ATLAS AIR WORLDWIDE HOLDINGS INC (Form: 10-Q, Received: 05/03/2017 12:29:28)

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Accelerated filer

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Smaller reporting company

Emerging growth company

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 10-Q

☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2017

☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number: 001-16545

Atlas Air Worldwide Holdings, Inc.

(Exact name of registrant as specified in its charter)

Delaware		13-4146982
(State or other jurisdiction of incorporation)		(IRS Employer Identification No.)

2000 Westchester Avenue, Purchase, New York		10577
(Address of principal executive offices)		(Zip Code)

(914) 701-8000

(Registrant’s telephone number, including area code)

Not Applicable

(Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

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. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of April 28, 2017, there were 25,262,899 shares of the registrant’s Common Stock outstanding.

TABLE OF CONTENTS

		Page

Part I. FINANCIAL INFORMATION

Item 1.	Financial Statements

	Consolidated Balance Sheets as of March 31, 2017 and December 31, 2016 (unaudited)	3

	Consolidated Statements of Operations for the Three Months ended March 31, 2017 and 2016 (unaudited)	4

	Consolidated Statements of Comprehensive Income (Loss) for the Three Months ended March 31, 2017 and 2016 (unaudited)	5

	Consolidated Statements of Cash Flows for the Three Months ended March 31, 2017 and 2016 (unaudited)	6

	Consolidated Statements of Stockholders’ Equity as of and for the Three Months ended March 31, 2017 and 2016 (unaudited)	7

	Notes to Unaudited Consolidated Financial Statements	8

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	19

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	28

Item 4.	Controls and Procedures	28

PART II. OTHER INFORMATION

Item 1.	Legal Proceedings	29

Item 1A.	Risk Factors	29

Item 6.	Exhibits	29

	Signatures	30

	Exhibit Index	31

PART I — FINANCI AL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

Atlas Air Worldwide Holdings, Inc.

Consolidated Balance Sheets

(in thousands, except share data)

(Unaudited)

	March 31, 2017			December 31, 2016
Assets
Current Assets
Cash and cash equivalents	$	109,100		$	123,890
Short-term investments		5,242			4,313
Restricted cash		9,836			14,360
Accounts receivable, net of allowance of $1,644 and $997, respectively		157,953			166,486
Prepaid maintenance		6,284			4,418
Prepaid expenses and other current assets		47,796			44,603
Total current assets		336,211			358,070
Property and Equipment
Flight equipment		3,993,853			3,886,714
Ground equipment		70,567			68,688
Less: accumulated depreciation		(602,420	)		(568,946	)
Flight equipment modifications in progress		242,013			154,226
Property and equipment, net		3,704,013			3,540,682
Other Assets
Long-term investments and accrued interest		26,699			27,951
Deferred costs and other assets		229,437			204,647
Intangible assets, net and goodwill		113,496			116,029
Total Assets	$	4,409,856		$	4,247,379

Liabilities and Equity
Current Liabilities
Accounts payable	$	54,610		$	59,543
Accrued liabilities		394,885			320,887
Current portion of long-term debt and capital lease		176,208			184,748
Total current liabilities		625,703			565,178
Other Liabilities
Long-term debt and capital lease		1,804,175			1,666,663
Deferred taxes		297,675			298,165
Financial instruments and other liabilities		170,679			200,035
Total other liabilities		2,272,529			2,164,863
Commitments and contingencies
Equity
Stockholders’ Equity
Preferred stock, $1 par value; 10,000,000 shares authorized; no shares issued		-			-
Common stock, $0.01 par value; 100,000,000 shares authorized;
30,052,095 and 29,633,605 shares issued, 25,258,361 and 25,017,242,
shares outstanding (net of treasury stock), as of March 31, 2017
and December 31, 2016, respectively		300			296
Additional paid-in-capital		661,290			657,082
Treasury stock, at cost; 4,793,734 and 4,616,363 shares, respectively		(192,549	)		(183,119	)
Accumulated other comprehensive loss		(4,737	)		(4,993	)
Retained earnings		1,047,320			1,048,072
Total stockholders’ equity		1,511,624			1,517,338
Total Liabilities and Equity	$	4,409,856		$	4,247,379

See accompanying Notes to Unaudited Consolidated Financial Statements

Atlas Air Worldwide Holdings, Inc.

Consolidated Statements of Operations

(in thousands, except per share data)

(Unaudited)

	Three Months Ended
	March 31, 2017			March 31, 2016

Operating Revenue	$	475,394		$	418,615

Operating Expenses
Salaries, wages and benefits		104,087			93,845
Aircraft fuel		82,432			63,220
Maintenance, materials and repairs		72,816			57,024
Depreciation and amortization		37,894			35,005
Aircraft rent		36,073			37,037
Travel		32,359			30,323
Passenger and ground handling services		25,123			20,879
Navigation fees, landing fees and other rent		18,535			21,974
Gain on disposal of aircraft		(54	)		-
Special charge		-			6,631
Transaction-related expenses		915			793
Other		41,178			31,827
Total Operating Expenses		451,358			398,558

Operating Income		24,036			20,057

Non-operating Expenses (Income)
Interest income		(1,256	)		(1,604	)
Interest expense		21,524			21,302
Capitalized interest		(1,780	)		(357	)
Loss on early extinguishment of debt		-			132
Unrealized loss on financial instruments		5,213			-
Other income		(253	)		(240	)
Total Non-operating Expenses (Income)		23,448			19,233

Income from continuing operations before income taxes		588			824
Income tax expense		553			353

Income from continuing operations, net of taxes		35			471

Loss from discontinued operations, net of taxes		(787	)		-

Net Income (Loss)	$	(752	)	$	471

Earnings per share from continuing operations:
Basic	$	0.00		$	0.02

Diluted	$	0.00		$	0.02

Loss per share from discontinued operations:
Basic	$	(0.03	)	$	-

Diluted	$	(0.03	)	$	-

Earnings (loss) per share:
Basic	$	(0.03	)	$	0.02

Diluted	$	(0.03	)	$	0.02

Weighted average shares:
Basic		25,162			24,711

Diluted		25,744			24,846

See accompanying Notes to Unaudited Consolidated Financial Statements

Atlas Air Worldwide Holdings, Inc.

Consolidated Statements of Comprehensive Income (Loss)

(in thousands)

(Unaudited)

	For the Three Months Ended
	March 31, 2017			March 31, 2016

Net Income (Loss)	$	(752	)	$	471
Other comprehensive income:
Interest rate derivatives:
Reclassification to interest expense		418			454
Income tax expense		(162	)		(176	)
Other comprehensive income		256			278
Comprehensive Income (Loss)	$	(496	)	$	749

See accompanying Notes to Unaudited Consolidated Financial Statements

Atlas Air Worldwide Holdings, Inc.

Consolidated Statements of Cash Flows

(in thousands)

(Unaudited)

	For the Three Months Ended
	March 31, 2017			March 31, 2016

Operating Activities:
Income from continuing operations, net of taxes	$	35		$	471
Less: Loss from discontinued operations, net of taxes		(787	)		-
Net Income (Loss)		(752	)		471

Adjustments to reconcile Net Income (Loss) to net cash provided by operating activities:
Depreciation and amortization		43,217			39,817
Accretion of debt securities discount		(307	)		(332	)
Provision for allowance for doubtful accounts		435			221
Special charge, net of cash payments		-			6,631
Loss on early extinguishment of debt		-			132
Unrealized loss on financial instruments		5,213			-
Gain on disposal of aircraft		(54	)		-
Deferred taxes		418			292
Stock-based compensation expense		4,212			5,455
Changes in:
Accounts receivable		8,134			29,871
Prepaid expenses, current assets and other assets		(30,336	)		(10,575	)
Accounts payable and accrued liabilities		(11,526	)		(52,544	)
Net cash provided by operating activities		18,654			19,439
Investing Activities:
Capital expenditures		(21,673	)		(10,682	)
Payments for flight equipment and modifications		(118,897	)		(84,230	)
Proceeds from investments		631			4,955
Proceeds from disposal of aircraft		137			-
Net cash used for investing activities		(139,802	)		(89,957	)
Financing Activities:
Proceeds from revolving credit facility		150,000			-
Proceeds from debt issuance		-			14,790
Customer maintenance reserves and deposits received		14,837			3,547
Customer maintenance reserves paid		(6,384	)		-
Purchase of treasury stock		(9,430	)		(4,112	)
Excess tax benefit from stock-based compensation expense		-			158
Payment of debt issuance costs		(90	)		(217	)
Payments of debt		(47,099	)		(50,666	)
Net cash provided by (used for) financing activities		101,834			(36,500	)
Net decrease in cash, cash equivalents and restricted cash		(19,314	)		(107,018	)
Cash, cash equivalents and restricted cash at the beginning of period		138,250			438,931
Cash, cash equivalents and restricted cash at the end of period	$	118,936		$	331,913

Noncash Investing and Financing Activities:
Acquisition of flight equipment included in Accounts payable and accrued liabilities	$	48,015		$	12,059
Acquisition of flight equipment under capital lease	$	32,380		$	-

See accompanying Notes to Unaudited Consolidated Financial Statements

Atlas Air Worldwide Holdings, Inc.

Consolidated Statements of Stockholders’ Equity

(in thousands, except share data)

(Unaudited)

									Accumulated
						Additional			Other						Total
	Common		Treasury			Paid-In			Comprehensive			Retained			Stockholders'
	Stock		Stock			Capital			Loss			Earnings			Equity
Balance at December 31, 2016	$	296	$	(183,119	)	$	657,082		$	(4,993	)	$	1,048,072		$	1,517,338
Net Income (Loss)		-		-			-			-			(752	)		(752	)
Other comprehensive income		-		-			-			256			-			256
Stock-based compensation		-		-			4,212			-			-			4,212
Purchase of 177,371 shares of treasury stock		-		(9,430	)		-			-			-			(9,430	)
Issuance of 418,490 shares of restricted stock		4		-			(4	)		-			-			-
Balance at March 31, 2017	$	300	$	(192,549	)	$	661,290		$	(4,737	)	$	1,047,320		$	1,511,624

									Accumulated
						Additional			Other					Total
	Common		Treasury			Paid-In			Comprehensive			Retained		Stockholders'
	Stock		Stock			Capital			Loss			Earnings		Equity
Balance at December 31, 2015	$	290	$	(171,844	)	$	625,244		$	(6,063	)	$	1,006,556	$	1,454,183
Net Income (Loss)		-		-			-			-			471		471
Other comprehensive income		-		-			-			278			-		278
Stock-based compensation		-		-			5,455			-			-		5,455
Purchase of 112,029 shares of treasury stock		-		(4,112	)		-			-			-		(4,112	)
Issuance of 287,466 shares of restricted stock		3		-			(3	)		-			-		-
Tax expense on restricted stock and stock options		-		-			(545	)		-			-		(545	)
Balance at March 31, 2016	$	293	$	(175,956	)	$	630,151		$	(5,785	)	$	1,007,027	$	1,455,730

See accompanying Notes to Unaudited Consolidated Financial Statements

Atlas Air Worldwide Holdings, Inc.

Notes to Unaudited Consolidated Financial Statements

March 31, 2017

1. Basis of Presentation

Our consolidated financial statements include the accounts of the holding company, Atlas Air Worldwide Holdings, Inc. (“AAWW”), and its consolidated subsidiaries. AAWW is the parent company of Atlas Air, Inc. (“Atlas”) and Southern Air Holdings, Inc. (“Southern Air”). AAWW is also the parent company of several subsidiaries related to our dry leasing services (collectively referred to as “Titan”). AAWW has a 51% equity interest and 75% voting interest in Polar Air Cargo Worldwide, Inc. (“Polar”). We record our share of Polar’s results under the equity method of accounting.

The terms “we,” “us,” “our,” and the “Company” mean AAWW and all entities included in its consolidated financial statements.

We provide outsourced aircraft and aviation operating services throughout the world, serving Africa, Asia, Australia, Europe, the Middle East, North America and South America through: (i) contractual service arrangements, including those through which we provide aircraft to customers and value-added services, including crew, maintenance and insurance (“ACMI”), as well as those through which we provide crew, maintenance and insurance, but not the aircraft (“CMI”); (ii) cargo and passenger charter services (“Charter”); and (iii) dry leasing aircraft and engines (“Dry Leasing” or “Dry Lease”).

The accompanying unaudited consolidated financial statements and related notes (the “Financial Statements”) have been prepared in accordance with the U.S. Securities and Exchange Commission (the “SEC”) requirements for quarterly reports on Form 10-Q, and consequently exclude certain disclosures normally included in audited consolidated financial statements prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”). Intercompany accounts and transactions have been eliminated. The Financial Statements should be read in conjunction with the audited consolidated financial statements and the notes included in the AAWW Annual Report on Form 10-K for the year ended December 31, 2016, which includes additional disclosures and a summary of our significant accounting policies. The December 31, 2016 balance sheet data was derived from that Annual Report. In our opinion, the Financial Statements contain all adjustments, consisting of normal recurring items, necessary to fairly state the financial position of AAWW and its consolidated subsidiaries as of March 31, 2017, the results of operations for the three months ended March 31, 2017 and 2016, comprehensive income (loss) for the three months ended March 31, 2017 and 2016, cash flows for the three months ended March 31, 2017 and 2016, and shareholders’ equity as of and for the three months ended March 31, 2017 and 2016.

Our quarterly results are subject to seasonal and other fluctuations, and the operating results for any quarter are therefore not necessarily indicative of results that may be otherwise expected for the entire year.

Except for per share data, all dollar amounts are in thousands unless otherwise noted.

2. Summary of Significant Accounting Policies

Heavy Maintenance

Except for engines used on our 747-8F aircraft, we account for heavy maintenance costs for airframes and engines used in our ACMI and Charter segments using the direct expense method. Under this method, heavy maintenance costs are charged to expense upon induction, based on our best estimate of the costs.

We account for heavy maintenance costs for airframes and engines used in our Dry Leasing segment and engines used on our 747-8F aircraft using the deferral method. Under this method, we defer the expense recognition of scheduled heavy maintenance events, which are amortized over the estimated period until the next scheduled heavy maintenance event is required. Amortization of deferred maintenance expense included in Depreciation and amortization was $0.8 million and zero for the three months ended March 31, 2017 and March 31, 2016, respectively. Deferred maintenance included within Deferred costs and other assets is as follows:

	Deferred Maintenance
Balance as of December 31, 2016	$	19,100
Deferred maintenance costs		23,151
Amortization of deferred maintenance		(813	)
Balance as of March 31, 2017	$	41,438

Supplemental Cash Flow Information

The following table provides a reconciliation of cash, cash equivalents and restricted cash reported within the consolidated balance sheets that sum to the total of the same such amounts shown in the consolidated statements of cash flows:

	March 31, 2017		December 31, 2016
Cash and cash equivalents	$	109,100	$	123,890
Restricted Cash		9,836		14,360
Total Cash, cash equivalents and restricted cash
shown in consolidated statements of cash flows	$	118,936	$	138,250

Recent Accounting Pronouncements

In March 2016, the Financial Accounting Standards Board (“FASB”) amended its accounting guidance for share-based compensation. The amended guidance changes how companies account for certain aspects of share-based payment awards to employees, including the accounting for income taxes, forfeitures, and statutory tax withholding requirements, as well as classification in the statement of cash flows. We adopted this amended guidance on January 1, 2017 on a prospective basis. As a result, we recognized $1.5 million of excess tax benefits during the first quarter of 2017 as a reduction of income tax expense in our consolidated statements of operations. Excess tax benefits were previously recognized within equity. Additionally, our consolidated statements of cash flows present such excess tax benefits, which were previously presented as a financing activity, as an operating activity.

