Air Transport Services Group, Inc. (Form: 8-K, Received: 11/06/2019 16:30:47)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

_____________________

Form 8-K

_____________________

Current Report

Pursuant to Section 13 or 15(d) of the

Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): November 4, 2019

_____________________

Air Transport Services Group, Inc.

(Exact name of registrant as specified in its charter)

_____________________




DE	000-50368	26-1631624
(State or other jurisdiction of incorporation)	Commission File Number:	(IRS Employer Identification No.)

145 Hunter Drive, Wilmington, OH 45177

(Address of principal executive offices, including zip code)

(937) 382-5591

(Registrant's telephone number, including area code)

_____________________

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:



☐	Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)



☐	Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)



☐	Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))



☐	Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter). ☐

Securities registered pursuant to Section 12(b) of the Exchange Act:



Title of each class	Trading Symbol	Name of each exchange on which registered
Common Stock, par value $0.01 per share	ATSG	NASDAQ Stock Market LLC

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Item 1.01 Entry into a Material Definitive Agreement

On November 4, 2019, Air Transport Services Group, Inc. (“ATSG”) entered into an amendment (the “Third Amendment”) of its Second Amended and Restated Credit Agreement (the “Credit Agreement”), dated November 9, 2018, with SunTrust Bank, as Administrative Agent, and the other financial institutions from time to time a party thereto. The Third Amendment: (i) extends the maturity date of the term loan and revolving credit facility for six months to November 30, 2024; (ii) reduces the interest pricing, by lowering rate spreads above the one-month LIBOR for borrowings, ranging from 37.5 basis points at ATSG’s current secured net leverage ratio to 25.0 basis points at each of the other steps on the pricing grid; (iii) reduces the pricing applied to unused revolver capacity by 5 basis points; (iv) increases the aggregate amount of the revolving credit facility by $105 million, to $750 million; (iv) consolidates two term loans totaling $707 million at September 30, 2019, into a single term loan of $635 million; (v) reduces the required term loan principal amortization over its remaining duration; (vi) adds a new leverage-based feature providing access to additional revolver or term loan capacity through the accordion option, subject to lenders’ consent; (vii) increases the maximum permitted total (secured and unsecured) leverage from 4.0x to 4.25x trailing 12-month EBITDA, as defined under the Credit Agreement; and (viii) increases the additional permitted indebtedness outside of the secured facility from $500 million to $750 million, excluding the existing convertible notes.

The foregoing description of the Third Amendment is qualified in its entirety by reference to the full text of the Third Amendment, which is attached as Exhibit 10.1 to this Current Report on Form 8-K and is incorporated into this Item 1.01 by reference.

Item 2.02 Results of Operations and Financial Condition.

On November 6, 2019, Air Transport Services Group, Inc. issued a press release relating to its results for the third quarter ended September 30, 2019. A copy of the press release is furnished herewith as Exhibit 99.1 and incorporated herein by reference.

The information in this Item 2.02 is "furnished" and not "filed" for purposes of Section 18 of the Securities and Exchange Act of 1934, or otherwise subject to the liabilities of that section.

Item 2.03 Creation of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement of a Registrant

Reference is made to the discussion in Item 1.01 to this Current Report on Form 8-K, which discussion is incorporated in this Item by reference.

Item 9.01 Financial Statements and Exhibits.



Exhibit No.	Description
99.1	Press release issued by Air Transport Services Group, Inc. on November 6, 2019, relating to the amendment of its senior secured credit facility.
99.2	Press release issued by Air Transport Services Group, Inc. on November 6, 2019, relating to its results for the third quarter ended September 30, 2019.

(d) Exhibits



Exhibit No.	Description
10.1	Third Amendment to Second Amended and Restated Credit Agreement, dated as of November 4, 2019, by and among Cargo Aircraft Management, Inc., as Borrower; Air Transport Services Group, Inc.; each of the financial institutions party hereto as "Lenders"; and SunTrust Bank, in its capacity as Administrative Agent, filed herewith.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.



AIR TRANSPORT SERVICES GROUP, INC.

By:	/S/ W. JOSEPH PAYNE
	W. Joseph Payne
	Chief Legal Officer & Secretary

Date:	November 6, 2019

Exhibit 10.1

THIRD AMENDMENT TO

SECOND AMENDED AND RESTATED CREDIT AGREEMENT

THIS THIRD AMENDMENT TO SECOND AMENDED AND RESTATED CREDIT AGREEMENT dated as of November 4, 2019 (this “Amendment”), by and among CARGO AIRCRAFT MANAGEMENT, INC., a Florida corporation (the “Borrower”), AIR TRANSPORT SERVICES GROUP, INC., a Delaware corporation (“Holdings”), each of the financial institutions party hereto as “Lenders” and SUNTRUST BANK, in its capacity as Administrative Agent (in such capacity, the “Administrative Agent”).

W I T N E S S E T H:

WHEREAS, the Borrower, Holdings, the Lenders and the Administrative Agent are parties to that certain Second Amended and Restated Credit Agreement dated as of November 9, 2018, as amended from time to time prior to the date hereof (as so amended, the “Credit Agreement”); and

WHEREAS, the Borrower has requested certain amendments and other modifications to the terms and provisions of the Credit Agreement, including a request to provide Incremental Revolving Commitments in an aggregate principal amount of $105,000,000 and a six month extension of the Final Maturity Date;

WHEREAS, the Lenders party to this Amendment and the Administrative Agent are willing to so amend or otherwise modify such terms and provisions and to extend the Final Maturity Date, in each case, on and subject to the terms and conditions herein; and

WHEREAS, each of the Lenders listed on Annex 1.1A attached hereto (collectively, the “Incremental Lenders”) are willing to provide Incremental Revolving Commitments to the Borrower in the amounts set forth on such Annex 1.1A on and subject to the terms and conditions herein.

NOW, THEREFORE, for and in consideration of the above premises and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged by the parties hereto, the parties hereto hereby agree as follows:

1.Defined Terms. Capitalized terms which are used herein without definition and which are defined in the Credit Agreement (after giving effect to this Amendment) shall have the same meanings herein as in the Credit Agreement (after giving effect to this Amendment).

2.Amendments to Credit Agreement.

(a) Section 1.1. of the Credit Agreement is hereby amended by adding the following new

definitions in the appropriate alphabetical order:

“Convertible Notes” shall mean the 1.125% Convertible Senior Notes due 2024, issued pursuant to that certain Indenture dated as of September 29, 2017 between Holdings and U.S. Bank National Association.

“Liquidity” shall mean, as of any date of determination, the sum of (i) the aggregate amount of unrestricted cash on hand of Holdings and its Subsidiaries plus (ii) the Total Revolving Commitment minus the Total Revolving Extensions of Credit.

“Third Amendment Effective Date” shall mean November 4, 2019.

(b) The Credit Agreement is hereby further amended by deleting the defined terms “Anniversary Date”, “Applicable Margin”, “Revolving Facility Final Maturity Date” and “Term Facility Final Maturity Date” in Section 1.1. thereof and substituting in lieu thereof the following defined terms, respectively:

“Anniversary Date" shall mean November 30 of each year after the Third Amendment Effective Date until the applicable Final Maturity Date.

“Applicable Margin” shall mean, for each Type and Class of Loan, the rate per annum set forth under the relevant column heading and opposite the relevant category below:



Level	Secured Leverage Ratio	Applicable Margin for Eurodollar Rate Loans	Applicable Margin for Base Rate Loans	Commitment Fee for Revolver
I	Greater than or equal to 2.50x	1.875%	0.875%	0.30%
II	Less than 2.50x but greater than or equal to 2.00x	1.75%	0.75%	0.25%
III	Less than 2.00x but greater than or equal to 1.50x	1.50%	0.50%	0.225%
IV	Less than 1.50x but greater than or equal to 1.00x	1.25%	0.25%	0.20%
V	Less than 1.00x	1.00%	0.00%	0.20%

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For the purposes hereof, changes in the Applicable Margin resulting from changes in the Secured Leverage Ratio shall become effective on the date (the “Adjustment Date”) that is three Business Days after the date on which financial statements are delivered to the Lenders pursuant to Section 8.1 and shall remain in effect until the next change to be effected pursuant to this paragraph; provided, that the foregoing is subject in all events to the last paragraph of Section 8.1(c). If any financial statements referred to above are not delivered within the time periods specified in Section 8.1, then, until the date that is three Business Days after the date on which such financial statements are delivered, the highest rate set forth in each column of the table above shall apply. Each determination of the Secured Leverage Ratio pursuant to the above table shall be made in a manner consistent with the determination thereof pursuant to Section 9.13. Notwithstanding the foregoing, the Applicable Margin from the Third Amendment Effective Date until the third Business Day after the Borrower delivers the required financial statements under Section 8.1 for the Fiscal Quarter ending December 31, 2019 shall be at Level I.

“Revolving Facility Final Maturity Date” shall mean November 30, 2024, or such later date to which the Revolving Facility Final Maturity Date may be extended pursuant to the terms hereof or, if earlier, the date on which the Revolving Commitments are terminated pursuant to Section 10; provided that if (i) on July 12, 2024, more than $75,000,000 in aggregate principal amount of the Convertible Notes remain outstanding and (ii) on such date, Holdings and its Subsidiaries have less than $375,000,000 of Liquidity, the Revolving Facility Final Maturity Date shall be July 12, 2024.

“Term Facility Final Maturity Date” shall mean November 30, 2024, or such later date to which the Term Facility Final Maturity Date may be extended pursuant to the terms hereof or, if earlier, the date on which the Term Loans are declared immediately due and payable pursuant to Section 10; provided that if (i) on July 12, 2024, more than $75,000,000 in aggregate principal amount of the Convertible Notes remain outstanding and (ii) on such date, Holdings and its Subsidiaries have less than $375,000,000 of Liquidity, the Term Facility Final Maturity Date shall be July 12, 2024.

(c) The Credit Agreement is hereby further amended by adding the following sentence at the end of Section 2.1(a)(ii) thereof:

“The Borrower acknowledges and agrees that the aggregate outstanding principal amount of the Term Loans A-2 as of the Third Amendment Effective Date (after giving effect to that certain Third Amendment to Second Amended and Restated Credit Agreement dated as of November 4, 2019 and the prepayment of the Term Loans A-2 contemplated thereby) is $635,000,000.”

