal hurdle for Air Transport Services Group, Inc. in 2025 is securing the regulatory approval for the Stonepeak acquisition. Until that closes, a degree of uncertainty remains. Beyond the deal, new US tariffs on imported aircraft and parts, mentioned earlier, could translate into higher legal costs as the company navigates customs and trade regulations to keep its fleet flying.

Evolving FAA (Federal Aviation Administration) and international safety standards require continuous compliance investment, which is a fixed cost of doing business in this sector. Finally, potential changes to gig worker and contractor classification laws could significantly impact the labor strategy, especially for ground support or specialized contract crew, so you need to be ready to pivot quickly.

Compliance is not optional, it's foundational.

Environmental Imperatives and Fleet Efficiency

The environmental pressure on Air Transport Services Group, Inc. is intense, but the company's technological investments are a direct response. Fleet modernization with the A330P2F and A321P2F conversions significantly improves fuel efficiency over the older Boeing 767s, which is the most effective way to cut emissions today. This is a crucial financial and environmental win.

Still, there is increasing pressure from customers and investors for Sustainable Aviation Fuel (SAF) adoption. While a long-term goal, the commitment to reducing CO2 emissions via operational improvements and technology implementation is a near-term action. To be fair, climate change impacts-like extreme weather-also pose risks to flight operations and scheduling, so this is a risk management issue as much as an ethical one.

Fuel efficiency is the new green.

Given the pending Stonepeak acquisition and the capex forecast of $300 million to $400 million, the most immediate action is to model the post-acquisition debt structure and the impact of that capital spending on free cash flow for the next 18 months. Owner: Finance Team: Draft 18-month post-acquisition cash flow projection by end of next week.

Air Transport Services Group, Inc. (ATSG) - PESTLE Analysis: Political factors

US trade policy risks new tariffs on imported aircraft and parts.

The shifting US trade policy landscape in 2025 presents a clear risk to Air Transport Services Group, Inc.'s (ATSG) operational costs, particularly around its fleet conversion and maintenance business. The new administration has repeatedly signaled a move toward higher tariffs, including a proposed universal baseline tariff of up to 20% on nearly all imports and a steep 60% tariff on all imports from China.

Even though the US and the European Union reached a trade agreement in July 2025 that exempted aircraft and aviation parts from tariffs, that deal is not defintely binding, and the threat of new duties remains. This is critical for ATSG because it is actively expanding its fleet, with commitments to acquire and convert additional Boeing 767-300, Airbus A321, and Airbus A330 aircraft into freighters, totaling $321.6 million through 2028. A tariff hike on components, such as the potential 25% duty on aircraft components from China, directly increases the capital expenditure and ongoing maintenance costs for this expansion.

Here's the quick math: Increased tariffs on imported parts raise the cost of conversion and maintenance, putting pressure on the margins of its leasing segment, which is ATSG's primary business.

Geopolitical volatility creates uncertainty for international air cargo routes.

Geopolitical turbulence is a major operational risk for international air cargo, forcing route diversification and increasing costs. Ongoing conflicts and military tensions lead to airspace closures, forcing carriers to reroute flights, which extends delivery times and drives up fuel and insurance expenses.

The air cargo market remains volatile in early 2025, partly due to tariff uncertainty and disruptions like the Red Sea shipping instability, which actually pushed more high-value cargo from sea to air. However, this volatility also shifts trade geography, which ATSG must monitor closely. For instance, while global air cargo demand rose 4.1% year-on-year in August 2025, North American carriers saw a demand decline of -2.1%, while Asia-Pacific carriers grew by +9.8%. This suggests that trade flows are moving away from traditional US-centric routes, demanding strategic flexibility from ATSG's contracted air transportation services.

• Airspace closures: Increase flight time and fuel burn.
• Sanctions/Trade restrictions: Disrupt cargo volumes and increase compliance costs.
• Shifting trade: North American air cargo demand lags Asia-Pacific growth.

New US administration policies may shift labor and immigration laws in 2025.