In February 2016, the FASB amended its accounting guidance for leases. The guidance requires a lessee to recognize assets and liabilities on the balance sheet arising from leases with terms greater than twelve months. While lessor accounting guidance is relatively unchanged, certain amendments were made to conform with changes made to lessee accounting and amended revenue recognition guidance. The new guidance will continue to classify leases as either finance or operating, with classification affecting the pattern of expense and income recognition in the statement of operations. It also requires additional quantitative and qualitative disclosures about leasing arrangements. The amended guidance is effective as of the beginning of 2019, with early adoption permitted. While we are still assessing the impact the amended guidance will have on our financial statements, we expect that recognizing the right-of-use asset and related lease liability will impact our balance sheet materially. We have developed and are implementing a plan for adopting this amended guidance.

In May 2014, the FASB amended its accounting guidance for revenue recognition. Subsequently, the FASB has issued several clarifications and updates. The fundamental principles of the new guidance are that companies should recognize revenue in a manner that reflects the timing of the transfer of services to customers and consideration that a company expects to receive for the services provided. It also requires additional disclosures necessary for the financial statement users to understand the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers. We will adopt this guidance on its required effective date of January 1, 2018. While we are still assessing the methods of adoption and impact the amended guidance will have on our financial statements, we expect that an immaterial amount of revenue currently recognized based on flight departure will likely be recognized over time as the services are performed. In addition, we expect that revenue related to contracted minimum block hour guarantees under certain ACMI and CMI contracts will likely be recognized in later periods under the amended guidance. The implementation of our plan to adopt this amended guidance is progressing as expected.

3. Related Parties

DHL Investment and Polar

AAWW has a 51% equity interest and 75% voting interest in Polar. DHL Network Operations (USA), Inc. (“DHL”), a subsidiary of Deutsche Post AG (“DP”), holds a 49% equity interest and a 25% voting interest in Polar. Polar is a variable interest entity that we do not consolidate because we are not the primary beneficiary as the risks associated with the direct costs of operation are with DHL. Under a 20-year blocked space agreement (the “BSA”), Polar provides air cargo capacity to DHL. Atlas has several agreements with Polar to provide ACMI, CMI, Dry Leasing, administrative, sales and ground support services to one another. We do not have any financial exposure to fund debt obligations or operating losses of Polar, except for any liquidated damages that we could incur under these agreements.

The following table summarizes our transactions with Polar:

	For the Three Months Ended
Revenue and Expenses:	March 31, 2017		March 31, 2016
Revenue from Polar	$	102,228	$	98,737
Ground handling and airport fees to Polar		466		223

Accounts receivable/payable as of:	March 31, 2017		December 31, 2016
Receivables from Polar	$	11,405	$	8,161
Payables to Polar		941		2,019

Aggregate Carrying Value of Polar Investment as of:	March 31, 2017		December 31, 2016
Aggregate Carrying Value of Polar Investment	$	4,870	$	4,870

GATS

We hold a 50% interest in GATS GP (BVI) Ltd. (“GATS”), a joint venture with an unrelated third party. The purpose of the joint venture is to purchase rotable parts and provide repair services for those parts, primarily for our 747-8F aircraft. The joint venture is a variable interest entity and we have not consolidated GATS because we are not the primary beneficiary as we do not exercise financial control. As of March 31, 2017 and December 31, 2016, our investment in GATS was $21.9 million and $22.2 million, respectively, and our maximum exposure to losses from the entity is limited to our investment, which is comprised primarily of rotable inventory parts. GATS does not have any third-party debt obligations. We had Accounts payable to GATS of $0.6 million as of March 31, 2017 and $2.4 million as of December 31, 2016.

4. Southern Air Acquisition

On April 7, 2016, we completed the acquisition of Southern Air and its subsidiaries, including Southern Air Inc. and Florida West International Airways, Inc. (“Florida West”). The acquisition of Southern Air provided us with immediate entry into 777 and 737 aircraft operating platforms, with the potential for developing additional business with existing and new customers. We believe this augments our ability to offer the broadest array of aircraft and operating services for domestic, regional and international applications. For the three months ended March 31, 2017, we incurred Transaction-related expenses of $0.9 million, primarily related to professional fees and integration costs associated with the acquisition.

The unaudited estimated pro forma operating revenue for AAWW, including Southern Air for the three months ended March 31, 2016 was $444.1 million if the acquisition had taken place on January 1, 2015. This information includes adjustments to conform with our accounting policies. The earnings of Southern Air were not material for the three months ended March 31, 2016 and, accordingly, pro forma and actual earnings information have not been presented.

As part of integrating Southern Air, management decided and committed to pursue a plan to sell Florida West. As a result, the financial results for Florida West were presented as a discontinued operation and the assets and liabilities of Florida West were classified as held for sale, since the date of acquisition through December 31, 2016. In February 2017, management determined that a sale was no longer likely to occur and committed to a plan to wind-down the Florida West operations. The wind-down of operations was completed during the first quarter of 2017.

A summary of our employee termination benefit liabilities, which are expected to be paid by the first quarter of 2018, is as follows:

	Employee Termination Benefits
Liability as of December 31, 2016	$	1,214
Wind-down expenses		369
Cash payments		(910	)
Liability as of March 31, 2017	$	673

5. Special Charge

During the first quarter of 2016, we classified four CF6-80 engines as held for sale, recognized an impairment loss of $6.5 million and ceased depreciation on the engines. All four of those engines were traded in during 2016. During the fourth quarter of

2016, we classified two CF6-80 engines as held for sale and one of those engines was traded in during the first quarter of 2017. The carrying value of one CF6-80 engine held for s ale at March 31, 2017 was $ 1.4 million and two CF6-80 engines held for sale at December 31, 2016 was $2.8 million, which were included within Prepaid expenses and other current assets in the consolidated balance sheets. The remaining CF6-80 engine classif ied as held for sale is expected to be sold during 2017.

6. Amazon

In May 2016, we entered into certain agreements with Amazon.com, Inc. and its subsidiary, Amazon Fulfillment Services, Inc., (collectively “Amazon”), which involves, among other things, CMI operation of 20 Boeing 767-300 freighter aircraft for Amazon by Atlas, as well as Dry Leasing by Titan. The Dry Leases will have a term of ten years from the commencement of each lease, while the CMI operations will be for seven years from the commencement of each agreement (with an option for Amazon to extend the term to a total of ten years). The first two aircraft were placed in service during the third quarter of 2016 and the first quarter of 2017. The third and fourth aircraft were placed in service in May 2017 with the remainder expected to be placed in service by the end of 2018.

In conjunction with these agreements, we granted Amazon a warrant providing the right to acquire up to 20% of our outstanding common shares, after giving effect to the issuance of shares pursuant to the warrants, at an exercise price of $37.50 per share. A portion of the warrant, representing the right to purchase 3.75 million shares, vested immediately upon issuance of the warrant and the remainder of the warrant, representing the right to purchase 3.75 million shares, will vest in increments of 375,000 as the lease and operation of each of the 11 ^th through 20 ^th aircraft commences. The warrant will be exercisable in accordance with its terms through 2021. As of March 31, 2017, no warrants have been exercised.

The agreements also provide incentives for future growth of the relationship as Amazon may increase its business with us. In that regard, we granted Amazon a warrant to acquire up to an additional 10% of our outstanding common shares, after giving effect to the issuance of shares pursuant to the warrants, for an exercise price of $37.50 per share. This warrant to purchase 3.75 million shares will vest in conjunction with payments by Amazon for additional business with us. The warrant will be exercisable in accordance with its terms through 2023.

The $92.9 million fair value of the vested portion of the warrant issued to Amazon as of May 4, 2016 was recorded as a warrant liability within Financial instruments and other liabilities (the “Amazon Warrant”). The initial fair value of the warrant was recognized as a customer incentive asset within Deferred costs and other assets, net and is being amortized as a reduction of revenue in proportion to the amount of revenue recognized over the terms of the Dry Leases and CMI agreements. We amortized $0.4 million of the customer incentive asset for the three months ended March 31, 2017. The balance of the customer incentive asset, net of amortization, was $91.9 million as of March 31, 2017 and $92.4 million as of December 31, 2016.

The Amazon Warrant liability is marked-to-market at the end of each reporting period with changes in fair value recorded in Unrealized loss on financial instruments. We utilize a Monte Carlo simulation approach to estimate the fair value of the Amazon Warrant which requires inputs such as our common stock price, the warrant strike price, estimated common stock price volatility and risk-free interest rate, among others. We recognized a net unrealized loss of $5.2 million on the Amazon Warrant during the three months ended March 31, 2017. The fair value of the Amazon Warrant liability was $101.0 million as of March 31, 2017 and $95.8 million as of December 31, 2016.

7. Accrued Liabilities

Accrued liabilities consisted of the following as of:

	March 31, 2017		December 31, 2016
Maintenance	$	141,666	$	54,495
Customer maintenance reserves		77,443		81,830
Salaries, wages and benefits		35,192		55,063
U.S. class action settlement		30,000		35,000
Deferred revenue		15,602		10,298
Aircraft fuel		13,754		16,149
Other		81,228		68,052
Accrued liabilities	$	394,885	$	320,887

8. Debt

Capital Lease

In March 2017, we amended and extended a lease for a 747-400 freighter aircraft to June 2032 at a lower monthly lease payment. As a result of the extension, we determined that the lease qualifies as a capital lease. The present value of the future minimum lease payments was $32.4 million.

Convertible Notes

In June 2015, we issued $224.5 million aggregate principal amount of convertible senior notes (the “Convertible Notes”) in an underwritten public offering. The Convertible Notes are senior unsecured obligations and accrue interest payable semiannually on June 1 and December 1 of each year at a fixed rate of 2.25%. The Convertible Notes will mature on June 1, 2022, unless earlier converted or repurchased pursuant to their terms. Proceeds from the issuance of the Convertible Notes were used to refinance higher-rate debt related to five 747-400 freighter aircraft that had an average cash coupon of 8.1%. As of March 31, 2017, the remaining life of the Convertible Notes is 5.2 years and consisted of the following:

	March 31, 2017
Liability component:
Gross proceeds	$	224,500
Less: debt discount, net of amortization		(41,285	)
Less: debt issuance cost, net of amortization		(3,973	)
Net carrying amount	$	179,242

Equity component ⁽¹⁾	$	52,903

(1)

Included in Additional paid-in capital on the consolidated balance sheet as of March 31, 2017.

The following table presents the amount of interest expense recognized related to the Convertible Notes:

	For the Three Months Ended
	March 31, 2017		March 31, 2016
Contractual interest coupon	$	1,263	$	1,263
Amortization of debt discount		1,671		1,567
Amortization of debt issuance costs		173		167
Total interest expense recognized	$	3,107	$	2,997

Revolving Credit Facility

In December 2016, we entered into a three-year $150.0 million secured revolving credit facility (the “Revolver”) for general corporate purposes, including financing the acquisition and conversion of 767 aircraft prior to obtaining permanent financing for the converted aircraft. As of March 31, 2017, the outstanding balance on the Revolver, included in Long-term debt and capital lease was $150.0 million at an interest rate of 3.23%.

9. Commitments

Equipment Purchase Commitments

As of March 31, 2017, our estimated payments remaining for flight equipment purchase commitments are $211.8 million, of which $143.1 million are expected to be made during 2017.

10. Income Taxes

Our effective income tax rates were 94.0% and 42.8% for the three months ended March 31, 2017 and 2016, respectively. The effective income tax rate for the three months ended March 31, 2017 differed from the U.S. statutory rate primarily due to nondeductible changes in the value of the Amazon Warrant liability (see Note 6 to our Financial Statements), partially offset by the impact of the 2017 adoption of the amended accounting guidance for share-based compensation which requires that excess tax benefits associated with share-based compensation be recognized within income tax expense in our consolidated statement of operations. The effective income tax rate for the three months ended March 31, 2016 differed from the U.S. federal statutory rate primarily due to nondeductible acquisition-related expenses incurred in connection with the acquisition of Southern Air. The effective

rates for bot h periods were impacted by our assertion to indefinitely reinvest the net earnings of foreign subsidiaries outside the U.S. For interim accounting purposes, we recognize income taxes using an estimated annual effective tax rate.

11. Financial Instruments

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (exit price). Inputs used to measure fair value are classified in the following hierarchy:

Level 1

Unadjusted quoted prices in active markets for identical assets or liabilities;

Level 2

Other inputs that are observable directly or indirectly, such as quoted prices in active markets for similar assets or liabilities, or inactive quoted prices for identical assets or liabilities in inactive markets;

Level 3

Unobservable inputs reflecting assumptions about the inputs used in pricing the asset or liability.

We endeavor to utilize the best available information to measure fair value.

The carrying value of Cash and cash equivalents, Short-term investments and Restricted cash is based on cost, which approximates fair value.

Long-term investments consist of debt securities for which we have both the ability and the intent to hold until maturity. These investments are classified as held-to-maturity and reported at amortized cost. The fair value of our Long-term investments is based on a discounted cash flow analysis using the contractual cash flows of the investments and a discount rate derived from unadjusted quoted interest rates for debt securities of comparable risk. Such debt securities represent investments in Pass-Through Trust Certificates (“PTCs”) related to enhanced equipment trust certificates (“EETCs”) issued by Atlas in 1998, 1999 and 2000.

The fair value of our term loans, notes guaranteed by the Export-Import Bank of the United States (“Ex-Im Bank”), the Revolver and EETCs are based on a discounted cash flow analysis using current borrowing rates for instruments with similar terms.

The fair value of our Convertible Notes is based on unadjusted quoted market prices for these securities.

The fair value of the Amazon Warrant is based on a Monte Carlo simulation which requires inputs such as our common stock price, the warrant strike price, estimated common stock price volatility, and risk-free interest rate, among others.