(d) The Credit Agreement is hereby further amended by deleting Section 2.14(a) thereof in its entirety and substituting in lieu thereof the following:

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“(a) Upon notice to the Administrative Agent (whereupon the Administrative Agent shall promptly notify the Lenders), at any time after the Third Amendment Effective Date, the Borrower may from time to time request (i) additional commitments under the Term Facility (each an “Incremental Term Commitment” and all of them, collectively, the “Incremental Term Commitments”) and/or (ii) increases in the aggregate amount of the Revolving Commitments (each such increase, an “Incremental Revolving Commitment” and, together with the Incremental Term Commitments, the “Incremental Commitments”); provided that (x) after giving effect to any such addition(s), the aggregate amount of Incremental Commitments that have been added pursuant to this Section 2.14 after the Third Amendment Effective Date (excluding, for the avoidance of doubt, the Incremental Revolving Commitments provided on the Third Amendment Effective Date) shall not exceed the Incremental Cap (as defined below), (y) any such addition or increase shall be in an amount of not less than $10,000,000 and (z) there shall be not more than three (3) such increases after the Third Amendment Effective Date. For purposes hereof, the “Incremental Cap” shall mean the sum of (i) $400,000,000 (the “Fixed Basket”) plus (ii) the maximum principal amount of Indebtedness that may be incurred at such time that would not cause the Secured Leverage Ratio on a pro forma basis to exceed 3.25 to 1.00; provided that in calculating the Secured Leverage Ratio for purposes of this definition only, all Incremental Revolving Commitments shall be assumed to be fully drawn (this clause (ii), the “Incremental Ratio Basket”). The Borrower may allocate use of the Incremental Cap between the Fixed Basket and the Incremental Ratio Basket in such amounts as it determines (which shall be specified in the Incremental Facility Amendment related to the Incremental Commitments).”

(e) The Credit Agreement is hereby further amended by deleting Section 5.2(a)(iii) thereof in its entirety and substituting in lieu thereof the following:

“(iii) The Borrower shall be required to repay the principal amount of Term Loans A-2 on the last day of March, June, September and December of each year and on the Term Facility Final Maturity Date, commencing March 31, 2020 (each such repayment, a “Term Loan A-2 Scheduled Repayment”), each such installment on any such date to be in the amount set forth below opposite such date:



Date	Installment Amount
March 31, 2020	$3,968,750
June 30, 2020	$3,968,750
September 30, 2020	$3,968,750
December 31, 2020	$3,968,750
March 31, 2021	$3,968,750
June 30, 2021	$3,968,750
September 30, 2021	$3,968,750
December 31, 2021	$3,968,750

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Date	Installment Amount
March 31, 2022	$7,937,500
June 30, 2022	$7,937,500
September 30, 2022	$7,937,500
December 31, 2022	$7,937,500
March 31, 2023	$7,937,500
June 30, 2023	$7,937,500
September 30, 2023	$7,937,500
December 31, 2023	$7,937,500
March 31, 2024 June 30, 2024 September 30, 2024	$7,937,500 $7,937,500 $7,937,500
Term Facility Final Maturity Date	All amounts outstanding in respect of Term Loans A-2

If the Term Facility Final Maturity Date is extended pursuant to Section 2.16, the Borrower shall continue to repay the principal amount of the Term Loan A-2 on the last day of March, June, September and December of each year (commencing with December 31, 2024) in equal installments of $7,937,500 each until the then extended Term Facility Final Maturity Date, at which time all amounts outstanding in respect of the Term Loans shall be due and payable. The Term Loan A-2 Scheduled Repayments shall be reduced as a result of the application of prepayments in accordance with the order of priority set forth in clause (b) immediately below.”

(f) The Credit Agreement is hereby further amended by deleting the reference to “December 31, 2015” in Section 6.2(d) thereof and substituting in lieu thereof “December 31, 2018”.

(g) The Credit Agreement is hereby further amended by deleting Section 7.9(b) thereof in its entirety and substituting in lieu thereof the following:

“(b) The audited financial statements of Holdings and its Subsidiaries for the 2018 Fiscal Year consisting of balance sheets and the related consolidated statements of income, stockholders’ equity and cash flows for such Fiscal Year, were prepared in conformity with GAAP and fairly present, in all material respects, the financial position, on a consolidated basis, of the Persons described in such financial statements as at the respective dates thereof and the results of operations and cash flows, on a consolidated basis, of the Persons described therein for each of the periods then ended. As of the Third Amendment Effective Date, none of Holdings, the Borrower or any of their respective Subsidiaries has any contingent liability or liability for taxes, long‑term lease or unusual forward or long‑term commitment that is not reflected in the foregoing financial statements or the notes thereto and which in any such case is material in relation to the business, operations, properties, assets,

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condition (financial or otherwise) or prospects of Holdings, the Borrower or any of their respective Subsidiaries. Since December 31, 2018, no event, circumstance or change has occurred that has caused or evidences, either in any case or in the aggregate, a Material Adverse Effect.”

(h) The Credit Agreement is hereby further amended by deleting the reference to “December 31, 2015” in Section 7.19 thereof and substituting in lieu thereof “December 31, 2018”.

(i) The Credit Agreement is hereby further amended by deleting Section 8.10(b)(i) thereof in its entirety and substituting in lieu thereof the following:

“(i) [reserved];”

(j) The Credit Agreement is hereby further amended by deleting Section 9.4(i) thereof in its entirety and substituting in lieu thereof the following:

“(i) other Indebtedness of Holdings and its Subsidiaries in an aggregate outstanding principal amount not to exceed at any time $750,000,000.”

(k) The Credit Agreement is hereby further amended by deleting Section 9.13(b) thereof in its entirety and substituting in lieu thereof the following:

“(b) Holdings will not permit the Total Leverage Ratio at the end of any Test Period ending on March 31, June 30, September 30 and December 31 of any calendar year to be more than 4.25 to 1.00. For the purposes of calculating the financial covenant set forth in this clause (b), the Relief Fund shall be deemed not to be a ‘Subsidiary.’”

(l) The Credit Agreement is hereby further amended by adding a new Section 12.25 thereto as follows:

“Section 12.25 Acknowledgement Regarding Any Supported QFCs. To the extent that the Credit Documents provide support, through a guarantee or otherwise, for Hedging Transactions or any other agreement or instrument that is a QFC (such support, “QFC Credit Support” and each such QFC a “Supported QFC”), the parties acknowledge and agree as follows with respect to the resolution power of the Federal Deposit Insurance Corporation under the Federal Deposit Insurance Act and Title II of the Dodd-Frank Wall Street Reform and Consumer Protection Act (together with the regulations promulgated thereunder, the “U.S. Special Resolution Regimes”) in respect of such Supported QFC and QFC Credit Support (with the provisions below applicable notwithstanding that the Credit Documents and any Supported QFC may in fact be stated to be governed by the laws of the State of New York and/or of the United States or any other state of the United States):

(a) In the event a Covered Entity that is party to a Supported QFC (each, a “Covered Party”) becomes subject to a proceeding under a U.S. Special

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Resolution Regime, the transfer of such Supported QFC and the benefit of such QFC Credit Support (and any interest and obligation in or under such Supported QFC and such QFC Credit Support, and any rights in property securing such Supported QFC or such QFC Credit Support) from such Covered Party will be effective to the same extent as the transfer would be effective under the U.S. Special Resolution Regime if the Supported QFC and such QFC Credit Support (and any such interest, obligation and rights in property) were governed by the laws of the United States or a state of the United States. In the event a Covered Party or a BHC Act Affiliate of a Covered Party becomes subject to a proceeding under a U.S. Special Resolution Regime, Default Rights under the Credit Documents that might otherwise apply to such Supported QFC or any QFC Credit Support that may be exercised against such Covered Party are permitted to be exercised to no greater extent than such Default Rights could be exercised under the U.S. Special Resolution Regime if the Supported QFC and the Credit Documents were governed by the laws of the United States or a state of the United States. Without limitation of the foregoing, it is understood and agreed that rights and remedies of the parties with respect to a Defaulting Lender shall in no event affect the rights of any Covered Party with respect to a Supported QFC or any QFC Credit Support.

(b) As used in this Section 12.25, the following terms have the following meanings:

“BHC Act Affiliate” of a party means an “affiliate” (as such term is defined under, and interpreted in accordance with, 12 U.S.C. 1841(k)) of such party.

“Covered Entity” means any of the following:


i.	a “covered entity” as that term is defined in, and interpreted in accordance with, 12 C.F.R. §252.82(b);


ii.	a “covered bank” as that term is defined in, and interpreted in accordance with, 12 C.F.R. §47.3(b); or


iii.	a “covered FSI” as that term is defined in, and interpreted in accordance with, 12 C.F.R. §382.2(b).

“Default Right” has the meaning assigned to that term in, and shall be interpreted in accordance with, 12 C.F.R. §§ 252.81, 47.2 or 382.1, as applicable.

“QFC” has the meaning assigned to the term “qualified financial contract” in, and shall be interpreted in accordance with, 12 U.S.C. 5390(c)(8)(D).”

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3.Incremental Facility Amendment; Extension Amendment. The parties hereto intend that this Amendment shall constitute an Incremental Facility Amendment in connection with the Borrower’s increase in the aggregate amount of the Revolving Commitments in the amount of $105,000,000 pursuant to Section 2.14 of the Credit Agreement. Each of the Incremental Lenders hereby agrees to provide to the Borrower, subject to the terms and conditions herein (including satisfaction of each of the conditions set forth in Section 4 immediately below), an Incremental Revolving Commitment in the amount, for each such Incremental Lender, set forth in Annex 1.1A attached hereto corresponding to such Incremental Lender. Immediately after giving effect to this Amendment, the Total Revolving Commitments shall be equal to $750,000,000 and the Revolving Commitment of each Lender shall be as set forth on Annex 1.1B attached hereto corresponding to each such Lender. The Incremental Revolving Commitments contemplated by this Amendment shall be subject to the same terms and provisions (including pricing and final maturity) as the existing Revolving Commitments. The parties hereto acknowledge and agree that after giving effect to the Incremental Revolving Commitments contemplated by this Amendment, the aggregate amount of Incremental Commitments available to the Borrower will be determined as set forth in Section 2.14 of the Credit Agreement (after giving effect to this Amendment). The Incremental Commitments Effective Date with respect to the Incremental Revolving Commitments contemplated by this Amendment shall be the Third Amendment Effective Date (immediately after the conditions set forth in Section 4 immediately below have been satisfied). Notwithstanding anything to the contrary contained in Section 2.16 of the Credit Agreement, each of the parties hereto intends that this Amendment shall constitute an Extension Amendment in connection with the extension contemplated hereby with respect to the Final Maturity Date. Each of the Lenders hereby waives any requirement for the delivery of corporate legal opinions with respect to the Borrower and the Guarantors in connection with this Amendment, including any legal opinion required by Section 2.16 of the Credit Agreement; provided that the foregoing shall not constitute (or be deemed to constitute) a waiver of any legal opinion required by Section 9 of this Amendment.