The new US administration's focus on an America First Trade Policy emphasizes labor standards and worker protection, which could translate into stricter enforcement and new regulations for the air cargo and logistics sector. A key area of impact is the enforcement of the Uyghur Forced Labor Prevention Act (UFLPA), which restricts goods made with forced labor from entering the U.S. As of August 1, 2025, U.S. Customs and Border Protection (CBP) had stopped over 16,700 shipments valued at almost $3.7 billion for examination under the UFLPA.

This heightened scrutiny and enforcement directly impact the flow of cargo for ATSG's customers, increasing compliance risk and potentially causing delays in the air freight supply chain. Also, unresolved labor negotiations at major U.S. East Coast and Gulf Coast ports in early 2025 pose a significant risk of a port strike, which, while disruptive to ocean freight, could force a temporary surge of cargo volume onto air carriers like ATSG.

Government contracts (e.g., U.S. DoD) remain a stable revenue source.

ATSG's long-standing relationship with the U.S. Department of Defense (DoD) provides a crucial and stable revenue base that acts as a hedge against volatility in the commercial air cargo market. This is a clear strength in a politically uncertain environment.

DoD contracts, which cover troop movement and cargo services, have consistently represented a large, predictable share of the company's top line. Using the most recent available figures, DoD revenue accounted for a stable 29% of ATSG's consolidated revenues during the nine months ended September 30, 2024. Based on the 2024 total external customer revenues of $1,962.0 million, this stable percentage translates to an estimated annual DoD revenue of approximately $568.98 million, which is a substantial anchor for the business. ATSG currently operates 15 passenger aircraft and four combi aircraft for the DoD under these agreements.

What this estimate hides is the regulatory risk: the pending merger agreement with Stonepeak Nile Parent LLC, expected to close in the first half of 2025, requires approval from the U.S. Department of Transportation, a significant political hurdle that could delay or derail the deal.

Air Transport Services Group, Inc. (ATSG) - PESTLE Analysis: Economic factors

Global Air Cargo Growth is Projected to Slow

The macroeconomic environment for Air Transport Services Group, Inc. (ATSG) in 2025 is marked by a significant deceleration in global air cargo demand, which directly impacts the company's core leasing and air transport services.

The International Air Transport Association (IATA) projects that global air cargo growth, measured in cargo-tonne kilometers (CTK), will slow substantially to only a 0.7% year-over-year increase in 2025.

This slowdown, a sharp contrast to the previous years' pandemic-fueled surge, is driven by a weakening global economic cycle, rising protectionism, and the removal of the de minimis exemption for low-value parcels entering the US, which dampens cross-border e-commerce volumes.

The Pending Acquisition by Stonepeak

The most significant near-term economic factor for ATSG is its impending acquisition by Stonepeak, a leading alternative investment firm specializing in infrastructure and real assets.

The all-cash transaction, with an enterprise valuation of approximately $3.1 billion, is expected to close in the first half of 2025, subject to customary regulatory approvals.

This move will take ATSG private, which fundamentally changes its financial structure and strategic focus from public market returns to long-term infrastructure investment. The deal was approved by ATSG stockholders in February 2025.

EBIT Interest Coverage is Forecast to Improve

Despite the broader air cargo slowdown that pressured 2024 performance, financial forecasts for ATSG's credit metrics show a modest recovery into 2025.

EBIT (Earnings Before Interest and Taxes) interest coverage is forecast to improve to around 2x in 2025. This metric, a key measure of a company's ability to service its debt, is expected to stabilize after facing pressure in 2024 from elevated interest expenses in a high interest rate environment and higher debt levels.

Here's the quick math on the industry's potential: IATA forecasts the global airline industry's net profit to improve to $36.6 billion in 2025, up from an estimated $31.5 billion in 2024. That's a 16% jump, so the environment isn't defintely all doom and gloom.

Key financial forecasts for ATSG's stability include:

• EBIT Interest Coverage: Improving to around 2x in 2025.
• Funds from Operations (FFO) to Debt: Expected to remain in the 25%-30% range through 2025.
• Debt to Capital: Forecasted to remain in the 50%-60% range through 2025.

Capital Expenditure (Capex) is Expected to Moderate

ATSG is strategically scaling back its capital spending (capex) in 2025, shifting from the aggressive fleet expansion seen in 2023.