The following table summarizes the carrying value, estimated fair value and classification of our financial instruments as of:

	March 31, 2017
	Carrying Value		Fair Value		Level 1		Level 2		Level 3
Assets
Cash and cash equivalents	$	109,100	$	109,100	$	109,100	$	-	$	-
Short-term investments		5,242		5,242		-		-		5,242
Restricted cash		9,836		9,836		9,836		-		-
Long-term investments and accrued interest		26,699		31,289		-		-		31,289
	$	150,877	$	155,467	$	118,936	$	-	$	36,531

Liabilities
Term loans	$	1,002,964	$	1,045,756	$	-	$	-	$	1,045,756
Ex-Im Bank guaranteed notes		598,339		612,567		-		-		612,567
Revolver		150,000		147,912		-		-		147,912
Convertible Notes		179,242		233,480		233,480		-		-
Amazon Warrant		100,988		100,988		-		100,988		-
EETC		17,958		20,239		-		-		20,239
	$	2,049,491	$	2,160,942	$	233,480	$	100,988	$	1,826,474

	December 31, 2016
	Carrying Value		Fair Value		Level 1		Level 2		Level 3
Assets
Cash and cash equivalents	$	123,890	$	123,890	$	123,890	$	-	$	-
Short-term investments		4,313		4,313		-		-		4,313
Restricted cash		14,360		14,360		14,360		-		-
Long-term investments and accrued interest		27,951		33,161		-		-		33,161
	$	170,514	$	175,724	$	138,250	$	-	$	37,474

Liabilities
Term loans	$	1,037,077	$	1,083,832	$	-	$	-	$	1,083,832
Ex-Im Bank guaranteed notes		616,892		632,977		-		-		632,977
Convertible Notes		177,398		228,429		228,429		-		-
Amazon Warrant		95,775		95,775		-		95,775		-
EETC		20,044		22,935		-		-		22,935
	$	1,947,186	$	2,063,948	$	228,429	$	95,775	$	1,739,744

The following table presents the carrying value, gross unrealized gain (loss) and fair value of our long-term investments and accrued interest by contractual maturity as of:

	March 31, 2017						December 31, 2016
	Carrying Value		Gross Unrealized Gain (Loss)		Fair Value		Carrying Value		Gross Unrealized Gain (Loss)		Fair Value

Debt securities
Due after one but within five years	$	26,699	$	4,590	$	31,289	$	27,951	$	5,210	$	33,161
Total	$	26,699	$	4,590	$	31,289	$	27,951	$	5,210	$	33,161

12. Segment Reporting

Our business is organized into three operating segments based on our service offerings: ACMI, Charter and Dry Leasing. All segments are directly or indirectly engaged in the business of air transportation services but have different commercial and economic characteristics. Each operating segment is separately reviewed by our chief operating decision maker to assess operating results and make resource allocation decisions. We do not aggregate our operating segments and, therefore, our operating segments are our reportable segments.

We use an economic performance metric (“Direct Contribution”) that shows the profitability of each segment after allocation of direct operating and ownership costs. Direct Contribution represents Income from continuing operations before income taxes excluding the following: Special charges, Transaction-related expenses, nonrecurring items, Losses (gains) on the disposal of aircraft, Losses on early extinguishment of debt, Unrealized losses (gains) on financial instruments, Gains on investments and Unallocated income and expenses, net. Direct operating and ownership costs include crew costs, maintenance, fuel, ground operations, sales costs, aircraft rent, interest expense on the portion of debt used for financing aircraft, interest income on debt securities and aircraft depreciation. Unallocated income and expenses, net include corporate overhead, nonaircraft depreciation, noncash expenses and income, interest expense on the portion of debt used for general corporate purposes, interest income on nondebt securities, capitalized interest, foreign exchange gains and losses, other revenue and other non-operating costs.

The following table sets forth Operating Revenue and Direct Contribution for our reportable segments reconciled to Operating Income and Income from continuing operations before income ta xes:

	For the Three Months Ended
	March 31, 2017			March 31, 2016
Operating Revenue:
ACMI	$	200,694		$	182,740
Charter		243,898			202,303
Dry Leasing		26,757			28,192
Customer incentive asset amortization		(445	)		-
Other		4,490			5,380
Total Operating Revenue	$	475,394		$	418,615

Direct Contribution:
ACMI	$	35,963		$	24,739
Charter		17,186			20,776
Dry Leasing		9,723			10,408
Total Direct Contribution for Reportable Segments		62,872			55,923

Unallocated income and expenses, net		(56,210	)		(47,543	)
Loss on early extinguishment of debt		-			(132	)
Unrealized loss on financial instruments		(5,213	)		-
Special charge		-			(6,631	)
Transaction-related expenses		(915	)		(793	)
Gain on disposal of aircraft		54			-
Income from continuing operations before income taxes		588			824

Add back (subtract):
Interest income		(1,256	)		(1,604	)
Interest expense		21,524			21,302
Capitalized interest		(1,780	)		(357	)
Loss on early extinguishment of debt		-			132
Unrealized loss on financial instruments		5,213			-
Other income		(253	)		(240	)
Operating Income	$	24,036		$	20,057

Given the nature of our business and international flying, geographic information for revenue, long-lived assets and total assets is not presented because it is impracticable to do so.

We are exposed to a concentration of revenue from the U.S. Military Air Mobility Command (the “AMC”), Polar and DHL (see Note 3 for further discussion regarding Polar). No other customer accounted for more than 10.0% of our Total Operating Revenue. Revenue from the AMC was $131.9 million for the three months ended March 31, 2017 and $111.0 million for the three months ended March 31, 2016. Accounts receivable from the AMC were $24.2 million and $9.0 million as of March 31, 2017 and December 31, 2016, respectively. Revenue from DHL was $54.9 million for the three months ended March 31, 2017 and $23.6 million for the three months ended March 31, 2016. Accounts receivable from DHL were $10.6 million and $29.1 million as of March 31, 2017 and December 31, 2016, respectively. We have not experienced any credit issues with any of these customers.

13. Labor and Legal Proceedings

Labor

Pilots of Atlas and Southern Air, and flight dispatchers of Atlas and Polar are represented by the International Brotherhood of Teamsters (the “IBT”). We have a five-year collective bargaining agreement (“CBA”) with our Atlas pilots, which became amendable in September 2016 and a four-year CBA with the Southern Air pilots, which became amendable in November 2016. We also have a five-year CBA with our Atlas and Polar dispatchers, which was extended in April 2017 for an additional four years, making the CBA amendable in November 2021.

After we completed the acquisition of Southern Air in April 2016, we informed the IBT of our intention to pursue (and we have been pursuing) a complete operational merger of Atlas and Southern Air. Pursuant to the merger provisions in both the Atlas and Southern Air CBAs, joint negotiations for a single CBA for Atlas and Southern Air should commence promptly. Further to this

process, once a seniority list is presented to us by the unions, it triggers an agreed-upon time frame to negotiate a new joint CBA with any unresolved issues submitted to binding arbitration. After the merger process began, the IBT filed an application for mediation with the National Mediation Board (“NMB”) on behalf of the Atlas pilots, and subsequently the IBT filed a similar application on behalf of Southern Air pil ots. We have opposed both mediation applications as they are not in accordance with the merger provisions in the parties’ existing CBAs. The Atlas and Southern Air CBAs have a defined and streamlined process for negotiating a joint CBA when a merger occu rs, as in the case with the Atlas and Southern Air merger. The NMB conducted a pre-mediation investigation on the Atlas application in June 2016, which is currently pending (along with Southern Air’s application). Due to a lack of meaningful progress in such discussions, in February 2017, we filed a lawsuit against the IBT to compel arbitration on the issue of whether the merger provisions in Atlas and Southern Air's CBAs apply to the bargaining process. While this lawsuit is pending in the Southern Dist rict Court of New York, the Company and the IBT continue to have ongoing discussions about the bargaining process.

We are subject to risks of work interruption or stoppage as permitted by the Railway Labor Act of 1926 (the “Railway Labor Act”) and may incur additional administrative expenses associated with union representation of our employees.

Matters Related to Alleged Pricing Practices

The Company and Polar Air Cargo, LLC (“Old Polar”), a consolidated subsidiary, were named defendants, along with a number of other cargo carriers, in several class actions in the U.S. arising from allegations about the pricing practices of Old Polar and a number of air cargo carriers. These actions were all centralized in the U.S. District Court for the Eastern District of New York. Polar was later joined as an additional defendant. The consolidated complaint alleged, among other things, that the defendants, including the Company and Old Polar, manipulated the market price for air cargo services sold domestically and abroad through the use of surcharges, in violation of U.S., state, and European Union antitrust laws. The suit sought treble damages and attorneys’ fees.

On January 7, 2016, the Company, Old Polar, and Polar entered into a settlement agreement to settle all claims by participating class members against the Company, Old Polar and Polar. The Company, Polar, and Old Polar deny any wrongdoing, and there is no admission of any wrongdoing in the settlement agreement. Pursuant to the settlement agreement, the Company, Old Polar and Polar have agreed to make installment payments over three years to settle the plaintiffs’ claims, with payments of $35.0 million paid in January 2016 and 2017, and $30.0 million due on or before January 15, 2018. The U.S. District Court for the Eastern District of New York issued an order granting preliminary approval of the settlement on January 12, 2016. On October 6, 2016, the final judgment was issued and the settlement was approved.

In the United Kingdom, several groups of named claimants have brought suit against British Airways in connection with the same alleged pricing practices at issue in the proceedings described above and are seeking damages allegedly arising from that conduct. British Airways has filed claims in the lawsuit against Old Polar and a number of air cargo carriers for contribution should British Airways be found liable to claimants. Old Polar’s formal statement of defense was filed on March 2, 2015. On October 14, 2015, the U.K. Court of Appeal released decisions favorable to the defendant and contributory defendants on two matters under appeal. Permission was sought to appeal the U.K. Court of Appeal's decisions to the U.K. Supreme Court. Permission was denied. In December 2015, certain claimants settled with British Airways removing a significant portion of the claim against British Airways and therefore reducing the potential contribution required by the other airlines, including Old Polar. On December 16, 2015, the European General Court released decisions annulling decisions that the European Commission made against the majority of the air cargo carriers. The European Commission did not appeal the General Court decision but has, in early 2017, reissued a revised decision to which Old Polar is, again, not an addressee. On April 13, 2017, Old Polar and claimants represented by Hausfeld & Co. LLP (the “Hausfeld Claimants”) entered into a bilateral settlement agreement in relation to the English proceedings (the “Settlement Agreement”). The Settlement Agreement contains a mechanism by which the Hausfeld Claimants will release Old Polar and remove from the English proceedings all claims for damages alleged by the Hausfeld Claimants to be attributable to air cargo purchases from Old Polar (and each of Old Polar’s parents, subsidiaries, affiliates, predecessors, successors, agents and assignees). The amount of the settlement, which is tax deductible and was previously accrued for, does not have a material adverse impact on the Company’s financial condition, results of operations or cash flows.

In the Netherlands, Stichting Cartel Compensation, successor in interest to claims of various shippers, has filed suit in the district court in Amsterdam against British Airways, KLM, Martinair, Air France, Lufthansa and Singapore Airlines seeking recovery for damages purportedly arising from the same pricing practices at issue in the proceedings described above. In response, British Airways, KLM, Martinair, Air France and Lufthansa filed third-party indemnification lawsuits against Old Polar and Polar seeking indemnification in the event the defendants are found to be liable in the main proceedings. Old Polar and Polar entered their initial court appearances on September 30, 2015. Various procedural issues are undergoing court review. Like the U.K. proceedings, the Netherlands proceedings are likely to be affected by the European Commission’s response to the European General Court decisions of December 16, 2015. We are unable to reasonably predict the outcome of the litigation. If the Company, Old Polar or Polar were to incur an unfavorable outcome in connection with this proceeding, such outcome may have a material adverse impact on our business, financial condition, results of operations or cash flows. We are unable to reasonably estimate a range of possible loss for this matter at this time.

Brazilian Customs Claim

Old Polar was cited for two alleged customs violations in Sao Paulo, Brazil, relating to shipments of goods dating back to 1999 and 2000. Each claim asserts that goods listed on the flight manifest of two separate Old Polar scheduled service flights were not on board the aircraft upon arrival and therefore were improperly brought into Brazil. The two claims, which also seek unpaid customs duties, taxes and penalties from the date of the alleged infraction, are approximately $9.7 million in aggregate based on March 31, 2017 exchange rates.

In both cases, we believe that the amounts claimed are substantially overstated due to a calculation error when considering the type and amount of goods allegedly missing, among other things. Furthermore, we may seek appropriate indemnity from the shipper in each claim as may be feasible. In the pending claim for one of the cases, we have received an administrative decision dismissing the claim in its entirety, which remains subject to a mandatory appeal by the Brazil customs authorities. As required to defend such claims, we have made deposits pending resolution of these matters. The balances were $5.2 million as of March 31, 2017 and $5.0 million as of December 31, 2016, and are included in Deposits and other assets.

We are currently defending these and other Brazilian customs claims and the ultimate disposition of these claims, either individually or in the aggregate, is not expected to materially affect our financial condition, results of operations or cash flows.

Accruals

As of March 31, 2017, the Company had accruals of $36.2 million related to the U.S. class action settlement that was recognized in 2015 and for pending litigation outside of the U.S that was recognized in 2016.

Other

We have certain other contingencies incident to the ordinary course of business. Management believes that the ultimate disposition of such other contingencies is not expected to materially affect our financial condition, results of operations or cash flows.

14. Earnings Per Share

Basic earnings per share (“EPS”) represents income (loss) divided by the weighted average number of common shares outstanding during the measurement period. Diluted EPS represents income (loss) divided by the weighted average number of common shares outstanding during the measurement period while also giving effect to all potentially dilutive common shares that were outstanding during the period using the treasury stock method. Anti-dilutive shares related to warrants and stock options that were out of the money and excluded for the three months ended March 31, 2017 and 2016 were 3.0 million.

The calculations of basic and diluted EPS were as follows:

	For the Three Months Ended
Numerator:	March 31, 2017			March 31, 2016
Income from continuing operations, net of taxes	$	35		$	471

Denominator:
Basic EPS weighted average shares outstanding		25,162			24,711
Effect of dilutive stock options and restricted stock		582			135
Diluted EPS weighted average shares outstanding		25,744			24,846

Earnings per share from continuing operations:
Basic	$	0.00		$	0.02
Diluted	$	0.00		$	0.02
Loss per share from discontinued operations:
Basic	$	(0.03	)	$	-
Diluted	$	(0.03	)	$	-
Earnings (loss) per share:
Basic	$	(0.03	)	$	0.02
Diluted	$	(0.03	)	$	0.02

The calculation of EPS does not include restricted share units and warrants in which performance or market conditions were not satisfied of 7.6 million for the three months ended March 31, 2017 and 0.5 million for the three months ended March 31, 2016.