4.Conditions Precedent to Effectiveness. The effectiveness of this Amendment is subject to the truth and accuracy of the warranties and representations set forth in Sections 5 and 6 below and receipt by the Administrative Agent of each of the following, each of which shall be in form and substance satisfactory to Administrative Agent:

(a) This Amendment, duly executed and delivered by the Borrower, Holdings, the Required Lenders, the Incremental Lenders and the Administrative Agent;

(b) A pro forma Compliance Certificate dated the Third Amendment Effective Date, after giving effect to the Revolving Commitment Increase contemplated by this Amendment;

(c) A certificate of the Borrower dated as of the Third Amendment Effective Date signed by an Authorized Officer of the Borrower certifying that, before and after giving effect to the Revolving Commitment Increase and the amendments contemplated by this Amendment (i) the representations and warranties contained in Section 7 of the Credit Agreement and the other Credit Documents are true and correct in all material respects on and as of the Third Amendment Effective Date, except to the extent that such representations and warranties specifically refer to an earlier date, in which case they shall have been true and correct in all material respects as of such earlier

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date, (ii) no Default or Event of Default exists before or after giving effect to the amendments contemplated by this Amendment and (iii) all conditions set forth in Section 6.2 of the Credit Agreement are satisfied as of the Third Amendment Effective Date;

(d) For the account of each Revolving Lender that has requested a Note (or a replacement Note) in respect of such Lender’s Revolving Commitment (after giving effect to the Revolving Commitment Increase contemplated by this Amendment), a Note evidencing such Lender’s Revolving Commitment (after giving effect to the Revolving Commitment Increase contemplated by this Amendment), duly executed by an Authorized Officer of the Borrower;

(e) A Reaffirmation of Obligations Under Credit Documents (the “Reaffirmation”) dated as of the Third Amendment Effective Date duly executed by each Credit Party, in the form of Exhibit I attached hereto;

(f) A Notice of Borrowing for the Revolving Loans in the form of Exhibit II attached hereto (which notice will direct the Administrative Agent to use the proceeds thereof to prepay (i) the entire outstanding balance of Term Loan A-1 and (ii) a portion of the principal balance of Term Loan A-2 in the amounts set forth in such Notice of Borrowing);

(g) A certificate, dated as of the Third Amendment Effective Date, signed by the Secretary (or Assistant Secretary) of each Credit Party in the form of Exhibit III attached hereto (together with certifications as to incumbency and signatures of such officers) with appropriate insertions and deletions, together with (i) copies of the articles or certificate of incorporation, the limited liability company agreement, the partnership agreement, any certificate of designation, the by-laws, or other organizational documents of each such Credit Party (or certifications from the applicable Credit Party that such documents have not been amended or otherwise modified in any way since the date such documents were delivered to the Administrative Agent (A) at the closing of the Credit Agreement or (B) when such Credit Party became a party to the Guarantee and Collateral Agreement), (ii) the resolutions, or such other administrative approval, of each such Credit Party referred to in such certificate in respect of the authorization and approval of the transactions contemplated by this Amendment and (iii) in the case of the certificate delivered by the Borrower, a statement that (1) all of the applicable conditions set forth in this Section 4 have been satisfied as of such date and (2) since December 31, 2018, there has not been any change, effect, event, occurrence, state of facts or development that has had or could reasonably be expected to have a Material Adverse Effect;

(h) Certified copies of all consents, approvals, authorizations, registrations and filings and orders required or advisable to be made or obtained under applicable law, if any, or by any Contractual Obligation of each Credit Party, in connection with the execution, delivery, performance, validity and enforceability of this Amendment or any of the transactions contemplated hereby, and such consents, approvals, authorizations, registrations, filings and orders shall be in full force and effect and all applicable waiting periods shall have expired;

(i) The payment of all fees and other amounts due and payable on or prior to the effective date of this Amendment, including reimbursement or payment of all out-of-pocket expenses (including reasonable fees, charges and disbursements of counsel to the Administrative Agent)

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required to be reimbursed or paid by the Borrower hereunder or under any other agreement with the Administrative Agent or SunTrust Robinson Humphrey, Inc.;

(j) An Affidavit of Out-Of-State Execution and Delivery regarding the execution and delivery of the Notes and the other documents contemplated by this Amendment, duly executed by the Borrower and notarized; and

(k) Such other documents as the Administrative Agent may reasonably request.

To the extent that any notice was required to be delivered or otherwise provided prior to the Third Amendment Effective Date pursuant to the terms of the Credit Agreement in connection with any of the transactions contemplated by this Amendment (other than for the Notice of Borrowing provided for in clause (f) of this Section 4, in which case such prior notice shall be required to be provided one (1) Business Day prior to the effectiveness of this Amendment (regardless of the Type of Loan requested)), including any notices required pursuant to Section 2.14 and Section 2.16, and such notice was not so provided, the parties hereto waive the requirement of such notice.

5.Representations. Each of the Borrower and Holdings represents and warrants to the Administrative Agent and the Lenders that:

(a) Power and Authority. Each of the Borrower and the other Credit Parties have the power and authority to execute, deliver and perform the terms and provisions of this Amendment and the Credit Agreement, as amended by this Amendment, and have taken all necessary corporate action to duly authorize the execution, delivery and performance of this Amendment. Each of this Amendment and the Credit Agreement, as amended by this Amendment, constitutes the legal, valid and binding obligation of the Borrower and Holdings enforceable in accordance with its terms, except to the extent that the enforceability thereof may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or other similar laws generally affecting creditors’ rights and by equitable principles.

(b) No Violation. The execution, delivery and performance by the Borrower and the other Credit Parties of this Amendment, and compliance by them with the terms and provisions of the Credit Agreement, as amended by this Amendment: (i) will not contravene any provision of any law, statute, rule or regulation or any order, writ, injunction or decree of any court or federal, state or local Governmental Authority, (ii) will not conflict with or result in any breach of any of the terms, covenants, conditions or provisions of, or constitute a default under, or result in the creation or imposition of (or the obligation to create or impose) any lien upon any of the property or assets of any Credit Party pursuant to the terms of any indenture, mortgage, deed of trust, credit agreement or loan agreement, or any other agreement, contract or instrument, to which any Credit Party is a party or by which they or any of their property or assets is bound or to which they may be subject or (iii) will not violate any provision of the certificate or articles of incorporation or bylaws of the Borrower, Holdings or any other Credit Party.

(c) Governmental Approvals; Consents. No order, consent, approval, license, authorization or validation of, or filing, recording or registration with (except for those that have

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otherwise been obtained or made on or prior to the date of the effectiveness of this Amendment and which remain in full force and effect on such date), or exemption by, any Governmental Authority, and no consent, approval, authorization, registration, filing or order under any Contractual Obligation or applicable law, is required to authorize, or is required in connection with, (i) the execution, delivery and performance of this Amendment by the Borrower or Holdings or (ii) the legality, validity, binding effect or enforceability of the Credit Agreement, as amended by this Amendment, against the Borrower or Holdings.

(d) No Default. No Default or Event of Default has occurred and is continuing as of the date hereof and no Default or Event of Default will exist immediately after giving effect to this Amendment.

(e) No Impairment. The execution, delivery, performance and effectiveness of this Amendment will not: (a) impair the validity, effectiveness or priority of the Liens granted pursuant to any Credit Document, and such Liens continue unimpaired with the same priority to secure repayment of all of the applicable Obligations, whether heretofore or hereafter incurred, and (b) require that any new filings be made or other action taken to perfect or to maintain the perfection of such Liens.

(f) Credit Parties. The list of signatories to the Reaffirmation represents a true, correct and complete list of all Persons who are required by the terms of the Credit Documents to be or to become a Credit Party as of the date hereof.

(g) Solvency. As of the Third Amendment Effective Date, on a pro forma basis after giving effect to the Revolving Commitment Increase contemplated hereby and to all Indebtedness incurred, and to be incurred under such increase, (x) the sum of the assets, at a fair market valuation, of each Credit Party and its respective Subsidiaries will exceed its debts, (y) no such Credit Party or its Subsidiaries will have incurred or intended to, or believes that it will, incur debts beyond its ability to pay such debts as such debts mature and (z) each such Credit Party and its Subsidiaries taken as a whole will have sufficient capital with which to conduct its business. For purposes of this clause (e), “debt” means any liability on a claim, and “claim” means (i) right to payment whether or not such a right is reduced to judgment, liquidated, unliquidated, fixed, contingent, matured, unmatured, disputed, undisputed, legal, equitable, secured or unsecured; or (ii) right to an equitable remedy for breach of performance if such breach gives rise to a payment, whether or not such right to an equitable remedy is reduced to judgment, fixed, contingent, matured, unmatured, disputed, undisputed, secured or unsecured.

(h) Disclosure. As of the Third Amendment Effective Date, all information (other than projections, other forward-looking information and information of a general economic or industry-specific nature) that has been made available concerning the Credit Parties and/or the transactions contemplated by this Amendment prepared by, or on behalf of, the Borrower or Holdings or by any of their respective representatives or affiliates, and made available to any Lender or the Administrative Agent in connection with the transactions contemplated by this Amendment on or before the Third Amendment Effective Date, when taken as a whole, did not, when furnished, contain any untrue statements of a material fact or omit to state a material fact necessary in order to make

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LEGAL02/39302758v7

the statements contained therein not materially misleading in light of the circumstances under which such statements are made.

6.Reaffirmation of Representations. Each of the Borrower and Holdings hereby repeats and reaffirms all representations and warranties made to the Administrative Agent and the Lenders in the Credit Agreement and the other Credit Documents on and as of the date hereof (and after giving effect to this Amendment) with the same force and effect as if such representations and warranties were set forth in this Amendment in full (except to the extent that such representations and warranties relate expressly to an earlier date, in which case such representations and warranties were true and correct as of such earlier date).

7.No Further Amendments; Ratification of Liability. Except as expressly amended or waived hereby, the Credit Agreement and each of the other Credit Documents shall remain in full force and effect in accordance with their respective terms, and the Lenders and the Administrative Agent hereby require strict compliance with the terms and conditions of the Credit Agreement and the other Credit Documents in the future. Each of the Borrower and Holdings hereby (i) restates, ratifies, confirms and reaffirms its respective liabilities, payment and performance obligations (contingent or otherwise) and each and every term, covenant and condition set forth in the Credit Agreement and the other Credit Documents to which it is a party, all as amended by this Amendment, and the liens and security interests granted, created and perfected thereby and (ii) acknowledges and agrees that this Amendment shall not in any way affect the validity and enforceability of any Credit Document to which it is a party, or reduce, impair or discharge the obligations of the Borrower or Holdings or the Collateral granted to the Administrative Agent and/or the Lenders thereunder. The Lenders’ agreement to the terms of this Amendment or any other amendment of the Credit Agreement or any other Credit Document shall not be deemed to establish or create a custom or course of dealing between the Borrower, Holdings or the Lenders, or any of them. This Amendment shall be deemed to be a “Credit Document” for all purposes under the Credit Agreement. This Amendment shall have prospective application only. After the effectiveness of this Amendment, each reference to the Credit Agreement in any of the Credit Documents shall be deemed to be a reference to the Credit Agreement as amended by this Amendment.