Capital expenditure is forecast at a range of $300 million to $400 million for 2025. This is a significant reduction from the approximately $800 million spent in 2023, where the company expanded its fleet in anticipation of strong leasing demand that did not fully materialize.

What this estimate hides is that the lower capex is a direct response to weaker demand for new lease deployments, particularly from international customers, and expected lease returns, allowing for disciplined capital allocation.

A breakdown of the forecast capital spending is shown below:

Moderating Jet Fuel Prices Offer a Cost Opportunity

A key tailwind for ATSG's airline operations is the moderating cost of jet fuel, a major operating expense for the air transport industry.

Jet fuel prices are expected to average around $86 per barrel in 2025. This is based on a projected average Brent crude oil price of $69 per barrel and an average crack spread (the difference between crude and jet fuel) of $17 per barrel.

This price point is a reduction from the estimated $99 per barrel average in 2024, which should help stabilize operating margins for ATSG's ACMI (Aircraft, Crew, Maintenance, and Insurance) services segment. Lower fuel costs will help offset some of the revenue pressure from lower block hours in both passenger and cargo operations.

Air Transport Services Group, Inc. (ATSG) - PESTLE Analysis: Social factors

Persistent labor shortages across the aviation sector increase operational costs.

The persistent, industry-wide labor shortage for skilled aviation professionals directly impacts Air Transport Services Group, Inc. (ATSG)'s operational costs and capacity. The company's total employee count stood at 4,745 as of December 31, 2024, representing a decrease of 6.87% from the prior year, which is a significant headwind in a growing cargo market.

This decline in personnel is happening while the industry is seeing major cost inflation. Across the broader aviation sector, total labor costs are projected to reach $253 billion in 2025, with airline labor costs expected to increase by an average of 7.6% this year. For ATSG, a leading provider of air cargo services, this translates into higher wages and recruitment expenses to attract and retain pilots and aircraft maintenance technicians (AMTs).

The shortage is particularly acute for technical roles. Demand from commercial air transport alone is expected to drive a 10% shortage in certificated mechanics in 2025, which directly affects ATSG's Maintenance, Repair, and Overhaul (MRO) services segment. This competitive pressure is explicitly cited in ATSG's 2024 financial reports as a risk factor for 2025 operations. It's a seller's market for talent, and you defintely pay for it.

Generational shifts are increasing demand for flexible work and advanced training.

The workforce is changing, and ATSG must adapt to the expectations of younger generations, particularly Gen Z, who prioritize work-life balance and career sustainability. The shift toward flexibility is a macro-trend, with one in three Americans now engaging in flexible work, up from one in six in 2022.

ATSG addresses this by offering benefits that signal a commitment to employee well-being and life-stage support. The company provides four weeks of paid parental leave to all eligible employees, regardless of gender, a policy that took effect in April 2023. This is a clear move to attract and retain talent in a competitive environment where flexibility is non-negotiable.

To mitigate the skills gap, ATSG's internal capabilities, such as Airborne Training Services, are crucial for developing the next generation of flight crews and mechanics. The industry needs a massive pipeline, with global forecasts indicating a need for 300,000 new pilots and 416,000 new AMTs over the next decade. ATSG's focus on training, including its support for Business and STEM student scholarships, is a necessary investment to secure its long-term operational capacity.

Corporate focus on Environmental, Social, and Governance (ESG) drives community and employee programs.

Investor and public focus on the Social (S) pillar of ESG is intensifying, pushing companies like ATSG to formalize their community and employee commitments. While the company's overall net impact ratio is measured at -75.8% due to the environmental impact of air freight, its positive contributions are heavily concentrated in the 'Social' categories: Jobs, Taxes, and Societal Infrastructure.

Here's the quick math on their community investment: ATSG's charitable support exceeded $850,000 in 2022, an increase of over 65% from the prior year, focusing on key areas like education, veterans support, and food security. Furthermore, the company actively promotes aviation careers through initiatives like hosting a Girls in Aviation Day 2025 event, directly addressing the industry's diversity and talent pipeline challenges.

Increased public scrutiny on corporate ethics and supply chain transparency.