15. Accumulated Other Comprehensive Income (Loss)

The following table summarizes the components of Accumulated other comprehensive income (loss):

	Interest Rate			Foreign Currency
	Derivatives			Translation		Total
Balance as of December 31, 2015	$	(6,072	)	$	9	$	(6,063	)
Reclassification to interest expense		454			-		454
Tax effect		(176	)		-		(176	)
Balance as of March 31, 2016	$	(5,794	)	$	9	$	(5,785	)

Balance as of December 31, 2016	$	(5,002	)	$	9	$	(4,993	)
Reclassification to interest expense		418			-		418
Tax effect		(162	)		-		(162	)
Balance as of March 31, 2017	$	(4,746	)	$	9	$	(4,737	)

Interest Rate Derivatives

As of March 31, 2017, there was $7.7 million of unamortized net realized loss before taxes remaining in Accumulated other comprehensive income (loss) related to terminated forward-starting interest rate swaps, which had been designated as cash flow hedges to effectively fix the interest rates on two 747-8F financings in 2011 and three 777-200LRF financings in 2014. The net loss is amortized and reclassified into Interest expense over the remaining life of the related debt. Net realized losses reclassified into earnings were $0.4 million and $0.5 million for the three months ended March 31, 2017 and 2016, respectively. Net realized losses expected to be reclassified into earnings within the next 12 months are $1.6 million as of March 31, 2017.

16. Subsequent Events

In April 2017 , we borrowed $20.1 million related to the conversion of a 767-300 freighter aircraft under a ninety-one month term loan (the “First 2017 Term Loan”). The First 2017 Term Loan, which is secured by a mortgage against the aircraft, contains customary covenants and events of default and accrues interest at a fixed rate of 3.02%, with principal and interest payable monthly.

In April 2017, we borrowed $21.3 million related to the conversion of a 767-300 freighter aircraft under a ninety-one month term loan (the “Second 2017 Term Loan”). The Second 2017 Term Loan, which is secured by a mortgage against the aircraft, contains customary covenants and events of default and accrues interest at a fixed rate of 3.16%, with principal and interest payable monthly.

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis should be read in conjunction with our Financial Statements appearing in this report and our audited consolidated financial statements and related notes included in our 2016 Annual Report on Form 10-K.

Background

Certain Terms - Glossary

The following represents terms and statistics specific to our business and industry. They are used by management to evaluate and measure operations, results, productivity and efficiency.

Block Hour		The time interval between when an aircraft departs the terminal until it arrives at the destination terminal.

C Check		High-level or “heavy” airframe maintenance checks, which are more intensive in scope than Line Maintenance and are generally performed between 18 and 24 months depending on aircraft type.

D Check		High-level or “heavy” airframe maintenance checks, which are the most extensive in scope and are generally performed every six and eight years depending on aircraft type.

Heavy Maintenance		Scheduled maintenance activities, which are the most extensive in scope and are primarily based on time or usage intervals, include, but are not limited to, C Checks, D Checks and engine overhauls. In addition, unscheduled engine repairs involving the removal of the engine from the aircraft are considered to be Heavy Maintenance.

Line Maintenance		Maintenance events occurring during normal day-to-day operations.

Non-heavy Maintenance		Discrete maintenance activities for the overhaul and repair of specific aircraft components, including landing gear, auxiliary power units and engine thrust reversers.

Yield		The average amount a customer pays to fly one tonne of cargo one mile.

Business Overview

We are a leading global provider of outsourced aircraft and aviation operating services. We operate the world’s largest fleet of 747 freighters and provide customers a broad array of 747, 777, 767, 757 and 737 aircraft for domestic, regional and international cargo and passenger applications. We provide unique value to our customers by giving them access to highly reliable new production freighters that deliver the lowest unit cost in the marketplace combined with outsourced aircraft operating services that we believe lead the industry in terms of quality and global scale. Our customers include express delivery providers, e-commerce retailers, airlines, freight forwarders, the U.S. military and charter brokers. We provide global services with operations in Africa, Asia, Australia, Europe, the Middle East, North America and South America.

Our primary service offerings include the following:

•

ACMI, whereby we provide outsourced cargo and passenger aircraft operating solutions, including the provision of an aircraft, crew, maintenance and insurance, while customers assume fuel, demand and price risk. In addition, customers are responsible for landing, navigation and most other operational fees and costs;

•

CMI, which is part of our ACMI business segment, whereby we provide outsourced cargo and passenger aircraft operating solutions, including the provision of crew, Line Maintenance and insurance, but not the aircraft. Customers assume fuel, demand and price risk, and are responsible for providing the aircraft (which they may lease from us) and for Heavy and Non-Heavy Maintenance, landing, navigation and most other operational fees and costs;

•

Charter, whereby we provide cargo and passenger aircraft charter services to customers, including the AMC, brokers, freight forwarders, direct shippers, airlines, sports teams and fans, and private charter customers. The customer pays a fixed charter fee that includes fuel, insurance, landing fees, navigation fees and most other operational fees and costs; and

•

Dry Leasing, whereby we provide cargo and passenger aircraft and engine leasing solutions. The customer operates, and is responsible for insuring and maintaining, the flight equipment.

We look to achieve our growth plans and enhance shareholder value by:

•

Delivering superior service quality to our valued customers;

•

Focusing on securing attractive long-term customer contracts;

•

Aggressively managing our fleet with a focus on leading-edge aircraft;

•

Driving significant and ongoing productivity improvements;

•

Selectively pursuing and evaluating future acquisitions and alliances; while

•

Appropriately managing capital allocation.

See “Business Overview” and “Business Strategy” in our 2016 Annual Report on Form 10-K for additional information.

Business Developments

Our ACMI results for the first quarter of 2017, compared with 2016, were impacted by the following events:

•

In February 2016, we began CMI flying for DHL a 767-300 freighter aircraft, Dry Leased from Titan, in DHL’s North American network, increasing the number of freighter aircraft in CMI service for DHL to thirteen.

•

In April 2016, we acquired Southern Air, which currently operates five 777-200LRF and five 737-400F aircraft under CMI agreements for DHL.

•

In August 2016 and February 2017, we began C MI flying for Amazon the first two of 20 Boeing 767-300 freighter aircraft Dry Leased from Titan . The third and fourth aircraft were placed in service in May 2017 with the remainder expected to be placed in service by the end of 2018.

•

During the first quarter of 2017, we began flying a 747-400 freighter for Nippon Cargo Airlines on its transpacific routes.

•

During the first quarter of 2017, we began flying a 747-400 freighter for Asiana Cargo on its transpacific routes.

During the second quarter of 2017, we entered into an ACMI agreement with Cathay Pacific Cargo for two 747-8F aircraft to supplement capacity on its existing network. We expect to begin flying in May 2017.

Charter results for the first quarter of 2017 were impacted by increased cargo and passenger demand from the AMC, and the temporary redeployment of 747-8F aircraft from the ACMI segment, partially offset by a decrease in Yields, primarily related to lower cargo and passenger rates from the AMC.

In February 2016, we began Dry Leasing one 767-300 converted freighter aircraft to DHL on a long-term basis. In March 2016, we also Dry Leased a 737-800 passenger aircraft on a long-term basis to a customer following its scheduled return. As described above, in August 2016 and February 2017, we began Dry Leasing two 767-300 converted freighter aircraft to Amazon on a long-term basis.

Results of Operations

The following discussion should be read in conjunction with our Financial Statements and other financial information appearing and referred to elsewhere in this report.

Three Months Ended March 31, 2017 and 2016

Operating Statistics

The following tables compare our Segment Operating Fleet (average aircraft equivalents during the period) and total Block Hours operated for the three months ended March 31:

Segment Operating Fleet	2017			2016			Inc/(Dec)
ACMI*
747-8F Cargo		7.0			8.8			(1.8	)
747-400 Cargo		12.8			12.6			0.2
747-400 Dreamlifter		3.0			2.8			0.2
777-200 Cargo		5.0			-			5.0
767-300 Cargo		5.8			3.4			2.4
767-200 Cargo		9.0			9.0			-
737-400 Cargo		5.0			-			5.0
747-400 Passenger		1.0			1.0			-
767-200 Passenger		1.0			1.0			-
Total		49.6			38.6			11.0

Charter
747-8F Cargo		2.9			1.1			1.8
747-400 Cargo		11.0			10.0			1.0
747-400 Passenger		2.0			2.0			-
767-300 Passenger		4.9			3.0			1.9
Total		20.8			16.1			4.7

Dry Leasing
777-200 Cargo		6.0			6.0			-
767-300 Cargo		3.6			1.4			2.2
757-200 Cargo		1.0			1.0			-
737-300 Cargo		1.0			1.0			-
737-800 Passenger		1.0			1.0			-
Total		12.6			10.4			2.2

Less: Aircraft Dry Leased to CMI customers		(3.6	)		(1.4	)		2.2
Total Operating Average Aircraft Equivalents		79.4			63.7			15.7

ACMI average fleet excludes spare aircraft provided by CMI customers.

Block Hours		2017				2016				Inc/(Dec)				% Change
Total Block Hours**			55,116				42,151				12,965				30.8	%

Includes ACMI, Charter and other Block Hours.

Operating Revenue

The following table compares our Operating Revenue for the three months ended March 31 (in thousands):

	2017			2016		Inc/(Dec)			% Change
Operating Revenue
ACMI	$	200,694		$	182,740	$	17,954			9.8	%
Charter		243,898			202,303		41,595			20.6	%
Dry Leasing		26,757			28,192		(1,435	)		(5.1	)%
Customer incentive asset amortization		(445	)		-		445		NM
Other		4,490			5,380		(890	)		(16.5	)%
Total Operating Revenue	$	475,394		$	418,615	$	56,779			13.6	%

NM represents year-over-year changes that are not meaningful.

ACMI

	2017		2016		Inc/(Dec)			% Change
ACMI Block Hours		38,916		29,529		9,387			31.8	%
ACMI Revenue Per Block Hour	$	5,157	$	6,188	$	(1,031	)		(16.7	)%

ACMI revenue increased $18.0 million, or 9.8%, primarily due to increased flying, partially offset by reduced Revenue per Block Hour. The increase in Block Hours reflects the impact from the Southern Air acquisition and increased 767 CMI flying, partially offset by the temporary redeployment of 747-8F aircraft to the Charter segment. The decrease in Revenue per Block Hour primarily reflects 777-200 and 737-400 CMI flying from the Southern Air acquisition, increased 767 CMI flying and the temporary redeployment of 747-8F aircraft to Charter in 2017.

Charter

	2017		2016		Inc/(Dec)			% Change
Charter Block Hours:
Cargo		10,939		8,230		2,709			32.9	%
Passenger		4,845		3,935		910			23.1	%
Total		15,784		12,165		3,619			29.7	%

Charter Revenue Per Block Hour:
Cargo	$	15,289	$	16,042	$	(753	)		(4.7	%)
Passenger	$	15,820	$	17,859	$	(2,039	)		(11.4	%)
Charter	$	15,452	$	16,630	$	(1,178	)		(7.1	%)

Charter revenue increased $41.6 million, or 20.6% primarily due to an increase in Block Hours, partially offset by a decrease in Revenue per Block Hour. The increase in Charter Block Hours was primarily driven by an increase in cargo and passenger demand from the AMC and the temporary redeployment of 747-8F aircraft from the ACMI segment. The decrease in Revenue per Block Hour was driven by a reduction in Yields, primarily related to lower cargo and passenger rates from the AMC.

Dry Leasing

Dry Leasing revenue decreased $1.4 million, or 5.1%, primarily due to lower revenue from maintenance payments received related to the scheduled return of an aircraft during the first quarter of 2016. There were no aircraft returned during the first quarter of 2017. Revenue from maintenance payments is based on the maintenance condition of the aircraft at the end of the lease. Partially offsetting this decrease was revenue from the placement of two 767-300 converted freighter aircraft with Amazon in August 2016 and February 2017, and one 767-300 converted freighter aircraft with DHL in February 2016.

Operating Expenses

The following table compares our Operating Expenses for the three months ended March 31 (in thousands):

	2017			2016		Inc/(Dec)			% Change
Operating Expenses
Salaries, wages and benefits	$	104,087		$	93,845	$	10,242			10.9	%
Aircraft fuel		82,432			63,220		19,212			30.4	%
Maintenance, materials and repairs		72,816			57,024		15,792			27.7	%
Depreciation and amortization		37,894			35,005		2,889			8.3	%
Aircraft rent		36,073			37,037		(964	)		(2.6	)%
Travel		32,359			30,323		2,036			6.7	%
Passenger and ground handling services		25,123			20,879		4,244			20.3	%
Navigation fees, landing fees and other rent		18,535			21,974		(3,439	)		(15.7	)%
Gain on disposal of aircraft		(54	)		-		54		NM
Special charge		-			6,631		(6,631	)	NM
Transaction-related expenses		915			793		122			15.4	%
Other		41,178			31,827		9,351			29.4	%
Total Operating Expenses	$	451,358		$	398,558

Salaries, wages and benefits increased $10.2 million, or 10.9%, primarily driven by the impact of the Southern Air acquisition and increased flying, partially offset by lower costs related to crew training.

Aircraft fuel increased $19.2 million, or 30.4%, primarily due to increased fuel consumption reflecting the increase in Charter Block Hours operated and an increase in the average fuel cost per gallon. We do not incur fuel expense in our ACMI or Dry Leasing businesses as the cost of fuel is borne by the customer. Average fuel cost per gallon and fuel consumption for the three months ended March 31 were:

	2017		2016		Inc/(Dec)		% Change
Average fuel cost per gallon	$	1.88	$	1.81	$	0.07		3.9	%
Fuel gallons consumed (000s)		43,927		34,945		8,982		25.7	%

Maintenance, materials and repairs increased by $15.8 million, or 27.7%, primarily reflecting increases of $12.5 million for 747-400 aircraft, $3.3 million for 767 aircraft and $2.9 million for 777-200 aircraft, partially offset by a decrease of $3.5 million for 747-8F aircraft. Heavy Maintenance expense on 747-400 aircraft increased $11.9 million primarily due to an increase in the number of D Checks and engine overhauls, partially offset by a decrease in the number of C Checks. Heavy Maintenance expense on 747-8F aircraft decreased $4.8 million primarily due to a decrease in unscheduled engine repairs, partially offset by an increase in the number of C Checks. Line Maintenance increased by $3.4 million on 747-400 aircraft, $2.5 million on 767 aircraft and $1.4 million on 747-8F aircraft due to increased flying and additional repairs performed. Line maintenance also increased $2.0 million on 777-200 aircraft related to the Southern Air acquisition. Non-heavy Maintenance on 747-400 aircraft decreased $2.8 million as a result of fewer events. Heavy airframe maintenance checks and engine overhauls impacting Maintenance, materials and repairs for the three months ended March 31 were:

Heavy Maintenance Events	2017		2016		Inc / (Dec)
747-8F C Checks		2		-		2
747-400 C Checks		2		4		(2	)
767 C Checks		1		1		-
747-400 D Checks		4		1		3
CF6-80 engine overhauls		3		2		1

Depreciation and amortization increased $2.9 million, or 8.3%, primarily due to additional aircraft operating in 2017.