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8.Allocations of Revolving Commitments and Revolving Loans. The Administrative Agent, the Lenders and the Borrower agree that the Revolving Commitment of each of the Revolving Lenders immediately prior to the effectiveness of this Amendment shall be reallocated among the Revolving Lenders such that, immediately after the effectiveness of this Amendment in accordance with its terms and the Revolving Commitment Increase, the Revolving Commitment of each Revolving Lender shall be as set forth on Annex 1.1B attached hereto. In order to effect such reallocations, assignments shall be deemed to be made among the Revolving Lenders in such amounts as may be necessary, and with the same force and effect as if such assignments were evidenced by the applicable Assignment Agreements (but without the payment of any related assignment fee), and no other documents or instruments shall be required to be executed in connection with such assignments (all of which such requirements are hereby waived) other than the execution of any documents or instruments required for the effectiveness of this Amendment pursuant to Section 4 of this Amendment. Further, to effect the foregoing, each Revolving Lender agrees to make cash settlements in respect of any outstanding Revolving Loans, either directly or through the Administrative Agent, as the Administrative Agent may direct or approve, such that after giving effect to this Amendment, each Revolving Lender holds Revolving Loans equal to its Pro Rata Share (based on the Revolving Commitment of each Lender as set forth on Annex 1.1B attached hereto).

9.Post Closing Covenant. Holdings and the Borrower shall cause to be delivered to the Administrative Agent, on or before the date that is 15 days after the Third Amendment Effective Date (or such later date as the Administrative Agent shall agree), each of the following:

(i) a legal opinion from Daugherty, Fowler, Peregrin, Haught & Jenson, P.C., special FAA counsel to Holdings and its Subsidiaries, addressed to the Administrative Agent and each of the Lenders, such opinion to be in form and content satisfactory to the Administrative Agent (and in any event covering the matters described in clause (ii) immediately below and those set forth in the opinion delivered by such law firm in connection with the Credit Agreement);

(ii) evidence that FAA form “Aircraft Security Agreements” and/or “Amended and Restated Aircraft Security Agreements”, the substance of which shall be satisfactory to the Administrative Agent, covering the Aircraft and Engines included in the Collateral Pool have been filed with the FAA, and priority search certificates satisfactory to the Administrative Agent identifying the registrations made with the “International Registry” (as defined under the Cape Town Convention) with respect to the airframe of such Aircraft and its Engines and confirming that, except (x) with respect to Liens in existence on the Closing Date with respect to the airframe and Engines described on Annex 1.1(B) to the Credit Agreement or (y) as otherwise agreed by the Administrative Agent, no other registrations have been made with respect to such airframe or Engines that have not been subordinated to the registrations made in favor of the Administrative Agent or discharged; and

(iii) evidence that all other actions necessary or, in the reasonable opinion of the Administrative Agent, desirable to perfect and protect the security interests purported to be created by the Security Documents have been taken.

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10.Other Provisions.

(a) This Amendment may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed and delivered shall be deemed to be an original, and all counterparts, taken together, shall constitute but one and the same document.

(b) The Borrower agrees to reimburse the Lenders and the Administrative Agent on demand for all reasonable costs and expenses (including, without limitation, reasonable attorneys’ fees) incurred by such parties in negotiating, documenting and consummating this Amendment, the other documents referred to herein, and the transactions contemplated hereby and thereby.

(c) THIS AMENDMENT SHALL BE GOVERNED BY AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH THE LAW OF THE STATE OF NEW YORK.

(d) THIS AMENDMENT CONSTITUTES THE ENTIRE CONTRACT AMONG THE PARTIES HERETO RELATING TO THE SUBJECT MATTER HEREOF AND SUPERSEDES ANY AND ALL PREVIOUS DISCUSSIONS, CORRESPONDENCE, AGREEMENTS AND OTHER UNDERSTANDINGS, WHETHER ORAL OR WRITTEN, RELATING TO THE SUBJECT MATTER HEREOF.

(e) In consideration of the amendments contained herein, each of the Borrower and Holdings hereby waives and releases each of the Lenders and the Administrative Agent from any and all known claims and defenses with respect to the Credit Agreement and the other Credit Documents and the transactions contemplated thereby.

(f) Each of the Borrower and Holdings agrees to take all further actions and execute such other documents and instruments as the Administrative Agent may from time to time reasonably request to carry out the transactions contemplated by this Amendment, the Credit Documents and all other agreements executed and delivered in connection herewith.

(g) THE PARTIES HERETO HAVE ENTERED INTO THIS AMENDMENT SOLELY TO AMEND TERMS OF THE CREDIT AGREEMENT. THE PARTIES DO NOT INTEND THIS AMENDMENT NOR THE TRANSACTIONS CONTEMPLATED HEREBY TO BE, AND THIS AMENDMENT AND THE TRANSACTION CONTEMPLATED HEREBY SHALL NOT BE CONSTRUED TO BE, A NOVATION OF ANY OF THE OBLIGATIONS OWING BY THE BORROWER OR HOLDINGS UNDER OR IN CONNECTION WITH THE CREDIT AGREEMENT OR ANY OF THE OTHER CREDIT DOCUMENTS.

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IN WITNESS WHEREOF, the Borrower, Holdings, the Lenders and the Administrative Agent have caused this Third Amendment to Second Amended and Restated Credit Agreement to be duly executed by their respective duly authorized officers and representatives as of the day and year first above written.

CARGO AIRCRAFT MANAGEMENT, INC.

By: /s/ W. Joseph Payne

Name: W. Joseph Payne

Title: Vice President, Secretary

AIR TRANSPORT SERVICES GROUP, INC.

By: /s/ Joseph C. Hete

Name: Joseph C. Hete

Title: CEO

[Signatures Continue on Following Pages]

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SUNTRUST BANK, as Administrative Agent and as a Lender

By: /s/ Chris Hursey

Name: Chris Hursey

Title: Director

[Signature Page to Third Amendment to Second Amended and Restated Credit Agreement]

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	BANK OF AMERICA, N.A., as a Lender


	By: /s/ Gregg Bush
	Name: Gregg Bush
	Title: Senior Vice President

[Signature Page to Third Amendment to Second Amended and Restated Credit Agreement]

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	PNC BANK, NATIONAL ASSOCIATION, as a Lender



	By: /s/ David Beckett
	Name: David Beckett
	Title: Senior Vice President

[Signature Page to Third Amendment to Second Amended and Restated Credit Agreement]

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	JPMORGAN CHASE BANK, N.A., as a Lender



	By: /s/ Eric B. Bergeson
	Name: Eric B. Bergeson
	Title: Authorized Officer

[Signature Page to Third Amendment to Second Amended and Restated Credit Agreement]

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	REGIONS BANK, as a Lender



	By: /s/ Joe Darcy
	Name: Joe Darcy
	Title: Senior Vice President

[Signature Page to Third Amendment to Second Amended and Restated Credit Agreement]

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	BRANCH BANKING AND TRUST COMPANY, as a Lender



	By: /s/ Melinda Gulledge
	Name: Melinda Gulledge
	Title: Assistant Vice President

[Signature Page to Third Amendment to Second Amended and Restated Credit Agreement]

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	BBVA USA, an Alabama banking corporation f/k/a Compass Bank, as a Lender



	By: /s/ Jeff Bork
	Name: Jeff Bork
	Title: Senior Vice President

[Signature Page to Third Amendment to Second Amended and Restated Credit Agreement]

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	GOLDMAN SACHS BANK USA, as a Lender



	By: /s/ Ryan Durkin
	Name: Ryan Durkin
	Title: Authorized Signatory

[Signature Page to Third Amendment to Second Amended and Restated Credit Agreement]

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	CIBC BANK USA, as a Lender



	By: /s/ Nick Fadel
	Name: Nick Fadel
	Title: Managing Director

[Signature Page to Third Amendment to Second Amended and Restated Credit Agreement]

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	THE NORTHERN TRUST COMPANY, as a Lender



	By: /s/ John Di Legge
	Name: John Di Legge
	Title: Senior Vice President

[Signature Page to Third Amendment to Second Amended and Restated Credit Agreement]

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	ATLANTIC UNION BANK, as a Lender



	By: /s/ deK Bowen
	Name: deK Bowen
	Title: Senior Vice President

[Signature Page to Third Amendment to Second Amended and Restated Credit Agreement]

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	ATLANTIC CAPITAL BANK, N.A., as a Lender



	By: /s/ Richard A. Oglesby, Jr.
	Name: Richard A. Oglesby, Jr.
	Title: Executive Vice President

[Signature Page to Third Amendment to Second Amended and Restated Credit Agreement]

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	BOKF, NA, as a Lender



	By: /s/ Timberly J. Harding
	Name: Timberly J. Harding
	Title: Senior Vice President

[Signature Page to Third Amendment to Second Amended and Restated Credit Agreement]

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	TRISTATE CAPITAL BANK, as a Lender



	By: /s/ Ellen Frank
	Name: Ellen Frank
	Title: Senior Vice President

[End of Signatures]

LEGAL02/39302758v7

Annex 1.1A



Incremental Lender	Incremental Revolving Commitment
SunTrust Bank	$14,430,275.23
Bank of America, N.A.	$13,815,596.33
PNC Bank, N.A.	$13,815,596.33
Regions Bank	$12,193,577.98
JPMorgan Chase Bank, N.A.	$12,200,000.00
Branch Banking and Trust Company	$10,256,880.73
BBVA USA, an Alabama banking corporation f/k/a Compass Bank	$10,665,051.61
CIBC Bank USA	$3,991,743.12
Goldman Sachs Bank USA	$4,046,875.00
The Northern Trust Company	$3,200,000.00
Atlantic Union Bank	$1,847,706.42
Atlantic Capital Bank, N.A.	$1,500,000.00
BOKF, NA	$1,936,697.25
TriState Capital Bank	$1,100,000.00
Total	$105,000,000

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Annex 1.1B



Lender	Revolving Commitment
SunTrust Bank	$102,600,000.00
Bank of America, N.A.	$100,500,000.00
PNC Bank, N.A.	$100,500,000.00
Regions Bank	$87,700,000.00
JPMorgan Chase Bank, N.A.	$87,700,000.00
Branch Banking and Trust Company	$73,100,000.00
BBVA USA, an Alabama banking corporation f/k/a Compass Bank	$62,700,000.00
CIBC Bank USA	$29,200,000.00
Goldman Sachs Bank USA	$29,100,000.00
The Northern Trust Company	$21,700,000.00
Atlantic Union Bank	$19,600,000.00
Atlantic Capital Bank, N.A.	$13,500,000.00
BOKF, NA	$14,600,000.00
TriState Capital Bank	$7,500,000.00
Total	$750,000,000

LEGAL02/39302758v7

EXHIBIT I

REAFFIRMATION OF OBLIGATIONS UNDER CREDIT DOCUMENTS

November 4, 2019

Reference is hereby made to (i) that certain Second Amended and Restated Credit Agreement dated as of November 9, 2018 among Cargo Aircraft Management, Inc. (the “Borrower”), Air Transport Services Group, Inc. (“Holdings”), the Lenders a party thereto and SunTrust Bank, as Administrative Agent (as amended, supplemented or otherwise modified from time to time, the “Credit Agreement”; capitalized terms used herein and not defined herein have the meanings ascribed to such terms in the Credit Agreement) and (ii) that certain Third Amendment to Second Amended and Restated Credit Agreement dated as of the date hereof (the “Amendment”) among the Borrower, Holdings, the Lenders party thereto and the Administrative Agent.

