FOOL CONFERENCE CALL SYNOPSIS*
By Greg Markus (TMF Boring)

Atlas Air, Inc.
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538 Commons Dr
Golden, CO 80401
(303) 526-5050

ANN ARBOR, Mich. (July 25, 1997) /FOOLWIRE/ -- Atlas Air is a U.S. certificated air carrier that operates a fleet of 747-200 freighter aircraft under long-term ACMI contracts. These contracts include the provision by Atlas of Aircraft, Crew, Maintenance and Insurance for some of the world's leading air carriers, including British Airways, China Airlines, Emirates, Fast Air, KLM, LAS, Lufthansa, SAS, Thai International Airways and Varig, serving 62 cities in 38 countries.

SECOND QUARTER RESULTS. On July 24 Atlas Air reported net earnings for the quarter ended June 30, 1997 of $3.5 million, or $0.16 per share, excluding the net impact of certain largely-offsetting special items. That compares with net income of $10.0 million, or $0.47 per share, for the year-earlier period. Revenues for the second quarter of 1997 increased 29%, to $93.9 million versus $72.6 million for the same quarter in 1996. Operating income, excluding the special items, was $16.4 million for the quarter ended June 30, 1997 versus $22.7 million for the prior year. Block hours totaled 17,541 in the second quarter of 1997, as compared with 14,073 block hours in the year-ago period. Revenue per block hour was $5353, up 4% from the second quarter of 1996.

EXTRAORDINARY ITEMS. As previously announced, Atlas recorded an extraordinary after-tax gain of $16.7 million in the second quarter, resulting from the receipt of a prepayment incentive credit associated with the refinancing of approximately $228 million of indebtedness during the quarter. Offsetting that gain were after-tax charges of $17.2 million, resulting from the write-off of Atlas's remaining balance sheet investment in five 747-200 freighter aircraft subleased from FEDERAL EXPRESS <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: FDX)") else Response.Write("(NYSE: FDX)") end if %>, as well as from the establishment of certain reserves associated with costs necessary to return the aircraft in the first quarter of next year and for other non-recurring items. Including the impact of these two one-time special items, net income for the second quarter 1997 was $3.0 million. Management believes they have established comfortable reserves for the return of the FedEx aircraft and does not anticipate any additional charges in that regard.

SIX MONTH RESULTS. Net income for the first six months of 1997 was $9.3 million, compared to $16.2 million for the year-earlier period, excluding special items. Revenues for the first half of the year rose by 34%, to $176.0 million from $131.3 million in the prior period. Operating income for the 1997 first half, excluding special items, was $34.7 million, compared to $38.1 million for the same period in 1996, representing a 20% operating margin. Block hours totaled 32,984 in the first six months of 1997, as compared with 25,198 block hours for the corresponding period in 1996.

FEDEX AIRCRAFT PROBLEMS. Second quarter results principally reflected the impact of the five FedEx aircraft. Since leasing those aircraft in 1996, Atlas experienced continuing high costs and reliability issues associated with their operation. The relative improvement in maintenance costs for those aircraft that the company saw during the first quarter of this year did not continue into the second quarter when greater demands were placed upon them. Estimated maintenance costs on these aircraft were more than $2800 per block hour, or over 75% higher than the rest of the fleet, during the second quarter. That increased the fleet average maintenance costs by approximately $100/hour to $1700 per block hour and increased the company's overall operating cost per block hour from the range of $3700 to $3800 per block hour to approximately $4400 per block hour. That increase also reflects added fuel and ground-handling expense associated with ferrying the problematic aircraft to and from repair and also moving backup planes into service to cover shortfalls by the FedEx aircraft.

OPERATIONAL LIMITATIONS. In addition, the operational limitations of these aircraft resulted in reduced revenue levels. The FedEx aircraft averaged a little less than 200 hours per month during the quarter, compared to the more normal fleet average of 350 monthly hours, or less than a 60% operating efficiency. The combination of these reduced aircraft production levels and continued high overall costs resulted in an estimated after-tax negative impact of $8-10 million on the company's second quarter earnings. The five FedEx aircraft differ from the balance of Atlas's fleet both in terms of the schedule by which they were maintained by previous operators and in terms of their engines. The other aircraft in Atlas's fleet all went through Boeing's modification program, and they are performing very reliably. Even as poorly as the FedEx aircraft have performed, Atlas still achieved a 20% operating margin through the first half of 1997.

IMPACT ON CUSTOMERS. The FedEx aircraft have been hard to place with clients, because clients recognize their operational limitations. Atlas has tried to place those aircraft in areas where time criticality of operations is comparatively lower, and the company has also provided backup capacity when needed. The vast majority of Atlas's customers have never been exposed to the FedEx aircraft and have been unaffected by them.

FEDEX PLANE REPLACEMENT. Atlas expects the operational limitations and high costs of the five FedEX aircraft to continue for the balance of the year. Fortunately, they will be removed from the fleet and returned to the lessor five months from now, ultimately to be replaced by, among other aircraft, the new 747-400's that Atlas is buying from BOEING <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: BA)") else Response.Write("(NYSE: BA)") end if %>. At the present time, FedEx has no plans for the immediate use of the aircraft Atlas will return to them, so it is possible that Atlas may retain one or two for a short time to provide additional backup capacity if needed. The elimination of the FedEx aircraft from Atlas's fleet next year should substantially improve the company's financial and operating results in 1998 and beyond.

FLEET STATUS. With the delivery of the fourth aircraft from Thai Air during the second quarter, Atlas now has a total of 20 aircraft in the fleet. Two additional aircraft coming from Thai Air will be operational in the fourth quarter. Four new 747-400s are scheduled for delivery in 1998, with two of those aircraft to be delivered in the second quarter of that year and two more in the third quarter. Boeing has a history of being very reliable in delivering aircraft on time. The 747-400s provide increased range and fuel efficiency, and approximately 25% greater cargo lift capability; so they are well-suited for certain long-haul, high volume routes, and Atlas will receive substantially higher ACMI rates for their use. Atlas's 747-200s remain better suited for the majority of existing routes.

OTHER ACQUISITIONS. Negotiations on three other 747-200s continue but have not been finalized, and so Atlas can give no assurances about when those aircraft will join the fleet. Atlas already owns two of those aircraft; they are on short-term lease in passenger configuration to Philippine Airlines (PAL). One of those leases expires in mid-1998 and the other in 2000. Atlas is negotiating the early return of those aircraft so that they could join Atlas's operations in the first quarter of 1998, but the negotiations depend in part upon PAL's negotiations with other aircraft suppliers to them. The third aircraft under negotiation is owned by a another lessor and is being leased to PAL. It is in passenger configuration, parked and available. If the negotiations for lease and conversion to cargo configuration are finalized, the aircraft could join Atlas's fleet in the first quarter of 1998. The first quarter tends to be a seasonally slow one, thus mitigating to some degree any potential risks associated with the timing of aircraft acquisitions.

* A Fool conference call synopsis represents an effort to highlight the salient points of a conference call and should not be taken as an authoritative accounting or transcription of the entire event. Note: Statements made by a company other than historical information may constitute forward-looking statements for which the company can claim protection under the Safe Harbor Act. Please consult the company's filings with the SEC for information on risk factors which might cause actual results to differ materially from the information contained in these forward-looking statements.