Travel increased $2.0 million, or 6.7%, primarily due to the impact of the Southern Air acquisition and increased flying, partially offset by lower rates for crewmember travel.

Passenger and ground handling services increased $4.2 million, or 20.3%, primarily due to increased Charter flying.

Navigation fees, landing fees and other rent decreased $3.4 million, or 15.7%, primarily due to a reduction in purchased capacity from the subcontracting of certai n Charter flights.

Special charge in 2016 primarily represents a $6.5 million loss on engines held for sale (see Note 5 to our Financial Statements). We may sell additional flight equipment, which could result in additional charges in future periods.

Transaction-related expenses relate to the Southern Air acquisition, which primarily include professional fees in 2017 and 2016, and integration costs in 2017 (see Note 4 to our Financial Statements).

Other increased $9.4 million, or 29.4%, primarily due to increased commission expense on higher revenue from the AMC, the impact of the Southern Air acquisition and other fleet growth initiatives.

Non-operating Expenses (Income)

The following table compares our Non-operating Expenses (Income) for the three months ended March 31 (in thousands):

	2017			2016			Inc/(Dec)			% Change
Non-operating Expenses (Income)
Interest income	$	(1,256	)	$	(1,604	)	$	(348	)		(21.7	)%
Interest expense		21,524			21,302			222			1.0	%
Capitalized interest		(1,780	)		(357	)		1,423		NM
Loss on early extinguishment of debt		-			132			(132	)	NM
Unrealized loss on financial instruments		5,213			-			5,213		NM
Other income		(253	)		(240	)		13			5.4	%

Capitalized interest increased $1.4 million, primarily due to an increase in the number of 767-300 aircraft undergoing passenger-to-freighter conversion.

Unrealized loss on financial instruments represents the change in fair value of the Amazon Warrant (see Note 6 to our Financial Statements).

Income taxes . Our effective income tax rates were 94.0% and 42.8% for the three months ended March 31, 2017 and 2016, respectively. The effective income tax rate for the three months ended March 31, 2017 differed from the U.S. statutory rate primarily due to nondeductible changes in the value of the Amazon Warrant liability (see Note 6 to our Financial Statements), partially offset by the impact of the 2017 adoption of the amended accounting guidance for share-based compensation which requires that excess tax benefits associated with share-based compensation be recognized within income tax expense in our consolidated statement of operations. The effective income tax rate for the three months ended March 31, 2016 differed from the U.S. federal statutory rate primarily due to nondeductible acquisition-related expenses incurred in connection with the acquisition of Southern Air. The effective rates for both periods were impacted by our assertion to indefinitely reinvest the net earnings of foreign subsidiaries outside the U.S.

Segments

The following table compares the Direct Contribution for our reportable segments for the three months ended March 31 (see Note 12 to our Financial Statements for the reconciliation to Operating income) (in thousands):

	2017		2016		Inc/(Dec)			% Change
Direct Contribution:
ACMI	$	35,963	$	24,739	$	11,224			45.4	%
Charter		17,186		20,776		(3,590	)		(17.3	)%
Dry Leasing		9,723		10,408		(685	)		(6.6	)%
Total Direct Contribution	$	62,872	$	55,923	$	6,949			12.4	%

Unallocated income and expenses, net	$	56,210	$	47,543	$	8,667			18.2	%

ACMI Segment

ACMI Direct Contribution increased $11.2 million, or 45.4%, primarily due to the Southern Air acquisition and lower costs related to crew training. Partially offsetting these items were higher Heavy Maintenance costs and the temporary redeployment of 747-8F aircraft to the Charter segment.

Charter Segment

Charter Direct Contribution decreased $3.6 million or 17.3%, primarily due to higher Heavy Maintenance costs and lower Yields. Partially offsetting these items were an increase in passenger and cargo demand from the AMC, lower costs related to crew training and the temporary redeployment of 747-8F aircraft from the ACMI segment.

Dry Leasing Segment

Dry Leasing Direct Contribution decreased $0.7 million, or 6.6%, primarily due to maintenance payments received related to the scheduled return of an aircraft during the first quarter of 2016. There were no aircraft returned during the first quarter of 2017. Partially offsetting this decrease was contribution from the placement of two 767-300 converted freighter aircraft with Amazon in August 2016 and February 2017, and one 767-300 converted freighter aircraft with DHL in February 2016.

Unallocated income and expenses, net

Unallocated income and expenses, net increased $8.7 million, or 18.2%, primarily due to the impact of the Southern Air acquisition and fleet growth initiatives.

Reconciliation of GAAP to non-GAAP Financial Measures

To supplement our Financial Statements presented in accordance with GAAP, we present certain non-GAAP financial measures to assist in the evaluation of our business performance. These non-GAAP financial measures include Adjusted Income from continuing operations, net of taxes and Adjusted Diluted EPS from continuing operations, net of taxes, which exclude certain noncash income and expenses, and items impacting year-over-year comparisons of our results. These non-GAAP financial measures may not be comparable to similarly titled measures used by other companies and should not be considered in isolation or as a substitute for Income from continuing operations, net of taxes and Diluted EPS from continuing operations, which are the most directly comparable measures of performance prepared in accordance with GAAP.

We use these non-GAAP financial measures in assessing the performance of our ongoing operations and in planning and forecasting future periods. In addition, management’s incentive compensation will be determined, in part, by using Adjusted Income from continuing operations, net of taxes. We believe that these adjusted measures, when considered together with the corresponding GAAP financial measures and the reconciliations to those measures, provide meaningful supplemental information to assist investors and analysts in understanding our business results and assessing our prospects for future performance.

The following is a reconciliation of Income (loss) from continuing operations, net of taxes and Diluted EPS from continuin g operations, net of taxes to the corresponding non-GAAP financial measures (in thousands, except per share data):

	For the Three Months Ended
	March 31, 2017			March 31, 2016			Percent Change

Income from continuing operations, net of taxes	$	35		$	471			(92.6	)%
Impact from:
Gain on disposal of aircraft		(54	)		-
Special charge		-			6,631
Transaction-related expenses		915			793
Accrual for legal matters and professional fees		74			290
Noncash expenses and income, net (a)		2,412			1,844
Charges associated with refinancing debt		-			132
Unrealized loss on financial instruments (b)		5,213			-
Income tax effect of reconciling items		(320	)		(2,418	)
Adjusted income from continuing operations, net of taxes	$	8,275		$	7,743			6.9	%

Weighted average diluted shares outstanding		25,744			24,846
Add: dilutive warrants (c)		1,111			-
Adjusted weighted average diluted shares outstanding		26,855			24,846

Adjusted Diluted EPS from continuing operations, net of taxes	$	0.31		$	0.31		NM

(a)

Noncash expenses and income, net in 2017 are primarily related to amortization of debt discount on the Convertible Notes (see Note 8 to our Financial Statements) and amortization of customer incentive related to the Amazon Warrant (see Note 6 to our Financial Statements). Noncash expenses and income, net in 2016 are primarily related to amortization of debt discount on the Convertible Notes (see Note 8 to our Financial Statements).

(b)

Unrealized loss on financial instruments related to the Amazon Warrant (see Note 6 to our Financial Statements).

(c)

Dilutive warrants represent potentially dilutive common shares related to the Amazon Warrant (see Note 6 to our Financial Statements). These shares were excluded from Diluted EPS from continuing operations, net of taxes prepared in accordance with GAAP as they would have been anti-dilutive.

Liquidity and Capital Resources

The most significant liquidity events during the first quarter of 2017 were as follows:

Debt Transactions

During the first quarter of 2017, we drew $150.0 million under the Revolver for general corporate purposes, including the acquisition and conversion of 767 aircraft prior to obtaining permanent financing for the converted aircraft.

Operating Activities. Net cash provided by operating activities for 2017 was $18.7 million, compared with $19.4 million for 2016.

Investing Activities. Net cash used for investing activities was $139.8 million for the first quarter of 2017, consisting primarily of $118.9 million of payments for flight equipment and modifications, and $21.7 million of core capital expenditures, excluding flight equipment. Payments for flight equipment and modifications during the first quarter of 2017 were primarily related to the purchase of 767-300 passenger aircraft and related freighter conversion costs and spare engines. All capital expenditures for 2017 were funded through working capital and the Revolver as discussed above. Net cash used for investing activities was $90.0 million for the first quarter of 2016, consisting primarily of $84.2 million of purchase deposits and payments for flight equipment, and $10.7 million of core capital expenditures, excluding flight equipment. Partially offsetting these investing activities were $5.0 million of proceeds from investments.

Financing Activities. Net cash provided by financing activities was $101.8 million for the first quarter of 2017, which primarily reflected $150.0 million of proceeds from revolving credit facility and $14.8 million of customer maintenance reserves and deposits received, partially offset by $47.1 million of payments on debt obligations, $9.4 million related to the purchase of treasury stock and $6.4 million of customer maintenance reserves paid. Net cash used for finan cing activities was $36.5 million for the first quarter of 2016, which primarily reflected $50.7 million of payments on debt obligations and $4.1 million related to the purchase of treasury stock partially offset by $14.8 million of proceeds from debt issu ance and $3.5 million of customer maintenance reserves received.

We consider Cash and cash equivalents, Short-term investments, Restricted cash and Net cash provided by operating activities to be sufficient to meet our debt and lease obligations, to fund core capital expenditures for 2017, and to pay amounts due related to the settlement of the U.S. class action litigation. Core capital expenditures for the remainder of 2017 are expected to range between $35.0 to $45.0 million, which excludes flight equipment and capitalized interest. Our payments remaining for flight equipment purchase and conversion commitments are expected to be approximately $211.8 million, of which approximately $143.1 million is expected to be made during 2017. We expect to finance the acquisition and conversion of this flight equipment with our Revolver prior to obtaining permanent financing for the converted aircraft.

We may access external sources of capital from time to time depending on our cash requirements, assessments of current and anticipated market conditions, and the after-tax cost of capital. To that end, we filed a shelf registration statement with the SEC in May 2015 that enables us to sell a yet to be determined amount of debt and/or equity securities over the subsequent three years, depending on market conditions, our capital needs and other factors. Our access to capital markets can be adversely impacted by prevailing economic conditions and by financial, business and other factors, some of which are beyond our control. Additionally, our borrowing costs are affected by market conditions and may be adversely impacted by a tightening in credit markets.

We do not expect to pay any significant U.S. federal income tax until 2025 or later. Our business operations are subject to income tax in several foreign jurisdictions. We do not expect to pay any significant cash income taxes in foreign jurisdictions for at least several years. We currently do not intend to repatriate cash from certain foreign subsidiaries that is indefinitely reinvested outside the U.S. Any repatriation of cash from these subsidiaries or certain changes in U.S. tax laws could result in additional tax expense.

Contractual Obligations and Debt Agreements

See Notes 8 and 16 to our Financial Statements for a description of our new debt obligations. See our 2016 Annual Report on Form 10-K for a tabular disclosure of our contractual obligations as of December 31, 2016 and a description of our other debt obligations and amendments thereto.

Off-Balance Sheet Arrangements

There were no material changes in our off-balance sheet arrangements during the three months ended March 31, 2017.

Recent Accounting Pronouncements

See Note 2 to our Financial Statements for a discussion of recent accounting pronouncements.

Forward-Looking Statements

This Quarterly Report on Form 10-Q (this “Report”), as well as other reports, releases and written and oral communications issued or made from time to time by or on behalf of AAWW, contain statements that may constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Those statements are based on management’s beliefs, plans, expectations and assumptions, and on information currently available to management. Generally, the words “will,” “may,” “should,” “expect,” “anticipate,” “intend,” “plan,” “continue,” “believe,” “seek,” “project,” “estimate” and similar expressions used in this Report that do not relate to historical facts are intended to identify forward-looking statements.

The forward-looking statements in this Report are not representations or guarantees of future performance and involve certain risks, uncertainties and assumptions. Such risks, uncertainties and assumptions include, but are not limited to, those described in our Annual Report on Form 10-K for the year ended December 31, 2016. Many of such factors are beyond AAWW’s control and are difficult to predict. As a result, AAWW’s future actions, financial position, results of operations and the market price for shares of AAWW’s common stock could differ materially from those expressed in any forward-looking statements. Readers are therefore cautioned not to place undue reliance on forward-looking statements. AAWW does not intend to publicly update any forward-looking statements that may be made from time to time by, or on behalf of, AAWW, whether as a result of new information, future events or otherwise, except as required by law.

ITEM 3. QUANTITATIVE AND QUALITAT IVE DISCLOSURES ABOUT MARKET RISK

There have been no material changes to our market risk during the three months ended March 31, 2017. For additional discussion of our exposure to market risk, refer to Part II, Item 7A “Quantitative and Qualitative Disclosures About Market Risk” included in our 2016 Annual Report on Form 10-K.

ITEM 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

An evaluation was performed under the supervision and with the participation of our management, including our Chief Executive Officer, or CEO, and Chief Financial Officer, or CFO, of the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) and 15d - 15(e) under the Exchange Act) as of March 31, 2017. Based on that evaluation, our CEO and CFO concluded that our disclosure controls and procedures are effective to ensure that information required to be disclosed by us in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms, and is accumulated and communicated to our management, including our CEO and CFO, to allow timely decisions regarding required disclosure.

Changes in Internal Control Over Financial Reporting

There has been no change in our internal control over financial reporting (as defined in Rule 13a-15(f) and 15d-15(f) under the Exchange Act) during the three months ended March 31, 2017 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

PART II — OTHE R INFORMATION

ITEM 1. LEGAL PROCEEDINGS

With respect to the fiscal quarter ended March 31, 2017, the information required in response to this Item is set forth in Note 13 to our Financial Statements and such information is incorporated herein by reference. Such description contains all of the information required with respect hereto.

ITEM 1A. RISK FACTORS

For risk factors that may cause actual results to differ materially from those anticipated, please refer to our 2016 Annual Report on Form 10-K.

ITEM 6. EXHIBITS

Exhibits

See accompanying Exhibit Index included after the signature page of this report for a list of exhibits filed or furnished with this report.

S IGNATURES

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.

		Atlas Air Worldwide Holdings, Inc.