Each Credit Party acknowledges and reaffirms that (i) all liens and security interests granted to the Administrative Agent and the Lenders under the Security Documents remain in full force and effect and shall continue to secure the Obligations and (ii) the validity, perfection, enforceability or priority of such liens and security interests will not be impaired in any way by the Amendment.

Each of the undersigned Credit Parties hereby further reaffirms its continuing obligations owing to the Administrative Agent and the Lenders under each of the Credit Documents (including, without limitation, the guarantee obligations of each Guarantor under the Guarantee and Collateral Agreement) to which such Person is a party, and each Credit Party agrees that the amendments contained in the Amendment are solely to amend the terms of the Credit Agreement and do not in any way affect the validity and/or enforceability of any Credit Document, or reduce, impair or discharge the obligations of such Person thereunder.

Each of the undersigned Credit Parties hereby represents and warrants to the Administrative Agent and the Lenders that: (a) the execution and delivery by the Credit Parties of this Reaffirmation is within the power (corporate or otherwise) and authority of the Credit Parties, has been duly authorized and approved by all requisite action on the part of the Credit Parties, and does not and will not contravene, breach or conflict with any provision of applicable law or any of the charter or other organic documents of the Credit Parties, or any indenture, agreement, instrument or undertaking binding on the Credit Parties; (b) this Reaffirmation has been duly executed by the Credit Parties; and (c) the Credit Documents remain in full force and effect and constitute the legal, valid and binding obligations of the Credit Parties, enforceable in accordance with their terms, except as limited by bankruptcy, insolvency, reorganization, moratorium or similar laws relating to or affecting generally the enforcement of creditor's rights; and (d) all of the Obligations are absolute and unconditional, and such Obligations are not subject to any claim, defense, deduction, right of offset or otherwise.

THE CREDIT PARTIES DO NOT INTEND THE AMENDMENT NOR THE TRANSACTIONS CONTEMPLATED THEREBY TO BE, AND THE AMENDMENT AND THE

LEGAL02/39302758v7

TRANSACTION CONTEMPLATED THEREBY SHALL NOT BE CONSTRUED TO BE, A NOVATION OF ANY OF THE OBLIGATIONS OWING BY THE CREDIT PARTIES UNDER OR IN CONNECTION WITH THE CREDIT AGREEMENT OR ANY OF THE OTHER CREDIT DOCUMENTS.

This Reaffirmation shall be construed in accordance with and be governed by the law (without giving effect to the conflict of law principles thereof) of the State of New York.

[Signatures Appear on Following Page]

LEGAL02/39302758v7

IN WITNESS WHEREOF, each of the undersigned has duly executed and delivered this Reaffirmation of Obligations under Credit Documents as of the date first written above.

CARGO AIRCRAFT MANAGEMENT, INC.

By:

Name: W. Joseph Payne


Title: Vice President, Secretary

ABX AIR, INC.

By:

Name: W. Joseph Payne

Title: Vice President, General Counsel & Secretary

LGSTX DISTRIBUTION SERVICES, INC.

By:

Name: W. Joseph Payne

Title: Vice President, Secretary

AIRBORNE GLOBAL SOLUTIONS, INC.

By:

Name: W. Joseph Payne

Title: Vice President & Secretary

[Signatures Continue on Following Pages]

LEGAL02/39302758v7

AIRBORNE MAINTENANCE AND ENGINEERING SERVICES, INC.

By:

Name: W. Joseph Payne

Title: Vice President & Secretary

AIR TRANSPORT INTERNATIONAL LIMITED LIABILITY COMPANY

By:

Name: W. Joseph Payne

Title: Vice President, Secretary

AMES MATERIAL SERVICES, INC.

By:

Name: W. Joseph Payne

Title: Vice President, Secretary

AIR TRANSPORT INTERNATIONAL, INC.

By:

Name: James F. O’Grady

Title: President

CARGO AVIATION, INC.

By:

Name: W. Joseph Payne

Title: Vice President, Secretary

[Signature Pages to Reaffirmation of Obligations Under Credit Documents]

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CARGO HOLDINGS INTERNATIONAL, INC.

By:

Name: W. Joseph Payne

Title: Vice President, Secretary

LGSTX FUEL MANAGEMENT, INC.

By:

Name: W. Joseph Payne

Title: Vice President, Secretary

LGSTX SERVICES, INC.

By:

Name: W. Joseph Payne

Title: Secretary

AIR TRANSPORT SERVICES GROUP, INC.

By:

Name: W. Joseph Payne

Title: Chief Legal Officer & Secretary

GLOBAL FLIGHT SOURCE, INC.

By:

Name: W. Joseph Payne

Title: Vice President, Secretary

[Signature Pages to Reaffirmation of Obligations Under Credit Documents]

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LGSTX CARGO SERVICES, INC.

By:

Name: W. Joseph Payne

Title: Vice President, Secretary

PEMCO WORLD AIR SERVICES, INC.

By:

Name: W. Joseph Payne

Title: Vice President, Secretary

OMNI AIR INTERNATIONAL, LLC

By:

Name: Richard F. Corrado

Title: Vice President, Secretary

OMNI AVIATION LEASING, LLC.

By:

Name: W. Joseph Payne

Title: Vice President, Secretary

[Signature Pages to Reaffirmation of Obligations Under Credit Documents]

LEGAL02/39302758v7

T7 AVIATION LEASING, LLC

By:

Name: W. Joseph Payne

Title: Vice President, Secretary

ADVANCED FLIGHT SERVICES, LLC

By:

Name: W. Joseph Payne

Title: Vice President, Secretary

TRIFACTOR SOLUTIONS, LLC

By:

Name: Timothy J. Allen

Title: Vice President, Secretary

[End of Signatures]

[Signature Pages to Reaffirmation of Obligations Under Credit Documents]

LEGAL02/39302758v7

EXHIBIT II

November 4, 2019

SunTrust Bank, as
Administrative Agent for the Lenders
party to the Credit Agreement
referred to below
303 Peachtree Street, NE, 25^th Floor
Atlanta, Georgia 30308

Attention: Agency Services

Ladies and Gentlemen:

The undersigned, Cargo Aircraft Management, Inc., a Florida corporation (the “Borrower”), refers to the Second Amended and Restated Credit Agreement, dated as of November 9, 2018 (as amended, supplemented or otherwise modified from time to time, the “Credit Agreement”, the capitalized terms defined therein being used herein as therein defined), among the Borrower, Air Transport Services Group, Inc., a Delaware corporation, the several Lenders from time to time party thereto, and the Administrative Agent, and hereby gives you notice pursuant to Section 2.3(a) of the Credit Agreement, that the undersigned hereby requests a Borrowing under the Credit Agreement, and in that connection sets forth below the information relating to such Borrowing (the “Proposed Borrowing”) as required by Section 2.3(a) of the Credit Agreement:

1. The Business Day of the Proposed Borrowing is November 4, 2019 (the “Third Amendment Closing Date”).

2. The aggregate principal amount of the Proposed Borrowing is $________________.

The Proposed Borrowing is to consist of Revolving Loans.

3. The Revolving Loans to be made pursuant to the Proposed Borrowing shall be initially maintained as [Base Rate Loans] [Eurodollar Rate Loans].

4. The initial Interest Period for the Proposed Borrowing of the Revolving Loan is ______ month(s). ¹

The undersigned hereby certify that the following statements are true on the date hereof, and will be true on the date of the Proposed Borrowing:

(a) no Default or Event of Default exists;

(b) all representations and warranties contained in the Credit Agreement or in the other Credit Documents are true and correct in all material respects with the same effect as though such representations and warranties had been made on and as of the date hereof and the date of the Proposed Borrowing, except to the extent that such representations and warranties expressly relate to an earlier date, in which case such representation and warranty shall have been true and

____________________________

¹ To be included for [a] Proposed Borrowings[s] of Eurodollar Rate Loans

correct in all material respects as of such earlier date; and

(c) since December 31, 2018, there shall have been no event, change, condition or occurrence that has had, or could reasonably be expected to have, a Material Adverse Effect.

The Borrower hereby irrevocably instructs the Administrative Agent to apply the proceeds of the Proposed Borrowing as follows: (i) to prepay the entire outstanding balance of Term Loan A-1, together with accrued interest thereon through the Third Amendment Closing Date, in the amount of $________________ and (ii) to prepay a portion of the principal balance of Term Loan A-2, together with accrued interest thereon through the Third Amendment Closing Date, in the amount of $________________.

Contemporaneous with this Notice of Borrowing, the Borrower has delivered a certificate to the Administrative Agent complying with Section 6.2(c) of the Credit Agreement.

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

LEGAL02/39302758v7

Very truly yours,

CARGO AIRCRAFT MANAGEMENT, INC.

By:

Name:

Title:

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EXHIBIT III

[FORM OF SECRETARY’S CLOSING CERTIFICATE]

I, the undersigned, [Assistant] Secretary of [Name of Credit Party], a [_______________] organized and existing under the laws of the State of _______________ (the “Company”), do hereby certify on behalf of the Company that:

1. This Certificate is being delivered on November 4, 2019 and is furnished pursuant to that certain Third Amendment to Second Amended and Restated Credit Agreement dated as of the date hereof, among Cargo Aircraft Management, Inc., a Florida corporation (the “Borrower”), Air Transport Services Group, Inc., a Delaware corporation, the several Lenders from time to time party thereto and SunTrust Bank, as Administrative Agent for the Lenders (such Credit Agreement, as in effect on the date of this Certificate, being herein called the “Credit Agreement”). Unless otherwise defined herein, capitalized terms used in this Certificate shall have the meanings set forth in the Credit Agreement.

2. The following named individuals are duly qualified and acting elected or appointed officers of the Company, and each holds the office of the Company set forth opposite his or her name, each of whom is authorized to sign the [Amendment/Reaffirmation] on behalf of the Company. The signature written opposite the name and title of each such officer is his or her genuine signature.