The increasing regulatory environment, like the EU's Corporate Sustainability Reporting Directive (CSRD) impacting global operations, means transparency is no longer optional. While ATSG has a clear commitment to a comprehensive code of ethics and its governance framework is designed to uphold the highest standards of integrity, the public is now scrutinizing the entire supply chain.

As a key partner to major e-commerce and government entities, including the U.S. Department of Defense and Amazon, ATSG's supply chain ethics are under a microscope. Any lapse in labor practices within its Maintenance, Repair, and Overhaul (MRO) subsidiaries or its air cargo operations could lead to significant reputational damage and operational disruption, especially given the pending acquisition by Stonepeak, which adds another layer of financial and public oversight.

The company's inferred core values, based on its mission, center on Safety, Reliability, and Professionalism. These values must be demonstrably upheld not just in flight operations, but also in the ethical sourcing of parts and the fair treatment of all personnel across its global network.

Air Transport Services Group, Inc. (ATSG) - PESTLE Analysis: Technological factors

Delivery of the first four converted Airbus A330 freighters is expected in 2025

The core of Air Transport Services Group, Inc.'s (ATSG) technological pivot in 2025 is the introduction of the Airbus A330-300 Passenger-to-Freighter (P2F) aircraft. This is a critical move to replace aging medium widebody aircraft, like the Boeing 767s, and significantly modernizes the fleet. The company expects to take delivery of its first four A330-300P2Fs this year, with the first two conversions completed in the first quarter of 2025.

This widebody freighter, with its superior payload and range, is a direct technological upgrade. The A330-300P2F boasts a payload capacity of approximately 62 tonnes (or 136,700 pounds) and a maximum range of 3,699 nautical miles (6,850 km), which gives ATSG's subsidiary, Cargo Aircraft Management (CAM), a substantial competitive edge for long-haul, high-volume routes.

Fleet diversification includes A321 Passenger-to-Freighter (P2F) conversions for e-commerce short-haul

In parallel with the widebody A330, ATSG is aggressively expanding its narrowbody fleet with the Airbus A321 P2F, a perfect fit for the booming e-commerce express market. This is a smart move because it optimizes for high-frequency, shorter routes where the Boeing 767 is simply too much aircraft.

The company's year-end filings showed that six A321 aircraft are currently undergoing cargo modifications. The A321-200PCF, converted through a joint venture, 321 Precision Conversions, has a payload capacity of up to 27 tonnes. Plus, ATSG delivered its first EASA-certified A321 freighter in July 2025 to Warsaw Cargo, marking a key milestone in their international growth strategy.

Investment in AI and automation for predictive maintenance and flight optimization

While a specific capital expenditure figure for ATSG's AI investment isn't public, the industry trend is unmistakable: AI is moving from an experiment to a necessity. The global AI in aviation market is valued at approximately $1.75 billion in 2025, and ATSG's new-generation Airbus fleet is the perfect platform for this technology.

Here's the quick math: AI-based predictive maintenance systems-which analyze real-time sensor data to forecast component failures-can decrease aircraft downtime by 5 to 15% and enhance labor efficiency by up to 20% for airlines. For a company focused on aircraft leasing and operations, that directly translates into higher asset utilization and lower maintenance costs, which is defintely a competitive advantage.

• Monitor thousands of components in real-time.
• Anticipate failures before they cause delays.
• Reduce unscheduled maintenance events by up to 15%.

Use of new flight planning software reduces fuel consumption and carbon emissions

The push for operational efficiency is directly tied to fuel burn, which represented about 30% of total airline operating costs in 2024. New-generation flight planning software uses advanced algorithms to calculate the most fuel-efficient vertical and lateral flight profiles, factoring in real-time weather and wind data.

This technology is a low-cost, high-impact way to save money. For example, similar AI-powered flight optimization tools used by other carriers have shown the ability to cut fuel consumption by up to 2% per flight. For ATSG, deploying such a system across its growing fleet of fuel-efficient A330 and A321 freighters means every flight is optimized for cost and emissions. This operational efficiency is a key selling point to customers like Amazon and DHL who have ambitious sustainability goals.

Next Step: Cargo Aircraft Management (CAM): Finalize the integration plan for A330/A321 P2F flight data into a third-party predictive maintenance platform by Q4 2025.