Dated: May 3, 2017		/s/ William J. Flynn
		William J. Flynn
		President and Chief Executive Officer

Dated: May 3, 2017		/s/ Spencer Schwartz
		Spencer Schwartz
		Executive Vice President and Chief Financial Officer

EXHIBIT INDEX

Exhibit Number		Description

10.1		Atlas Air Worldwide Holdings, Inc. 2017 Long Term Cash Incentive Program

10.2		Atlas Air Worldwide Holdings, Inc. Annual Incentive Plan for Senior Executives

10.3		Form of Performance Share Unit Agreement between Atlas Air Worldwide Holdings, Inc. and William J. Flynn

10.4		Form of Restricted Stock Unit Agreement between Atlas Air Worldwide Holdings, Inc. and William J. Flynn

10.5		Form of Performance Share Unit Agreement

10.6		Form of Restricted Stock Unit Agreement between Atlas Air Worldwide Holdings, Inc. and Non-Employee Members of the Board of Directors

31.1		Rule 13a-14(a)/15d-14(a) Certification of the Chief Executive Officer.

31.2		Rule 13a-14(a)/15d-14(a) Certification of the Chief Financial Officer.

32.1		Section 1350 Certifications.

101.INS		XBRL Instance Document. *

101.SCH		XBRL Taxonomy Extension Schema Document. *

101.CAL		XBRL Taxonomy Extension Calculation Linkbase Document. *

101.DEF		XBRL Taxonomy Extension Definition Linkbase Document. *

101.LAB		XBRL Taxonomy Extension Labels Linkbase Document. *

101.PRE		XBRL Taxonomy Extension Presentation Linkbase Document. *

Attached as Exhibit 101 to this report are the following formatted in XBRL (Extensible Business Reporting Language): (i) Consolidated Balance Sheets as of March 31, 2017 and December 31, 2016, (ii) Consolidated Statements of Operations for the three months ended March 31, 2017 and 2016, (iii) Consolidated Statements of Comprehensive Income (Loss) for the three months ended March 31, 2017 and 2016, (iv) Consolidated Statements of Cash Flows for the three months ended March 31, 2017 and 2016, (v) Consolidated Statement of Stockholders’ Equity as of and for the three months ended March 31, 2017 and 2016 and (vi) Notes to the Unaudited Consolidated Financial Statements.

Exhibit 10.1

ATLAS AIR WORLDWIDE HOLDINGS, INC.

2017 LONG TERM CASH INCENTIVE PROGRAM

ATLAS AIR WORLDWIDE HOLDINGS, INC.

2017 LONG TERM CASH INCENTIVE PROGRAM

Section 1. Purpose .

The purpose of the Program is to set forth certain terms and conditions governing cash awards made under Atlas Air Worldwide Holdings, Inc.’s (“AAWW”) 2016 Incentive Plan (the “Plan”). The Program shall be treated for all purposes as a sub-plan or arrangement for the grant of Cash Awards under the Plan and shall be subject to the Plan, which is incorporated herein by reference. Awards under the Program are intended to qualify for the performance-based compensation exception to the limitations on tax deductibility imposed by Section 162(m) of the Code and, together with the applicable terms of the Plan and Program, shall be construed accordingly. The Program shall be effective as of January 1, 2017, and shall be applicable for the 2017-2019 Performance Period. Capitalized terms not defined herein shall have the meanings given in the Plan.

Section 2. Definitions .

2.1. Award shall mean an opportunity to earn benefits under the Program.

2.2. Board shall mean the Board of Directors of AAWW.

2.3. Beneficiary shall mean a Participant’s beneficiary designated pursuant to Section 8.

2.4. Code shall mean the Internal Revenue Code of 1986, as amended from time to time.

2.5. Committee shall mean the Compensation Committee of the Board.

2.6. Company shall mean AAWW or its subsidiaries.

2.7. Eligible Participant shall mean any of the Chief Executive Officer, President, Executive Vice Presidents, Senior Vice Presidents, Vice Presidents and Staff Vice Presidents of the Company, and such other Company officers as may from time to time be designated by the Committee.

2.8. Participant shall mean any Eligible Participant during such Eligible Participant’s period of participation in the Program.

2.9. Performance Period shall mean January 1, 2017 through December 31, 2019.

2.10. Program shall mean this Atlas Air Worldwide Holdings, Inc. 2017 Long Term Cash Incentive Program, as it may be amended from time to time.

Section 3. Administration .

The Program shall be administered by the Committee in accordance with and subject to the provisions of Section 3 of the Plan.

Section 4. Participation .

Each individual who is employed as an Eligible Participant on the first day of the Performance Period shall participate in the Program. An individual who first becomes employed as an Eligible Participant on or prior to September 30, 2017 (March 31, 2017 in the case of an individual whose Award is intended to qualify for the performance-based compensation exception to the limitations on tax deductibility imposed by Section 162(m) of the Code), may participate in the Program in the discretion of the Committee (or, in the case of officers below the level of Senior Vice President, its delegate). An individual employed by the Company, including an Eligible Participant, may be awarded incentive compensation outside the Program in lieu of or in addition to Awards, if any, under the Program.

Section 5. Determination of Awards .

5.1. Target Bonus Award . The target cash bonus payable under an Award for the Performance Period will be the amount established by the Committee (or, in the case of officers below the level of Senior Vice President, its delegate) for each Participant classification (the “Target Bonus Amount”).

5.2. Performance Measures . Payment of an Award is conditioned upon written certification by the Committee of satisfaction of the achievement of certain internal ROIC and EBITDA Growth levels as described below (the “Performance Criteria”) during the period beginning January 1, 2017 and ending December 31, 2019. The actual amount payable pursuant to an Award (the “Payable Amount”) shall be determined in accordance with Annex A hereto (the “Performance Plan Schedule”). In no event shall the Payable Amount exceed, for any Participant, the maximum amount specified in Section 4(c) of the Plan.

(1) “ROIC” for the Company shall be an average of the Company’s actual ROIC for 2017, 2018 and 2019 and shall mean a fraction where the numerator is NOPAT and the denominator is Average Invested Capital, as determined by the Committee. “NOPAT” is defined as adjusted operating income, as included in the Company’s press release, minus Cash Tax Paid. “Cash Tax Paid” is defined as income taxes as reflected on the income statement minus deferred taxes as reflected on the cash flow statement. “Average Invested Capital” is defined as the average of the beginning and ending Invested Capital during the year. “Invested Capital” is defined as capital lease obligations, plus short-and long-term debt, plus total stockholders equity, minus an amount equal to cash, cash equivalents, restricted cash, and short-term investments. Invested Capital shall exclude investment amounts associated with aircraft acquisition until the first time that such aircraft is flown under a customer contract, at which time all amounts accrued with respect to such aircraft shall be considered in the Average Invested Capital calculation from such date. Invested Capital shall be reduced by the amount of any investments held in the Company’s direct or indirect debt securities that remain outstanding and that have not otherwise been defeased.

(2) “EBITDA” for the Company shall mean adjusted income from continuing operations, before interest, income taxes, depreciation expense and amortization expense as included in the Company’s press release . “EBITDA Growth” shall be calculated by averaging the percentage increase or decrease in EBITDA for each of the three years ended December 31 in the Performance Period. EBITDA increase or decrease for each twelve month period shall be calculated by subtracting EBITDA for the twelve months ended December 31 for the prior year from EBITDA for the twelve months ended December 31 for the current year and dividing the resulting difference in EBITDA by the EBITDA for the twelve months ended December 31 for the prior year.

(3) In the calculation of EBITDA Growth and ROIC, amounts objectively demonstrated to be attributable to the following items will not be taken into account: (i) any benefit or detriment resulting from changes in the Company’s financial reporting (including but not limited to changes in accounting principles) or from statutory changes in federal, state or foreign income tax rates; (ii) any aggregate costs in excess of $500,000 for business initiatives not specified in the Company’s operating plans; (iii) any costs related to retention, recruitment, or termination of executive officers; (iv) any costs related to collective bargaining, other labor negotiations, grievances or other disputes including labor unions in excess of the Company’s operating plans; and (v) any costs or the payment of any fines, penalties, deposits or settlement amounts in connection with (A) foreign or domestic antitrust investigations and related lawsuits, (B) Brazilian customs or labor claims or investigations, or (C) environmental, regulatory or compliance matters (including any related compliance or other costs or actions) resulting from changes in applicable law or otherwise. The ROIC ratio will exclude the unconsolidated results of Polar Air Cargo Worldwide, Inc.

Section 6. Payment of Awards under this Program .

6.1. General . A Participant will be entitled to receive payment, if any, under an Award if the Participant’s Employment continues through December 31, 2019, subject to this Section 6 and Section 7. A Participant will receive an Award in the manner and at the times set forth in Sections 6.2, 6.3, 6.4 and Section 7.

6.2. Time of Payment . In connection with the completion of performance, the Committee shall certify, in accordance with Section 162(m) of the Code, whether and at what level the Performance Criteria have been achieved. For the purposes of this Program, the term “Determination Date” means the date in 2020 on which the Committee makes such certification. Any Payable Amount for an Award for the Performance Period shall be paid by the Company within two weeks following the Determination Date, but in no event later than March 15, 2020.

6.3. Form of Payment . All Payable Amounts for an Award shall be paid in cash.

6.4. Termination of Employment .

(a) General . Except as provided otherwise in this Section 6.4 or Section 7, a Participant whose Employment terminates for any reason prior to the last day of the Performance Period shall forfeit such Award.

(b) Termination by Reason of Death or Disability; Termination by the Company Not For Cause . In the event of the termination of the Participant’s Employment (i) due to death, (ii) by the Company by reason of the Participant’s Disability, or (iii) by reason of an involuntary termination by the Company not for Cause, in each case occurring after January 1, 2017, but before the end of the Performance Period and before the occurrence of a Change in Control of the Company, the portion of the Award that will be payable is calculated by dividing the number of days from January 1, 2017 until the date of such termination of Employment, by the total number of days in the Performance Period, and multiplying that fraction by the Payable Amount. Subject to Section 7, the reduced (prorated) Payable Amount, if any (calculated as provided in Section 5.2) shall not be payable until after the Determination Date in accordance with Section 6.2 above.

(1) A termination of Employment shall be deemed to be by reason of “Disability” if immediately prior to such termination of Employment, the Participant shall have been continuously disabled from performing the duties assigned to the Participant for a period of not less than six consecutive calendar months, in which case such Disability shall be deemed to have commenced on the date following the end of such six consecutive calendar month period; and

(2) “Cause” shall mean (i) the Participant’s refusal or failure (other than during periods of illness or disability) to perform the Participant’s material duties and responsibilities to the Company, (ii) the conviction or plea of guilty or nolo contendere of the Participant in respect of any felony, other than a motor vehicle offense, (iii) the commission of any act which causes material injury to the reputation, business or business relationships of the Company including, without limitation, any breach of written policies of the Company with respect to trading in securities, (iv) any other act of fraud, including, without limitation, misappropriation, theft or embezzlement, or (v) a violation of any applicable material policy of the Company, including, without limitation, a violation of the laws against workplace discrimination.

(d) Retirement of the Chief Executive Officer . In the event of a termination of Employment of the Chief Executive Officer of the Company (the “Chief Executive Officer”) by reason of the Chief Executive Officer’s Retirement before the end of the Performance Period and before the occurrence of a Change in Control of the Company, the Payable Amount shall be payable as if the Chief Executive Officer’s Employment had continued during the entire Performance Period. Subject to Section 7, the Payable Amount, if any (calculated as provided in Section 5.2) shall not be delivered until after the Determination Date. For purposes of this Program, “Retirement” shall mean a termination of the Chief Executive Officer’s Employment with the Company for any reason other than Cause on or after the Chief Executive Officer’s attainment of age sixty (60) and ten (10) years of service with the Company; provided, however, that a voluntary

resignation from Employment shall not be considered Retirement for purposes of the Program unless the Chief Executive Officer shall have given not less than six (6) months’ advance written notice of such resignation to the Chair of the Board (or such lesser period of notice as may be determined by the Board).

(e) Other Terminations of Employment . Except as provided in this Section 6.4 or in Section 7, any termination of Employment of the Participant occurring prior to the end of the Performance Period (including a termination of Employment initiated by the Participant) shall result in the immediate and automatic termination and forfeiture of the Award.

Section 7. Change in Control .

7.1. Vesting; Determination of Payable Amount . Immediately prior to a Change in Control of the Company (as defined below) unless in connection therewith an Award is assumed (or a substitute award granted) pursuant to Section 7(a)(1) of the Plan, the Performance Criteria in the Performance Plan Schedule applicable to an Award, if an Award is then outstanding, shall be deemed to have been satisfied based on assumed achievement at the 200% achievement level (“Deemed CIC Achievement”) and the Company shall pay to the Participant in full satisfaction of its obligations with respect thereto cash in an amount equal to the Payable Amount on the basis of such Deemed CIC Achievement within ten (10) days following the Change in Control of the Company. Notwithstanding the immediately preceding sentence but, solely in the case of the Chief Executive Officer, subject to the fourth sentence of this Section 7.1, if in connection with the Change in Control of the Company, an Award is assumed (or a substitute award granted) pursuant to Section 7(a)(1) of the Plan, then such Award shall become payable only if (A) the Participant’s Employment continues until the end of the Performance Period, in which case this Award will become fully payable at the end of the Performance Period, or (B) there is a Change in Control Termination before the end of the Performance Period, in which case this Award will become fully payable in connection with the Change in Control Termination. In the case of either (A) or (B), the Company shall pay to the Participant, within ten (10) days following the period specified in (A) or the time specified in (B), as applicable, the Payable Amount on the basis of the Deemed CIC Achievement. Solely in the case of the Chief Executive Officer, in the event of a Change in Control of the Company, notwithstanding anything in this Section 7.1 to the contrary, his Award shall become fully payable on, and the Company shall pay the Payable Amount, on the basis of the Deemed CIC Achievement, to the Chief Executive Officer within ten (10) days following, the later of the date on which the Chief Executive Officer becomes eligible for Retirement and a Change in Control of the Company. The foregoing is intended to qualify such payment as a “short-term deferral” within the meaning of Section 1.409A-1(b)(4) of the Treasury regulations. For the avoidance of doubt, if there is a Change in Control Termination before the end of the Performance Period and before the date on which the Chief Executive Officer becomes eligible for Retirement, then his Award will become fully payable in connection with the Change in Control Termination and the Company shall pay the Payable Amount, on the basis of the Deemed CIC Achievement, to the Chief Executive Officer within ten (10) days following such Change in Control Termination.

7.2. Definitions . For purposes of this Program, the following definitions shall apply:

(a) “Change in Control Termination” means the termination of a Participant’s Employment following a Change in Control of the Company (i) by the Company and its subsidiaries not for Cause, (ii) by the Participant for Good Reason, or (iii) by reason of the Participant’s death or Disability.