Name ²	Office	Signature
________________	________________	______________________
________________	________________	______________________
________________	________________	______________________

3. Attached hereto as Exhibit A is a true and complete copy of the [Charter Document] of the Company, including all amendments thereto, as filed in the Office of the Secretary of State of the State of __________ (the “Secretary of State”), which constitutes the [Charter Document] of the Company as presently in effect (the “[Articles of ___________]”); no amendment to the Articles of ______________ is pending or contemplated, and there are no proceedings, pending or contemplated, for the merger, consolidation, conversion, liquidation or dissolution of the Company; and no steps have been or are being taken to appoint an administrator, receiver, liquidator or analogous person or body to wind up or dissolve the Company. ³

4. Attached hereto as Exhibit B is a true and correct copy of the [By-Laws] [limited liability company agreement] of the Company which was duly adopted and is in full force and effect on the date hereof. ⁴

______________________

² Include name, office and signature of each officer who will sign any Credit Document, including the officer who will sign the certification at the end of this Certificate or related documentation.

³ May include alternate statement that documents have not been amended, changed or otherwise modified in any way since the Closing Date.

⁴ May include alternate statement that such documents have not been amended, changed or otherwise modified in any way since the Closing Date.

5. Attached hereto as Exhibit C is a true and correct copy of resolutions authorizing the execution, delivery and performance of the [Amendment/Reaffirmation], which [have][has] been duly adopted by unanimous written consent of the members of the Company, and said resolutions have not been rescinded, amended or modified, are in full force and effect on the date hereof, and have been duly filed with the minutes of the proceedings of the members. ⁵

6. Attached hereto as Exhibit D is a certificate of good standing from the Secretary of State of the jurisdiction of incorporation or organization of the Company.

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

⁵ In the case of the Borrower only, this Certificate shall also state that: (1) all of the applicable conditions set forth in this Section 4 of the Amendment have been satisfied and (2) since December 31, 2018, there has not been any change, effect, event, occurrence, state of facts or development that has had or could reasonably be expected to have a Material Adverse Effect.

IN WITNESS WHEREOF, the undersigned has duly executed and delivered this Certificate as of the date first written above.

[COMPANY]

_________________________________

_____________________, Secretary

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Exhibit A

Articles of ______________

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Exhibit B

[By-Laws][Limited Liability Company Agreement]

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Exhibit C

Resolutions

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Exhibit D

Good Standing Certificate

LEGAL02/39302758v7

ATSG Amends Bank Credit Facility

Changes reduce interest cost and extend maturity

WILMINGTON, OH - November 6, 2019 - Air Transport Services Group, Inc. (NASDAQ:ATSG) announced today that it has extended its senior secured credit facility until November 30, 2024, expanded the facility’s revolver portion, consolidated and lowered its term loans, and reduced pricing to immediately lower interest cost. Other changes under the amendment provide the Company greater access and flexibility in future borrowings.

Specific changes included:


•	A reduction in interest pricing, which lowers rate spreads above one-month LIBOR (London Inter-Bank Offered Rate) for borrowings on the facility. Reductions ranged from 37.5 basis points at ATSG's current secured net leverage ratio to 25.0 basis points at each of the other steps on the pricing grid. Additionally, the pricing applied to unused revolver capacity was lowered by 5 basis points.


•	An increase in revolver capacity from $645 million to $750 million.


•	Consolidation of two term loans totaling $707 million at September 30, 2019 into a single term loan of $635 million.


•	A reduction in the required term loan principal amortization over its remaining duration.


•	A new leverage-based feature providing access to additional revolver or term loan capacity through the accordion option, subject to lenders' consent.


•	An increase in the maximum permitted total (secured and unsecured) leverage from 4.0x to 4.25x trailing 12-month EBITDA, as defined under the bank agreement.


•	An increase in additional permitted indebtedness outside of the secured facility from $500 million to $750 million, excluding the existing convertible notes.


•	No changes to other financial covenants.

Quint Turner, Chief Financial Officer of ATSG, said lender response to the latest amendment was excellent, and reflects the banks’ recognition of ATSG’s strong credit profile and its outlook for sustained, growing cash flow generation.

"We appreciate the continued strong support from our banks. The favorable changes included in this amendment will lower ATSG’s interest cost on its secured facility by approximately $4.7 million per year at current borrowing levels, and provide the Company with greater flexibility to adjust the mix and scale of its debt capital structure in the future."

About ATSG

services, aircraft maintenance services and airport ground services. ATSG's subsidiaries include ABX Air, Inc.; Airborne Global Solutions, Inc.; Airborne Maintenance and Engineering Services, Inc., including its subsidiary, Pemco World Air Services, Inc.; Air Transport International, Inc.; Cargo Aircraft Management, Inc.; and Omni Air International, LLC. For more information, please see www.atsginc.com.

Except for historical information contained herein, the matters discussed in this release contain forward-looking statements that involve risks and uncertainties. A number of important factors could cause Air Transport Services Group's (ATSG's) actual results to differ materially from those indicated by such forward-looking statements. These factors include, but are not limited to, our ability to remain in compliance with our senior secured credit facility; and other factors that are contained from time to time in ATSG's filings with the U.S. Securities and Exchange Commission, including its Annual Report on Form 10-K and Quarterly Reports on Form 10-Q. Readers should carefully review this release and should not place undue reliance on ATSG's forward-looking statements. These forward-looking statements were based on information, plans and estimates as of the date of this release. ATSG undertakes no obligation to update any forward-looking statements to reflect changes in underlying assumptions or factors, new information, future events or other changes.

Contact: Quint Turner, ATSG Inc. Chief Financial Officer

937-366-2303

ATSG Reports Third Quarter 2019 Results

Continued Double-Digit Percentage Growth in Revenues, Adjusted Earnings and Adjusted EBITDA

WILMINGTON, OH, November 6, 2019 - Air Transport Services Group, Inc. (Nasdaq: ATSG), the leading provider of medium wide-body aircraft leasing, contracted air transportation and related services, today reported consolidated financial results for the quarter and nine months ended September 30, 2019. Results as compared with the third quarter of 2018 include:


•	Customer revenues were $366.1 million, up $161.2 million, or 79 percent.

Both of ATSG's principal business segments, aircraft leasing and air transport, reported higher revenues for the third quarter. Revenues from Omni Air International, which ATSG acquired in November 2018, were the largest contributor to the year-over-year revenue gain.


•	GAAP Earnings from Continuing Operations were $105.1 million, up $72.2 million, or 219 percent. GAAP Earnings per Share basic were $1.78, versus $0.56 a year ago.

The unrealized effect of re-measurement of financial instrument values increased ATSG's third quarter 2019 after-tax earnings by $90.8 million, and third-quarter 2018 after-tax earnings by $17.2 million. The majority of the earnings gain related to a non-cash change in the value of warrants issued to Amazon.com, Inc. related to a decrease in ATSG's share price during the third quarter 2019. Increases in interest expense, depreciation and amortization expense, and in retiree benefit costs were also significant factors.


•	Adjusted Earnings from Continuing Operations (non-GAAP) increased by $2.0 million, or 10 percent, to $21.4 million. Adjusted Earnings Per Share (non-GAAP) were $0.31 diluted, up $0.03.

Adjusted Earnings from Continuing Operations and Adjusted EPS exclude elements from GAAP results that in management's opinion differ distinctly in predictability among periods or are not closely related to operations. Adjustments from GAAP include financial instrument revaluations, amortization of aircraft lease incentives, retiree benefit costs, and losses of non-consolidated ATSG affiliates.


•	Adjusted EBITDA from Continuing Operations (non-GAAP) were $109.2 million, up $35.0 million, or 47 percent.

Contributions from Omni Air, and from the increase in externally leased 767 freighters since September 2018, drove the majority of the increase in Adjusted EBITDA.

Adjusted Earnings per Share, Adjusted Earnings from Continuing Operations and Adjusted EBITDA from Continuing Operations are non-GAAP financial measures and are defined in the non-GAAP reconciliation tables at the end of this release. (See the paragraph entitled "Non-GAAP Financial Measures")


•	Capital spending for the first nine months was $336.9 million, up 57 percent.

Capital expenditures in the first nine months of 2019 included $247.9 million for the purchase of nine Boeing 767 aircraft, including two in the third quarter, and for freighter modification costs.

Joe Hete, Chief Executive Officer of ATSG, said, "Demand for our aircraft and flight operations continued to accelerate in the third quarter, pointing toward a strong peak period of non-payload-sensitive flying for our air express network customers as we deploy more 767 freighters. Flight operations for the U.S. Department of Defense and passenger charter customers were also strong."

Segment Results

Cargo Aircraft Management (CAM)



CAM	Third Quarter						Nine Months
($ in thousands)	2019			2018			2019			2018
Aircraft leasing and related revenues	$	75,160		$	63,012		$	223,017		$	178,217
Lease incentive amortization	(4,156		)	(4,226		)	(12,407		)	(12,678		)
Total CAM revenues	71,004			58,786			210,610			165,539
Allocated interest expense	9,494			4,681			28,838			13,675
Segment earnings, pretax	17,428			19,034			50,285			49,892

Significant Developments:

•

CAM's third quarter revenues, net of warrant-related lease incentives, increased 21 percent versus the prior year. Third quarter revenues benefited from seventeen more aircraft in service at September 30, 2019, versus the same date a year ago, and a full nine months of revenues from eleven Omni Air passenger aircraft that CAM acquired and leased back to Omni Air in November 2018. CAM's external customer revenues increased two percent to $42.0 million during the third quarter.


•	At September 30, 2019, ATSG's in-service fleet of CAM-owned aircraft included ninety aircraft, comprising seventy-eight cargo and twelve passenger aircraft. Fifty-eight cargo aircraft were leased to external customers, four more than were leased as of the same date last year, and two more than on June 30, 2019.


•	CAM leased three 767-300 freighters to Amazon during the third quarter, including two newly converted aircraft and one previously leased to ATI. Six additional 767 freighters are scheduled for deployment during the fourth quarter, two to Amazon and four to United Parcel Service ("UPS"). The first of those UPS placements occurred in October.


•	Ten 767s were undergoing conversion or awaiting deployment as freighters at September 30, including two 767s acquired during the third quarter. CAM purchased nine 767s during 2019.

•

CAM’s pretax earnings for the quarter were $17.4 million, down $1.6 million from the prior-year's third quarter but up $0.7 million from this year's second quarter. Earnings reflected $4.8 million more in quarterly allocated interest expense and $7.7 million more for depreciation expense, due to both organic and acquired fleet growth, versus the year-ago quarter. Also impacting CAM’s results was the timing of new aircraft lease deliveries and transitioning of aircraft between lessees during the quarter.