Air Transport Services Group, Inc. (ATSG) - PESTLE Analysis: Legal factors

Regulatory approval for the Stonepeak acquisition is the primary legal hurdle in 2025.

The foremost legal factor for Air Transport Services Group, Inc. (ATSG) in the 2025 fiscal year is the completion of its definitive merger agreement with Stonepeak, an infrastructure-focused investment firm. This all-cash transaction has an enterprise valuation of approximately $3.1 billion, with ATSG common shareholders set to receive $22.50 per share.

While stockholders approved the merger in February 2025, the final closing, anticipated in the first half of 2025, remains subject to necessary regulatory approvals. These approvals typically involve scrutiny from the Department of Justice (DOJ) for antitrust concerns and the Committee on Foreign Investment in the United States (CFIUS) due to Stonepeak's global nature and the strategic importance of ATSG's assets, which include three airlines holding separate U.S. FAA Part 121 Air Carrier certificates.

The legal process here is the last major gate before the company transitions to a privately held entity, which will defintely alter its public reporting and compliance obligations.

New US tariffs on imported aircraft and parts can raise fleet maintenance costs.

The unpredictable landscape of US trade policy, particularly regarding tariffs on imported aircraft parts, presents a clear cost risk for ATSG's maintenance, repair, and overhaul (MRO) operations. While the 1979 Agreement on Trade in Civil Aircraft generally supports duty-free trade, recent executive actions have created significant uncertainty.

For example, the court has stayed a decision on tariffs imposed under the International Emergency Economic Powers Act (IEEPA) until October 14, 2025, leaving a cloud over imports from key trading partners. Furthermore, the imposition of a 25% tariff on steel and aluminum imports, effective March 12, 2025, is critical, as these materials are essential for MRO operations and could directly increase the cost of maintaining ATSG's fleet of Boeing 767, Airbus A321, and A330 converted freighters.

Evolving FAA and international safety standards require continuous compliance investment.

The air cargo sector is subject to rigorous and constantly updated safety and security regulations from the Federal Aviation Administration (FAA) and international bodies like the International Air Transport Association (IATA). For 2025, a major focus is on security, with new Transportation Security Administration (TSA) air cargo compliance rules requiring 100% cargo screening enforcement.

This mandate necessitates an initial investment in smart security technologies and staff training, which raises operational costs. Also, the FAA has extended emergency airworthiness directives (ADs) for urgent inspections on older widebody freighters, which, while not directly impacting ATSG's core Boeing 767 fleet, signals a broader regulatory trend toward enhanced airframe and engine pylon safety. IATA alone updates its manuals with over 350 changes annually, meaning compliance is a continuous, high-cost investment, not a one-time fix.

• Invest in security technology for 100% cargo screening enforcement.
• Allocate budget for training staff on over 350 annual IATA regulation changes.
• Manage compliance with FAA Airworthiness Directives to avoid contractual penalties and accelerated retirement of older leased aircraft.

Potential changes to gig worker and contractor classification laws impact labor strategy.

ATSG relies on a diverse labor model that includes full-time employees and various contractors across its maintenance, ground handling, and air transport subsidiaries. The legal risk of misclassification has intensified with the Department of Labor's (DOL) final rule, effective March 11, 2024, which revises the standard for determining a worker's status under the Fair Labor Standards Act (FLSA).

This new 'economic reality' test, which weighs factors like the worker's opportunity for profit or loss and the nature and degree of control by the employer, makes it easier for a contractor to be legally deemed an employee. Misclassification carries the risk of costly litigation, tax penalties, fines, and liability for back pay and benefits. While the federal government has signaled a pullback on enforcement in 2025, the risk remains high due to aggressive, fragmented state-level rules. This legal shift directly impacts ATSG's labor strategy, potentially increasing its payroll and benefits expenses if a portion of its contractor workforce must be reclassified. It's a huge cost exposure.

Air Transport Services Group, Inc. (ATSG) - PESTLE Analysis: Environmental factors

Fleet modernization with A330P2F and A321P2F improves fuel efficiency over older 767s.