(b) “Change in Control of the Company” means a “change in control event” (as that term is defined at Section 1.409A-3(i)(5) of the Treasury Regulations) with respect to the Company, which generally will include the following events, subject to such additional rules and requirements as may be set forth in the Treasury Regulations and related guidance:

(1) a transfer or issuance of stock of the Company, where stock in the Company remains outstanding after the transaction, and one person, or more than one person acting as a group (as determined under the Treasury Regulations), acquires ownership of stock in the Company that, together with stock held by such person or group, constitutes more than 50% of the total fair market value or total voting power of the stock of the Company (however, if a person or group is considered to own more than 50% of the total fair market value or 30% of the total voting power of the stock of the Company, the acquisition of additional stock by the same person or group will not be considered a change in control for purposes of this Section 7);

(2) the acquisition by a person or group, during the 12-month period ending on the date of the most recent acquisition by such person or group, of ownership of stock possessing 30% or more of the total voting power of the Company (however, if a person or group is considered to control the Company within the meaning of this sentence (i.e., owns stock of the Company possessing 30% or more of the total voting power of the Company), then the acquisition of additional control will not be considered a change in control for purposes of this Section 7);

(3) the replacement of a majority of members of the Company’s Board of Directors during any 12-month period by directors whose appointment or election is not endorsed by a majority of the members of the Company’s Board of Directors before the appointment or election; or

(4) the acquisition by a person or group, during the 12-month period ending on the date of the most recent acquisition by such person or group, of assets from the Company that have a total gross fair market value equal to or more than 40% of the total gross fair market value of all the assets of the Company, as determined under the Treasury Regulations (however, a transfer of assets to certain related persons, as provided under the Treasury Regulations, or to an entity that is controlled by the shareholders of the Company immediately after the transfer, will not be considered a change in control for purposes of this Section 7).

(c) “Good Reason” means (i) a material reduction in a Participant’s duties and responsibilities from those of the Participant’s most recent position with the Company, (ii) a reduction of a Participant’s aggregate salary, benefits and other compensation (including incentive opportunity) from that which the Participant was most recently entitled during Employment with the Company other than in connection with a reduction as part of a general reduction applicable to all similarly-situated Participants of the Company, or (iii) a relocation of a Participant to a position that is located greater than 40 miles from the location of such Participant’s mos t recent principal location of Employment ; provided , however , that a Participant will be treated as having resigned for Good Reason only if he or she provides the Company with a notice of termination within 90 days of the initial existence of one of the conditions described above, following which the Company shall have 30 days from the receipt of the notice of termination to cure the event specified in the notice of termination and, if the Company fails to so cure the event, the Participant must terminate his or her Employment not later than 30 days following the end of such cure period.

Section 8. Beneficiary Designation .

8.1. Designation and Change of Designation . Each Participant shall file with the Company a written designation of one or more persons as the Beneficiary who shall be entitled to receive the Award, if any, payable under the Program upon the Participant’s death. A Participant may, from time to time, revoke or change his Beneficiary designation without the consent of any prior Beneficiary by filing a new designation with the Company. The last such designation received by the Company shall be controlling; provided , however , that no designation, or change or revocation thereof, shall be effective unless received by the Company prior to the Participant’s death, and in no event shall it be effective as of any date prior to such receipt.

8.2. Absence of Valid Designation . If no such Beneficiary designation is in effect at the time of a Participant’s death, or if no designated Beneficiary survives the Participant, or if such designation conflicts with law, the Participant’s estate shall be deemed to have been designated as the Participant’s Beneficiary and shall receive the payment of the amount, if any, payable under the Program upon the Participant’s death. If the Company is in doubt as to the right of any person to receive such amount, the Company may retain such amount, without liability for any interest thereon, until the rights thereto are determined, or the Company may pay such amount into any court of appropriate jurisdiction and such payment shall be a complete discharge of the liability of the Program and the Company therefor.

Section 9. General Provisions .

9.1. Program to be Unfunded . The Program is intended to constitute an unfunded incentive compensation arrangement. Nothing contained in the Program, and no action taken pursuant to the Program, shall create or be construed to create a trust of any kind. A Participant’s right to receive an Award shall be no greater than the right of an unsecured general creditor of the Company. All Awards shall be paid from the general funds of the Company, and no special or separate fund shall be established and no segregation of assets shall be made to assure payment of such Awards. There shall not vest in any Participant or Beneficiary any right, title, or interest in and to any specific assets of the Company.

9.2. Section 409A of the Code . Awards under the Program are intended to be exempt from, or comply with, the requirements of Section 409A of the Code and shall be construed and administered accordingly. Notwithstanding anything to the contrary in this Program, if at the time of the Participant’s termination of employment, the Participant is a “specified employee,” as defined below, any and all amounts payable under this Program on account of such separation from service that constitute deferred compensation and would (but for this provision) be payable within six (6) months following the date of termination, shall instead be paid on the next business day following the expiration of such six (6) month period or, if earlier, upon the Participant’s death; except (A) to the extent of amounts that do not constitute a deferral of compensation within the meaning of Section 1.409A-1(b) of the Treasury Regulations , as determined by the Company in its reasonable good faith discretion or (B) other amounts or benefits that are not subject to the requirements of Section 409A. For purposes of this Program, all references to “termination of employment” and correlative phrases shall be construed to require a “separation from service” (as defined in Secti on 1.409A-1(h) of the Treasury R egulations after giving effect to the presumptions contained therein), and the term “specified employee” means an individual determined by the Company to be a specified employee under Section 1.409A-1(i) of the Treasury Regulations . Notwithstanding anything to the contrary in the Program, neither the Company, nor any affiliate, nor the Committee, nor any person acting on behalf of the Company, any affiliate, or the Committee, shall be liable to any Participant or to the estate or beneficiary of any Participant or to any other holder of an Award by reason of any acceleration of income, or any additional tax, asserted by reason of the failure of an Award to be exempt from the requirements of Section 409A or by reason of Section 4999 of the Code; provided , that nothing in this Section 9.2 shall limit the ability of the Committee or the Company to provide by separate express written agreement with a Participant for a gross-up payment or other payment in connection with any such tax or additional tax.

9.3. Rights Limited . Nothing contained in the Program shall give any Eligible Participant the right to continue in the employment of the Company, or limit the right of the Company to discharge an Eligible Participant.

9.4. Governing Law . The Program shall be construed and governed in accordance with the laws of the State of New York.

9.5. Taxes . There shall be deducted from all amounts paid under the Program all federal, state, local and other taxes required by law to be withheld with respect to such payments.

Section 10. Amendment, Suspension, or Termination .

The Committee reserves the right to amend, suspend, or terminate the Program at any time.

Exhibit 10.2

ATLAS AIR WORLDWIDE HOLDINGS, INC.

ANNUAL INCENTIVE PROGRAM

FOR SENIOR EXECUTIVES

Adopted by Compensation Committee: As of March 9, 2017

ATLAS AIR WORLDWIDE HOLDINGS, INC.

ANNUAL INCENTIVE PROGRAM

FOR SENIOR EXECUTIVES

Section 1. Purpose .

The purpose of the Program is to set forth certain terms and conditions governing cash awards made under Atlas Air Worldwide Holdings, Inc.’s (“AAWW”) 2016 Incentive Plan, as amended (the "Plan"). The Program shall be treated for all purposes as a sub-plan or arrangement for the grant of Cash Awards under the Plan. Awards under the Program are intended to qualify for the performance-based compensation exception to the limitations on tax deductibility imposed by Section 162(m) of the Code and together with the applicable terms of the Plan and Program shall be construed accordingly. The Program shall be effective as of January 1, 2017, and shall be applicable for the 2017 Program Year and subsequent Program Years during the continuance of the Plan unless amended or terminated by the Committee pursuant to Section 10. Capitalized terms not defined herein shall have the meanings given in the Plan.

Section 2. Definitions .

2.1. Award

shall mean an opportunity to earn benefits under the Program.

2.2. Atlas

shall mean AAWW or its subsidiaries, as applicable.

2.3. Base Salary

shall mean an Eligible Employee’s actual base salary for the applicable period.

2.4. Board

shall mean the Board of Directors of AAWW.

2.5. Beneficiary

shall mean a Participant's beneficiary designated pursuant to Section 8.

2.6. Code

shall mean the Internal Revenue Code of 1986, as amended from time to time.

2.7. Committee

shall mean the Compensation Committee of the Board.

2.8. Eligible Employee

means any of the Chief Executive Officer, President and Executive Vice Presidents AAWW and such other Atlas senior executive officers as shall be designated by the Committee.

2.9. Participant

shall mean any Eligible Employee during such Eligible Employee’s period of participation in the Program.

2.10. Program

shall mean this Atlas Air Worldwide Holdings, Inc. Annual Incentive Program for Senior Executives, as it may be amended from time to time.

2.11. Program Year

shall mean the calendar year.

Section 3. Administration .

The Program shall be administered by the Committee. The Committee shall have full power and authority in its sole discretion to construe and interpret the Program, establish and amend administrative regulations to further the purpose of the Program, determine the extent to which Award payments have been earned by virtue of satisfying the financial goal described in Section 5.2, determine whether to reduce under Sections 5.2(b) through 5.2(e), to the extent that cost control, service reliability, management-business objectives and any other performance criteria have not been satisfied, the amount otherwise payable under Section 5.2, determine whether to settle a portion of the Award in Atlas stock and take any other action necessary to administer the Program. All decisions, actions or interpretations of the Committee shall be final, conclusive, and binding upon all Participants.

Section 4. Participation .

Each Eligible Employee shall participate in the Program if he or she is employed as an Eligible Employee on the first day of the Program Year. An individual who becomes an Eligible Employee during a Program Year but prior to September 30 of the applicable year will participate only with respect to Base Salary earned on and after the date he or she first becomes an Eligible Employee. Any determination by the Committee to provide incentive compensation to an Eligible Employee other than as described in the preceding two sentences shall be treated as a separate award made outside the Program.

Section 5 . Determination of Awards.

5.1. Maximum Bonus Award . The maximum bonus payable under an Award for each Program Year will be the lesser of (i) the dollar limit set forth in Section 4(c) of the Plan, and (ii) the following percentage of Base Salary for each Participant, as such percentages may be increased by the Committee from time to time: two-hundred percent (200%) of Base Salary for the Chief Executive Officer, one-hundred eighty percent (180%) of Base Salary for Executive Vice Presidents who also hold the title of President of Atlas Air, Inc. or Chief Executive Officer of Titan Aviation Holdings, Inc., and one-hundred and seventy percent (170%) of Base Salary for other Executive Vice Presidents.

5.2. Performance Measures . Payment under an Award is conditioned upon achievement of the threshold Financial Goal, as described below. If the threshold Financial Goal is achieved, the Award payment will be the maximum bonus amount described in Section 5.1 minus such adjustments, if any, as the Committee determines to be appropriate to reflect levels of achievement with respect to the Financial Goal (if that Goal is achieved at a level below the maximum level) and/or one or more of the other factors described below and/or such other factors as shall be designated by the Committee.

(a) Financial Goal . The financial goal is based on Atlas's adjusted income from continuing operations, net of taxes (”Adjusted Income”) as reported in Atlas’s press release, as may be further provided in any exhibit to the Program. For each Program Year, the threshold Adjusted Income level (which must be met before any amounts will be payable under Awards), the maximum Adjusted Income level, intermediate Adjusted Income levels, and the percentage of each Participant's target bonus award that will be deemed achieved at each such profit level, will be determined by the Committee.

(b) Service Reliability . The Committee may also reduce maximum Award payments, if any, to reflect the level of achievement of such service reliability factors as the Committee may determine for the Program Year.

(c) Management Business Objectives Adjustment . The Committee may also reduce maximum Award payments, if any, to reflect the level of achievement of such individual management business objectives as the Committee may determine in the case of any Participant for the Program Year.

(d) Effect of Corporate Transactions and other Exigencies . Without limiting the generality of the foregoing, the Committee shall have the authority, to the extent consistent with the requirements for satisfying the performance-based compensation exception under 162(m) of the Code, to identify objectively determinable events (for example, but without limitation, acquisitions or dispositions) which, if they occur, would have a material effect on objective Performance Criteria applicable to Awards under the Program, and to adjust such Performance Criteria in an objectively determinable manner to reflect such events.

Section 6. Payment of Awards under this Program .

6.1. General . Subject to Section 6.4, Participant will be entitled to receive payment, if any, under an Award if the Participant is still employed by Atlas on the last day of the Program Year for which the Award is paid, unless in the period between the last day of the Program Year and any payout under the Program, the Participant is terminated by Atlas for Cause (as defined in Section 7) or the Participant terminates his employment with Atlas for any reason. A Participant will receive an Award in the manner and at the times set forth in this Sections 6.

6.2. Time of Payment . Any amount payable for an Award for a Program Year shall be paid by Atlas within two weeks following certification by the Committee as to achievement of the performance goals following the completion of the year-end audit for the applicable Program Year, but in no event later than March 15 of the year following the applicable Program Year.

6.3. Form of Payment . All amounts payable for an Award shall be paid in cash or Atlas stock, but Atlas stock may be used, if at all, only for the portion of the Award that exceeds fifty percent (50%) of Base Salary.

6.4. Termination of Employment .

(a) In General . Except as provided otherwise in this Section 6.4, a Participant whose employment terminates for any reason prior to the last day of the Program Year for which an Award is payable shall forfeit such Award.

(b) Death or Disability . In the event of death or termination by the Company of the Participant’s employment with the Company or its Subsidiaries (a “Termination of Service”) by reason of the Participant’s Disability the Committee may, in its sole discretion, direct that all or a portion of a Participant's Award be paid, taking into account the duration of employment during the Program Year, the Participant's performance, and such other matters as the Committee shall deem appropriate. For purposes of this Agreement, a termination of Service shall be deemed to be by reason of “Disability” if upon such Termination of Service, the Participant shall have been continuously disabled from performing the duties assigned to the Participant for a period of not less than six consecutive calendar months and such Disability shall be deemed to have commenced on the date following the end of such six consecutive calendar months.

(c) Retirement; Involuntary Termination; Good Reason . If a Participant's employment terminates during a Program Year by reason of (i) an involuntary termination by Atlas not for Cause (as defined in Section 7 below), (ii) termination by the Participant for Good Reason (as defined below), or (iii) in the sole discretion of the Committee, normal retirement under a retirement program of Atlas, the Participant shall be entitled to receive a payment with respect to an Award for the Program Year in which such termination occurred, as if he or she had been employed by Atlas on the last day of such Program Year, in an amount equal to the lesser of (1) the amount he or she would have received if he or she was employed by Atlas on the last day of the Program Year based upon actual company performance measured pursuant to the plan (and assuming for such purpose that 50% of his or her individual Management Business Objectives

(“MBOs”) have been achieved), or (2) his or her Target Bonus Percentage. Such payment shall be subject to all terms and conditions of the Program, including without limitation the provisions of Section 5 (relating to determination of the Award) and Section 6.2 (relating to the time of payment of the Award). This Section 6.4 shall not apply to the extent the rights of a Participant in such circumstances are governed by another agreement. "Good Reason" under this Section 6 shall mean (i) a material reduction in Participant’s duties and responsibilities from those of Participant's most recent position with Atlas, or (ii) a reduction of Participant’s aggregate salary, benefits and other compensation (other than bonus opportunity, which shall be paid as provided above) from that which the Participant was most recently entitled during employment with Atlas other than in connection with a reduction as part of a general reduction applicable to all participants in the Program. This Section 6.4 shall not apply to the extent the rights of a Participant in such circumstances are governed by another agreement.