ACMI Services



ACMI Services	Third Quarter					Nine Months
($ in thousands)	2019		2018			2019		2018
Revenues	$	272,188	$	116,224		$	785,082	$	355,204
Allocated interest expense	6,530		402			19,520		1,419
Segment earnings, pretax	4,375		(341		)	17,658		3,574

Significant Developments:


•	Revenues for ACMI Services again more than doubled from the prior-year period, stemming mainly from Omni Air's operations for the Department of Defense since ATSG acquired Omni in November 2018. Also contributing to the increase were higher operations for Amazon and ACMI flights for UPS.

•

Pretax earnings for the quarter were $4.4 million versus a year-earlier loss of $0.3 million, and more than four times the amount earned in the second quarter this year, primarily due to contributions from Omni Air. Earnings were adversely affected by previously forecast ramp-up costs for expanded flight operations in the second half. Interest expense allocated to ACMI Services for the third quarter increased $6.1 million, primarily related to debt associated with the Omni Air acquisition.


•	Total block hours increased 56 percent for the quarter and 37 percent through the first nine months of 2019, principally due to the contribution from Omni Air's ACMI and charter operations and growth in flight operations for Amazon.

Other Activities



Other	Third Quarter				Nine Months
($ in thousands)	2019		2018		2019		2018
Total Revenues	$	87,762	$	69,477	$	226,228	$	206,736
Revenues from external customers	$	51,895	$	47,344	$	140,270	$	141,124
Pretax Earnings	2,939		3,051		8,848		9,808

Significant Developments:

•

Total third-quarter revenues from other activities of $87.8 million increased by $18.3 million, or 26 percent, due to growth in maintenance services for ATSG affiliate airlines and ground services for external customers. Revenues from external customers increased $4.6 million versus the prior-year period, driven by additional revenue for ground services and fuel sales offset by the termination of sort-facility management services for the U.S. Postal Service in the third quarter of 2018.


•	Pretax earnings were flat for the third quarter. The loss of business with the U.S. Postal Service offset higher earnings from gateway services from other customers.

Outlook

ATSG continues to project that its Adjusted EBITDA will increase to $450 million in 2019 from $312 million in 2018.

Peak-season flight schedules for ATSG's scheduled express-package services will be higher in the fourth quarter than previously forecast, largely due to strong e-commerce demand. As a result, costs to prepare for and support that demand will be greater than previously anticipated. Additionally, fourth-quarter aircraft lease revenues may be impacted by the timing of lease start-ups and transitioning delays.

2019 capital expenditures, principally to purchase and modify Boeing 767 aircraft for freighter deployment, are now projected to be approximately $460 million, down from $475 million previously projected. Five 767-300s are expected to be in or awaiting cargo conversion at year-end 2019.

We anticipate ten lease deployments in 2020, including commitments of four to Amazon and one to UPS. The demand for Boeing 767 freighters remains very strong and ATSG is negotiating with multiple customers seeking to lease the remaining aircraft. Goals for 2020 also include mid-year approval of our application for a Supplemental Type Certificate for our Airbus A321 passenger-to-freighter conversion program.

Hete noted that ATSG expects to continue investing in 767 aircraft in the near term, based on known and anticipated requirements of customers relying even more on air express networks to speed fulfillment, and those customers' preference for ATSG's customized turnkey solutions and superior service performance.

"While trade and tariff issues have impacted the general cargo market," he said, "demand for our mid-size freighters remains very strong, driven by the expansion of regional air express networks and growth in e-commerce. Looking forward, the aircraft and other investments we are making will drive even higher cash flows into an already strong cash-generating business. We expect lower capital expenditures in the next few years with decreasing debt leverage and full availability of capital allocation options to increase shareholder returns."

Separately today, the company announced an amendment to its senior secured credit facility which, among other changes, lengthened the term of the agreement and lowered pricing of its term loan and revolver debt. A news release describing the facility changes is available on our website, atsginc.com.

Non-GAAP Financial Measures

This release, including the attached tables, contains non-GAAP financial measures that management uses to evaluate historical results and project future results. Management believes that these non-GAAP measures assist in highlighting operational trends, facilitate period-over-period comparisons, and provide additional clarity about events and trends affecting core operating performance. Disclosing these non-GAAP measures provides insight to investors about additional metrics that management uses to evaluate past performance and prospects for future performance. Non-GAAP measures are not a substitute for GAAP. The historical non-GAAP financial measures included in this release are reconciled to GAAP earnings in tables included later in this release. The Company does not provide a reconciliation of projected Adjusted EBITDA because it is unable to predict with reasonable accuracy the value of certain adjustments. Certain adjustments can be significantly impacted by the re-measurements of financial instruments including stock warrants issued to customers. The Company’s earnings on a GAAP basis and the non-GAAP adjustments for gain and losses resulting from the re-measurement of stock warrants, will depend on the future prices of ATSG stock, interest rates and other assumptions which are highly uncertain.

Conference Call

ATSG will host a conference call on November 7, 2019, at 10 a.m. Eastern time to review its financial results for the third quarter of 2019. Participants should dial (800) 708-4539 and international participants should dial (847) 619-6397 ten minutes before the scheduled start of the call and ask for conference pass code 49148053. The call will also be webcast live (in listen-only mode) via a link at www.atsginc.com. A replay of the conference call will be available by phone on November 7, 2019, beginning at 2 p.m. and continuing through November 14, 2019, at (888) 843-7419 (international callers (630) 652-3042; use pass code 49148053#). The webcast replay will remain available via www.atsginc.com for 30 days.

About ATSG

ATSG is a leading provider of aircraft leasing and air cargo transportation and related services to domestic and foreign air carriers and other companies that outsource their air cargo lift requirements. ATSG, through its leasing and airline subsidiaries, is the world's largest owner and operator of converted Boeing 767 freighter aircraft. Through its principal subsidiaries, including three airlines with separate and distinct U.S. FAA Part 121 Air Carrier certificates, ATSG provides aircraft leasing, air cargo lift, passenger ACMI and charter services, aircraft maintenance services and airport ground services. ATSG's subsidiaries include ABX Air, Inc.; Airborne Global Solutions, Inc.; Airborne Maintenance and Engineering Services, Inc., including its subsidiary, Pemco World Air Services, Inc.; Air Transport International, Inc.; Cargo Aircraft Management, Inc.; and Omni Air International, LLC. For more information, please see www.atsginc.com.

Group's (ATSG's) actual results to differ materially from those indicated by such forward-looking statements. These factors include, but are not limited to, changes in market demand for our assets and services; our operating airlines' ability to maintain on-time service and control costs; the cost and timing with respect to which we are able to purchase and modify aircraft to a cargo configuration; fluctuations in ATSG's traded share price, which may result in mark-to-market charges on certain financial instruments; the number, timing and scheduled routes of our aircraft deployments to customers; our ability to remain in compliance with our agreements with key customers and lenders; changes in general economic and/or industry specific conditions; changes in our capital expenditure plans and requirements; and other factors that are contained from time to time in ATSG's filings with the U.S. Securities and Exchange Commission, including its Annual Report on Form 10-K and Quarterly Reports on Form 10-Q. Readers should carefully review this release and should not place undue reliance on ATSG's forward-looking statements. These forward-looking statements were based on information, plans and estimates as of the date of this release. ATSG undertakes no obligation to update any forward-looking statements to reflect changes in underlying assumptions or factors, new information, future events or other changes.

Contact:

Quint Turner, ATSG Inc. Chief Financial Officer

937-366-2303

AIR TRANSPORT SERVICES GROUP, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS

(In thousands, except per share data)



	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2019			2018			2019			2018
REVENUES	$	366,073		$	204,919		$	1,048,832		$	611,566

OPERATING EXPENSES
Salaries, wages and benefits	110,706			71,341			307,897			216,173
Depreciation and amortization	64,149			43,201			190,052			124,825
Maintenance, materials and repairs	41,496			33,469			125,501			107,152
Fuel	41,193			5,981			110,311			17,682
Contracted ground and aviation services	17,190			2,636			47,319			7,464
Travel	25,366			6,903			66,401			20,823
Landing and ramp	2,539			1,211			7,978			3,670
Rent	4,123			3,274			11,860			10,264
Insurance	1,833			1,696			5,601			4,473
Transaction fees	—			—			373			—
Other operating expenses	16,712			8,380			50,763			20,672
	325,307			178,092			924,056			533,198

OPERATING INCOME	40,766			26,827			124,776			78,368
OTHER INCOME (EXPENSE)
Net gain on financial instruments	91,952			17,895			60,566			28,707
Interest expense	(16,712		)	(5,608		)	(50,906		)	(16,336		)
Non-service component of retiree benefit (costs) credits	(2,351		)	2,045			(7,053		)	6,135
Loss from non-consolidated affiliates	(2,645		)	(2,647		)	(12,459		)	(7,600		)
Interest income	78			67			255			144
	70,322			11,752			(9,597		)	11,050

EARNINGS FROM CONTINUING OPERATIONS BEFORE INCOME TAXES	111,088			38,579			115,179			89,418
INCOME TAX EXPENSE	(6,003		)	(5,646		)	(14,092		)	(16,339		)

EARNINGS FROM CONTINUING OPERATIONS	105,085			32,933			101,087			73,079

EARNINGS FROM DISCONTINUED OPERATIONS, NET OF TAX	243			170			305			536
NET EARNINGS	$	105,328		$	33,103		$	101,392		$	73,615

EARNINGS PER SHARE - CONTINUING OPERATIONS
Basic	$	1.78		$	0.56		$	1.72		$	1.24
Diluted	$	0.19		$	0.24		$	0.43		$	0.71

WEIGHTED AVERAGE SHARES - CONTINUING OPERATIONS
Basic	58,919			58,739			58,889			58,773
Diluted	68,718			68,323			69,382			68,629

Certain historical expenses have been reclassified to conform to the presentation above.