Your biggest environmental opportunity right now is fleet renewal, pure and simple. ATSG is actively transitioning from its core Boeing 767 fleet to more fuel-efficient Airbus models. This is a critical move, as the older Boeing 767-200F and 767-300ERF models have a benchmark fuel burn around 0.09 USG per available ton-mile.

The company is taking delivery of new Airbus A330-300 Passenger-to-Freighter (P2F) conversions in the 2025 fiscal year, with the first two expected in the first quarter of 2025. ATSG has a total of 29 A330P2Fs on order. The A330P2F offers a payload capacity of approximately 62 tons, similar to the aging 767s, but with better fuel performance on long-haul routes. Plus, the smaller A321P2F, with six aircraft currently undergoing cargo modifications, is specifically cited to have greater fuel efficiency than comparable freighter variants of the Boeing 737 and Boeing 757, making it perfect for e-commerce express routes.

This is where the rubber meets the road: new aircraft mean lower operating costs.

Increasing pressure from customers and investors for Sustainable Aviation Fuel (SAF) adoption.

The pressure to adopt Sustainable Aviation Fuel (SAF) is intense, driven by your major customers and the global regulatory landscape. While ATSG itself has not published a specific 2025 SAF usage target, the industry is moving fast. Global SAF production is expected to reach approximately 2 million tonnes in 2025, which still only accounts for about 0.7% of total airline fuel demand.

This low supply creates a cost problem: IATA estimates this small amount of SAF will add approximately $4.4 billion globally to the airline fuel bill in 2025. For an aircraft lessor and operator like ATSG, this translates to higher fuel costs for your airline subsidiaries and increased operating expenses for your lessees like Amazon and DHL, who are themselves under immense pressure to decarbonize their supply chains. The European Union's ReFuelEU Aviation regulation, for example, mandates a minimum 2% SAF blend for all fuel uplifted at EU airports starting in 2025.

Commitment to reducing CO2 emissions via operational improvements and technology implementation.

ATSG is clearly focused on operational efficiency to cut its carbon footprint, which is smart given the lack of a readily available SAF supply. From 2021 to 2022, the company's operational improvements resulted in a relative reduction in jet fuel usage by 19.9 million gallons and a corresponding CO2 emissions reduction of 191,000 tons. That's a huge, tangible result.

However, investor scrutiny is rising. In May 2024, a shareholder proposal requested ATSG set near- and long-term science-based GHG reduction targets aligned with the 1.5 degrees Celsius goal of the Paris Agreement. While the proposal did not pass, it received significant support with 29.63% of votes in favor. This signals that a large portion of the investor base wants more than just operational improvements; they want a validated, Science Based Targets initiative (SBTi) plan that covers all three scopes of emissions. Two of ATSG's airline subsidiaries are committed to the International Air Transport Association's (IATA) Net Zero by 2050 resolution, but the parent company itself has not set an interim, company-wide target, which is a key gap in your environmental strategy disclosure.

Climate change impacts (e.g., extreme weather) pose risks to flight operations and scheduling.

The physical risks of climate change are becoming a material financial factor in air cargo. For an operator with a global footprint, extreme weather events-like more frequent and severe hurricanes, heatwaves, and flooding-directly impact operations.

These physical risks translate to operational and financial costs:

• Reduced Payload: Higher temperatures (heatwaves) reduce air density, which forces aircraft to carry less cargo or fuel to maintain safe take-off distances.
• Increased Turbulence: Changes in atmospheric wind speeds and temperatures are increasing the frequency and severity of clear-air turbulence, leading to higher maintenance and insurance costs.
• Scheduling Disruption: Extreme storms and flooding at key airport hubs cause flight delays and cancellations, increasing crew and maintenance costs and potentially triggering service credit penalties for lessees.

Regulatory pressure is also forcing disclosure of these risks. The US Securities and Exchange Commission (SEC) rules on climate disclosure, set to be implemented in phases starting from the 2025 fiscal year, will require large public companies to disclose climate-related financial risks and mitigation strategies in line with frameworks like the Task Force on Climate-related Financial Disclosures (TCFD). This means you need to defintely quantify the financial impact of a 1-in-100-year weather event on your key hubs.