AIR TRANSPORT SERVICES GROUP, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except share data)



	September 30,			December 31,
	2019			2018
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$	46,833		$	59,322
Accounts receivable, net of allowance of $2,793 in 2019 and $1,444 in 2018	135,907			147,755
Inventory	32,776			33,536
Prepaid supplies and other	18,018			18,608
TOTAL CURRENT ASSETS	233,534			259,221

Property and equipment, net	1,707,332			1,555,005
Customer incentive	151,271			63,780
Goodwill and acquired intangibles	530,512			535,359
Operating lease assets	54,473			—
Other assets	67,711			57,220
TOTAL ASSETS	$	2,744,833		$	2,470,585

LIABILITIES AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES:
Accounts payable	$	132,508		$	109,843
Accrued salaries, wages and benefits	50,080			50,932
Accrued expenses	15,656			19,623
Current portion of debt obligations	43,451			29,654
Current portion of lease obligations	14,794			—
Unearned revenue	20,153			19,082
TOTAL CURRENT LIABILITIES	276,642			229,134
Long term debt	1,408,086			1,371,598
Stock warrant obligations	308,074			203,782
Post-retirement obligations	54,066			64,485
Long term lease obligations	38,541			—
Other liabilities	53,410			51,905
Deferred income taxes	125,018			113,243

STOCKHOLDERS’ EQUITY:
Preferred stock, 20,000,000 shares authorized, including 75,000 Series A Junior Participating Preferred Stock	—			—
Common stock, par value $0.01 per share; 150,000,000 shares authorized; 59,368,570 and 59,134,173 shares issued and outstanding in 2019 and 2018, respectively	594			591
Additional paid-in capital	474,915			471,158
Retained earnings	86,085			56,051
Accumulated other comprehensive loss	(80,598		)	(91,362		)
TOTAL STOCKHOLDERS’ EQUITY	480,996			436,438
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	2,744,833		$	2,470,585

AIR TRANSPORT SERVICES GROUP, INC. AND SUBSIDIARIES

PRETAX EARNINGS AND ADJUSTED PRETAX EARNINGS SUMMARY

FROM CONTINUING OPERATIONS

NON-GAAP RECONCILIATION

(In thousands)



	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2019			2018			2019			2018
Revenues
CAM
Aircraft leasing and related revenues	$	75,160		$	63,012		$	223,017		$	178,217
Lease incentive amortization	(4,156		)	(4,226		)	(12,407		)	(12,678		)
Total CAM	71,004			58,786			210,610			165,539
ACMI Services	272,188			116,224			785,082			355,204
Other Activities	87,762			69,477			226,228			206,736
Total Revenues	430,954			244,487			1,221,920			727,479
Eliminate internal revenues	(64,881		)	(39,568		)	(173,088		)	(115,913		)
Customer Revenues	$	366,073		$	204,919		$	1,048,832		$	611,566

Pretax Earnings (Loss) from Continuing Operations
CAM, inclusive of interest expense	17,428			19,034			50,285			49,892
ACMI Services, inclusive of interest expense	4,375			(341		)	17,658			3,574
Other Activities	2,939			3,051			8,848			9,808
Net, unallocated interest expense	(610		)	(458		)	(2,293		)	(1,098		)
Net gain on financial instruments	91,952			17,895			60,566			28,707
Other non-service components of retiree benefit (costs) credits, net	(2,351		)	2,045			(7,053		)	6,135
Transaction fees	—			—			(373		)	—
Non-consolidated affiliates	(2,645		)	(2,647		)	(12,459		)	(7,600		)
Earnings from Continuing Operations before Income Taxes (GAAP)	$	111,088		$	38,579		$	115,179		$	89,418

Adjustments to Pretax Earnings
Add non-service components of retiree benefit costs (credits), net	2,351			(2,045		)	7,053			(6,135		)
Add loss from non-consolidated affiliates	2,645			2,647			12,459			7,600
Add transaction fees	—			—			373			—
Add customer incentive amortization	4,334			4,226			12,585			12,678
Add net gain on financial instruments	(91,952		)	(17,895		)	(60,566		)	(28,707		)
Adjusted Pretax Earnings (non-GAAP)	$	28,466		$	25,512		$	87,083		$	74,854

Adjusted Pretax Earnings excludes certain items included in GAAP based pretax earnings (loss) from continuing operations because they are distinctly different in their predictability among periods or not closely related to our operations. Presenting this measure provides investors with a comparative metric of fundamental operations, while highlighting changes to certain items among periods. Adjusted Pretax Earnings should not be considered an alternative to Earnings from Continuing Operations Before Income Taxes or any other performance measure derived in accordance with GAAP.

AIR TRANSPORT SERVICES GROUP, INC. AND SUBSIDIARIES

ADJUSTED EARNINGS FROM CONTINUING OPERATIONS BEFORE INTEREST, TAXES, DEPRECIATION AND AMORTIZATION

NON-GAAP RECONCILIATION

(In thousands)



	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2019			2018			2019			2018

Earnings (loss) from Continuing Operations Before Income Taxes	$	111,088		$	38,579		$	115,179		$	89,418
Interest Income	(78		)	(67		)	(255		)	(144		)
Interest Expense	16,712			5,608			50,906			16,336
Depreciation and Amortization	64,149			43,201			190,052			124,825
EBITDA from Continuing Operations (non-GAAP)	$	191,871		$	87,321		$	355,882		$	230,435
Add non-service components of retiree benefit costs (credits), net	2,351			(2,045		)	7,053			(6,135		)
Add losses for non-consolidated affiliates	2,645			2,647			12,459			7,600
Add acquisition related transaction fees	—			—			373			—
Add customer incentive amortization	4,334			4,226			12,585			12,678
Add net (gain) loss on financial instruments	(91,952		)	(17,895		)	(60,566		)	(28,707		)

Adjusted EBITDA (non-GAAP)	$	109,249		$	74,254		$	327,786		$	215,871

Management uses Adjusted EBITDA to assess the performance of its operating results among periods. It is a metric that facilitates the comparison of financial results of underlying operations. Additionally, these non-GAAP adjustments are similar to the adjustments used by lenders in the Company’s senior secured credit facility to assess financial performance and determine the cost of borrowed funds. The adjustments also exclude the non-service cost components of retiree benefit plans because they are not closely related to ongoing operating activities. Management presents EBITDA from Continuing Operations, a commonly referenced metric, as a subtotal toward computing Adjusted EBITDA.

EBITDA from Continuing Operations is defined as Earnings (Loss) from Continuing Operations Before Income Taxes plus net interest expense, depreciation, and amortization expense. Adjusted EBITDA is defined as EBITDA from Continuing Operations less financial instrument revaluation gains or losses, non-service components of retiree benefit costs including pension plan settlements, amortization of warrant-based customer incentive costs recorded in revenue, and costs from non-consolidated affiliates.

Adjusted EBITDA and EBITDA from Continuing Operations are non-GAAP financial measures and should not be considered as alternatives to Earnings from Continuing Operations Before Income Taxes or any other performance measure derived in accordance with GAAP. Adjusted EBITDA and EBITDA from Continuing Operations should not be considered in isolation or as substitutes for analysis of the Company's results as reported under GAAP, or as alternative measures of liquidity.

AIR TRANSPORT SERVICES GROUP, INC. AND SUBSIDIARIES

ADJUSTED EARNINGS PER SHARE FROM CONTINUING OPERATIONS

NON-GAAP RECONCILIATION

(In thousands)

Management presents Adjusted Earnings and Adjusted Earnings Per Share from Continuing Operations, both non-GAAP measures, to provide additional information regarding earnings per share without the volatility otherwise caused by the items below. Management uses Adjusted Earnings and Adjusted Earnings Per Share from Continuing Operations to compare the performance of its operating results among periods.



	Three Months Ended											Nine Months Ended
	September 30, 2019					September 30, 2018						September 30, 2019					September 30, 2018
	$			$ Per Share		$			$ Per Share			$			$ Per Share		$			$ Per Share

Earnings (loss) from Continuing Operations - basic (GAAP)	$	105,085				$	32,933					$	101,087				$	73,079
Gain from warrant revaluation, net tax¹	(91,849		)			(16,801		)				(71,319		)			(24,274		)
Earnings (loss) from Continuing Operations - diluted (GAAP)	13,236			$	0.19	16,132			$	0.24		29,768			$	0.43	48,805			$	0.71
Adjustments, net of tax
Customer incentive amortization²	3,310			0.05		3,272			0.05			9,611			0.14		9,816			0.14
Non-service component of retiree benefits ³	1,795			0.02		(1,562		)	(0.02		)	5,385			0.08		(4,686		)	(0.07		)
Loss from affiliates⁴	2,020			0.03		2,049			0.02			11,771			0.17		5,883			0.09
Omni acquisition fees⁵	—			—		—			—			285			—		—			—
Derivative revaluation⁶	1,081			0.02		(435		)	(0.01		)	9,234			0.13		(2,875		)	(0.04		)
Adjusted Earnings from Continuing Operations (non-GAAP)	$	21,442		$	0.31	$	19,456		$	0.28		$	66,054		$	0.95	$	56,943		$	0.83

	Shares					Shares						Shares					Shares
Weighted Average Shares - diluted	68,718					68,323						69,382					68,629
Additional weighted average shares¹	—					—						—					—
Adjusted Shares (non-GAAP)	68,718					68,323						69,382					68,629

Adjusted Earnings from Continuing Operations and Adjusted Earnings Per Share from Continuing Operations are non-GAAP financial measures and should not be considered as alternatives to Earnings from Continuing Operations, Weighted Average Shares - diluted or Earnings Per Share from Continuing Operations or any other performance measure derived in accordance with GAAP. Adjusted Earnings and Adjusted Earnings Per Share from Continuing Operations should not be considered in isolation or as a substitute for analysis of the company's results as reported under GAAP.

Under U.S. GAAP, certain warrants are reflected as a liability and unrealized warrant gains are typically removed from diluted earnings per share (“EPS”) calculations while unrealized warrant losses are not removed because they are dilutive to EPS. As a result, the Company’s EPS, as calculated under U.S. GAAP, can vary significantly among periods due to unrealized mark-to-market losses created by an increased trading value for the Company's shares. Adjustment removes the unrealized gains for a large grant of stock warrants granted to a customer as a lease incentive.


2.	Adjustment removes the amortization of the warrant-based customer incentives which are recorded against revenue over the term of the related aircraft leases and customer contracts.


3.	Removes the non-service component of post-retirement costs and credits.


4.	Adjustment removes losses for the Company's non-consolidated affiliates.


5.	Adjustment removes the fees incurred for the acquisition of Omni Air International.


6.	Adjustment removes gains and losses from derivative interest rate instruments revaluations.

AIR TRANSPORT SERVICES GROUP, INC. AND SUBSIDIARIES

AIRCRAFT FLEET



Aircraft Types
	September 30,		December 31,		September 30,		December 31,
	2018		2018		2019		2019 Projected

B767-200 Freighter		34		34		33		33
B767-200 Passenger¹		—		3		3		3
B767-300 Freighter²		29		33		36		44
B767-300 Passenger¹		—		7		8		8
B777-200 Passenger		—		3		3		3
B757-200 Freighter		4		4		4		4
B757 Combi		4		4		4		4
B737-400 Freighter		2		2		1		1
Total Aircraft in Service		73		90		92		100

B767-300 in or awaiting cargo conversion		6		5		10		5
B767-200 staging for lease		2		1		2		2
Total Aircraft		81		96		104		107

Aircraft in Service Deployments
	September 30,		December 31,		September 30,		December 31,
	2018		2018		2019		2019 Projected

Dry leased without CMI		22		28		25		29
Dry leased with CMI		32		31		33		35
Customer provided for CMI²		—		—		—		2
ACMI/Charter¹		19		31		34		34


1.	Includes one Boeing 767-300ER passenger aircraft and one 767-200ER passenger aircraft that are leased from external companies.


2.	The fourth quarter of 2019 includes two aircraft provided by a customer and operated under a CMI agreement by a Company airline.