Section 7. Change in Control .

In the event Atlas undergoes a Change in Control, Awards will be determined and paid in accordance with this Section 7 based on the assumption that each of the Financial Goal, the Service Reliability Goal, the MBOs and any other Performance Criteria under Section 2 have been achieved at a level of 100% of target for the Plan Year in which the Change in Control takes place pursuant to Section 5 of the Program; provided, however, if upon completion of the year-end audit for the applicable Program Year it is determined that the Financial Goal or any other Performance Criteria was achieved at a level higher than 100% of target, Awards will be correspondingly adjusted pursuant to Section 5 of the Program. Notwithstanding the above, a Participant whose employment with Atlas terminates prior to the Change in Control shall forfeit such Award, unless such termination is by reason of (i) death, (ii) Disability (as defined in the Plan), (iii) normal retirement under a retirement program of Atlas, (iv) by Atlas not for Cause, or (v) by the Participant for Good Reason (as defined below). For purposes of this Program, "Change in Control of Atlas” shall mean a “change in control event” (as that term is defined at Section 1.409A-3(i)(5) of the Treasury Regulations) with respect to the Company, which generally will include the following events, subject to such additional rules and requirements as may be set forth in the Treasury Regulations and related guidance:

(1)

A transfer or issuance of stock of the Company, where stock in the Company remains outstanding after the transaction, and one person, or more than one person acting as a group (as determined under the Treasury Regulations), acquires ownership of stock in the Company that, together with stock held by such person or group, constitutes more than 50% of total fair market value or total voting power of the stock of the Company (however, if a person or group is considered to own more than 50% of the total fair market value or 30% of the total voting power of the stock of the Company, the acquisition of additional stock by the same person or group will not be considered a change in control for purposes of this Section 7);

(2)

The acquisition by a person or group, during the 12-month period ending on the date of the most recent acquisition by such person or group, of ownership of stock

possessing 30% or more of the total voting power of the Company (however, if a person or group is considered to control the Company within the meaning of this sentence (i.e. owns stock of the Company possessing 30% or more of the total voting power of the Company), then the acquisition of additional control will not be considered a change in control for purposes of this Section 7);

(3)

The replacement of a majority of members of the Company’s Board of Directors during any 12-month period by directors whose appointment or election is not endorsed by a majority of the members of the Company’s Board of Directors before the appointment or election; or

(4)

The acquisition by a person or group, during the 12-month period ending on the date of the most recent acquisition by such person or group, of assets from the Company that have a total gross fair market value equal to more than 40% of the total gross fair market value of all the assets of the Company, as determined under the Treasury Regulations, or to an entity that is controlled by the shareholders of the Company immediately after the transfer, will not be considered a change in control for purposes of this Section 7). For purposes of this Program, “Continuing Directors” shall mean the directors of Atlas on the date hereof and each other director, if such other director’s nomination for election to the Board of Directors of Atlas is recommended by a majority of the then Continuing Directors. “Cause” shall mean (i) the Participant’s refusal or failure (other than during periods of illness or Disability (as defined in the Plan)) to perform his or her material duties and responsibilities to Atlas, (ii) the conviction or plea of guilty or nolo contendere of the Participant in respect of any felony, other than a motor vehicle offense, (iii) the commission of any act which causes material injury to the reputation, business or business relationships of Atlas including, without limitation, any material breach of written policies of Atlas with respect to trading in securities, (iv) other acts of fraud in connection with the Participant’s duties and responsibilities to Atlas, including, without limitation, misappropriation, theft or embezzlement in the performance of the Participant's duties and responsibilities as an employee of Atlas, or (v) a violation of any material Atlas policy, including, without limitation, a violation of the laws against workplace discrimination. "Good Reason" under this Section 7 shall mean the failure of the surviving entity in the Change in Control, of failure of an affiliate of the surviving entity, to continue the Participant in a position with the surviving entity or affiliate that (a) is not located within 40 miles of the location of such Participant's most recent principal location of employment with Atlas, (ii) does not involve substantially comparable duties and responsibilities as such Participant's most recent position with Atlas, or (iii) does not entitle the Participant to salary, benefits and other compensation (other than bonus opportunity, which shall be paid as provided above) that, in the aggregate, are substantially comparable or more favorable than those to which the Participant most recently was entitled during employment with Atlas. This Section 7 shall not apply to the extent the rights of a Participant in such circumstances are governed by another agreement.

Section 8. Beneficiary Designation .

8.1. Designation and Change of Designation . Each Participant shall file with Atlas a written designation of one or more persons as the Beneficiary who shall be entitled to receive the Award, if any, payable under the Program upon the Participant's death. A Participant may, from time to time, revoke or change his Beneficiary designation without the consent of any prior Beneficiary by filing a new designation with Atlas. The last such designation received by Atlas shall be controlling; provided, however, that no designation, or change or revocation thereof, shall be effective unless received by Atlas prior to the Participant's death, and in no event shall it be effective as of any date prior to such receipt.

8.2. Absence of Valid Designation . If no such Beneficiary designation is in effect at the time of a Participant's death, or if no designated Beneficiary survives the Participant, or if such designation conflicts with law, the Participant's estate shall be deemed to have been designated as the Participant's Beneficiary and shall receive the payment of the amount, if any, payable under the Program upon his death. If Atlas is in doubt as to the right of any person to receive such amount, Atlas may retain such amount, without liability for any interest thereon, until the rights thereto are determined, or Atlas may pay such amount into any court of appropriate jurisdiction and such payment shall be a complete discharge of the liability of the Program and Atlas therefor.

Section 9. General Provisions .

9.1. Plan to be Unfunded . The Program is intended to constitute an unfunded incentive compensation arrangement. Nothing contained in the Program, and no action taken pursuant to the Program, shall create or be construed to create a trust of any kind. A Participant's right to receive an Award shall be no greater than the right of an unsecured general creditor of Atlas. All Awards shall be paid from the general funds of Atlas, and no special or separate fund shall be established and no segregation of assets shall be made to assure payment of such Awards. There shall not vest in any Participant or Beneficiary any right, title, or interest in and to any specific assets of Atlas.

9.2. Section 409A of the Code . Awards under the Program are intended to be exempt from the requirements of Section 409A of the Code and shall be construed and administered accordingly. Notwithstanding anything to the contrary in the Program, neither Atlas, nor any affiliate, nor the Committee, nor any person acting on behalf of Atlas, any affiliate, or the Committee, shall be liable to any Participant or to the estate or beneficiary of any Participant or to any other holder of an Award by reason of any acceleration of income, or any additional tax, asserted by reason of the failure of an Award to satisfy the requirements of Section 409A or by reason of Section 4999 of the Code; provided, that nothing in this Section 9.3 shall limit the ability of the Committee or Atlas to provide by separate express written agreement with a Participant for a gross-up payment or other payment in connection with any such tax or additional tax.

9.3. Rights Limited; Conflicts . Nothing contained in the Program shall give any Eligible Employee the right to continue in the employment of Atlas, or limit the right of Atlas to discharge an Eligible Employee. If there is a conflict between this Program and another senior executive employment program or arrangement, such other program or arrangement shall control.

9.4. Governing Law . The Program shall be construed and governed in accordance with the laws of the State of New York.

9.5. Taxes . There shall be deducted from all amounts paid under the Program all federal, state, local and other taxes required by law to be withheld with respect to such payments.

Section 10. Amendment, Suspension, or Termination .

Except with respect to 6.4(c) for any Program Year in effect, the Committee reserves the right to amend, suspend, or terminate the Program at any time.

Section 11. Awards Subject to Clawback

Pursuant to the Company’s Executive Compensation Clawback Policy, as the same is in effect following its adoption by the Board and as may be subsequently amended from time to time (the “Clawback Policy”), by his or her acceptance of an Award under the Program, the Participant agrees that the Committee may withhold, and participant will forfeit, compensation otherwise payable under an Award or seek recovery from, and the participant agrees to repay, compensation previously paid under an Award, as the case may be, as provided by the Clawback Policy, or to the extent required to comply with applicable law.

Exhibit 10.3

ATLAS AIR WORLDWIDE HOLDINGS, INC.

PERFORMANCE SHARE UNIT AGREEMENT

THIS PERFORMANCE SHARE UNIT AGREEMENT, dated as of [●], 2017 (the “Agreement”), is between Atlas Air Worldwide Holdings, Inc. (the “Company”), a Delaware corporation, and William J. Flynn (the “Employee).

WHEREAS, the Employee has been granted the following award under the Company’s 2016 Incentive Plan (the “Plan”) as of [●], 2017 (the “Date of Grant”);

NOW, THEREFORE, in consideration of the premises and mutual covenants contained herein, and for other good and valuable consideration, the parties hereto agree as follows.

1. Award of Performance Share Units . Pursuant to the provisions of the Plan, the terms of which are incorporated herein by reference and subject to the other provisions of this Agreement, the Employee is hereby awarded [●] performance share units (“Performance Share Units”), which constitute the right to receive, without payment by the Employee therefor, (i) up to [●] shares of Stock upon the Company’s satisfaction of certain performance criteria as described in Section 2 below (the “Unit Delivered Shares”), and (ii) the right to receive, without payment by the Employee therefor, additional shares of Stock on the same basis as the Unit Delivered Shares, equal in value (determined as hereafter provided) to the dividends, if any, which would have been paid with respect to the Stock underlying the Unit Delivered Shares had such Unit Delivered Shares been issued to the Employee on the Date of Grant (the “Deferred Dividend Shares”), in each case subject to the terms and conditions of the Plan and those set forth herein. For purposes of clause (ii) of the immediately preceding sentence, the number of Deferred Dividend Shares with respect to any dividend shall be calculated as of the date on which the dividend is paid to holders of Stock. For the avoidance of doubt, no shares of Stock (including Deferred Dividend Shares) shall be payable in respect of the Unit Delivered Shares if the Unit Delivered Shares are forfeited, and no Deferred Dividend Shares shall be payable in respect of any dividend for which the record date falls on or after the date on which the Employee or other person entitled to the Unit Delivered Shares becomes the record owner of such shares of Stock for dividend record-date purposes. If the number of shares of Stock (including Deferred Dividend Shares) deliverable with respect to the Performance Share Units includes a fractional share, the value of such fractional share (determined as of the trading day immediately preceding the delivery date described in Section 2(c) or 2(e) below) shall be payable in cash in lieu of such fractional share. Except as otherwise expressly provided, all terms used herein shall have the same meaning as in the Plan.

The Unit Delivered Shares and the Deferred Dividend Shares are collectively referred to herein as the “Performance Share Award” or “this award.”

2. Vesting; Delivery of Stock; Termination of Employment .

(a) Vesting Generally . Subject to the following provisions of this Section 2 and the other terms and conditions of this Agreement, the Performance Share Award shall become vested (meaning that the Employee shall be entitled to receive a certain number of

shares of Stock (as provided in Section 2(c) or 2(e) in respect of each Performance Share Unit as determined pursuant to S ection 2(b)) if, and only if: (i ) the Employee remains continuously employed by the Company or its subsidiaries from the date hereof until the end of the Performa nce Period, as defined below, (ii ) there is a termination of Employment of the Employee pursuant to Section 2(d), as further provided in such Section, or (iii ) the conditions of Section 2(e) are satisfied on or before the last day of the Performance Period.

(b) Determination of Number of Unit Delivered Shares Upon Satisfaction of Performance Criteria . Notwithstanding anything to the contrary in this Agreement but subject to Section 2(e) below, shares of the Company’s common stock underlying the Performance Share Award will only become deliverable by the Company in respect of a vested Performance Share Award and only upon satisfaction of the achievement of certain internal ROIC and EBITDA Growth levels as described below (the “Performance Criteria”) during the period beginning January 1, 2017 and ending December 31, 2019 (the “Performance Period”). The number of Delivered Shares and Deferred Dividend Shares in respect of each vested Performance Share Unit, if any, shall be determined in accordance with Annex A hereto (the “Performance Unit Plan Schedule”). Performance Share Units are originally awarded on the basis of one Performance Share Unit to one Unit Delivered Share, subject to adjustment depending on the level of achievement set forth in the Performance Unit Plan Schedule. Intermediate values between specified levels of ROIC and adjusted EBITDA are determined by straight line interpolation.

(1) “ROIC” for the Company shall be an average of the Company’s actual ROIC for 2017, 2018 and 2019 and shall mean a fraction where the numerator is NOPAT and the denominator is Average Invested Capital, as determined by the Committee. “NOPAT” is defined as adjusted operating income, as included in the Company’s press release, minus Cash Tax Paid. “Cash Tax Paid” is defined as income taxes as reflected on the income statement minus deferred taxes as reflected on the cash flow statement. “Average Invested Capital” is defined as the average of the beginning and ending Invested Capital during the year. “Invested Capital” is defined as capital lease obligations, plus short and long term debt plus total stockholders’ equity minus an amount equal to cash, cash equivalents, restricted cash, and short-term investments. Invested Capital shall exclude investment amounts associated with aircraft acquisition until the first time that such aircraft is flown under a customer contract at which time all amounts accrued with respect to such aircraft shall be considered in the Average Invested Capital calculation from such date. Invested Capital shall be reduced by the amount of any investments held in the Company’s direct or indirect debt securities that remain outstanding and that have not otherwise been defeased.

(2) “EBITDA” for the Company shall mean adjusted income from continuing operations before interest, income taxes, depreciation expense and amortization expense as included in the Company’s press release. “EBITDA Growth” shall be calculated by averaging the percentage increase or decrease in EBITDA for each of the three years ended December 31 in the Performance Period. EBITDA increase or decrease for each twelve month period shall be calculated by subtracting EBITDA for the twelve months ended December 31 for the prior year from EBITDA for the twelve months ended December 31 for the current year and dividing the resulting difference in EBITDA by the EBITDA for the twelve months ended December 31 for the prior year.

(3) In the calculation of EBITDA Growth and ROIC, amounts objectively demonstrated to be attributable to the following items will not be taken into account: (i) any benefit or detriment resulting from changes in the Company’s financial reporting ( including but not limited to changes in accounting principles) or from statutory changes in federal, state or foreign income tax rates; (ii) any a ggregate costs in excess of $5 00, 000 for business initiatives not specified in the Company’s operating plans; (iii) any costs related to retention, recruitment, or termination of executive officers; (iv) any costs related to collective bargaining, other labor negotiations, grievances or other disputes including labor unions in excess of the Company’s operating plans; and (v) any costs or the payment of any fines, penalties, deposits or settleme nt amounts in connection with (A ) foreign or domestic antitrust investi gations and related lawsuits, (B ) Brazilian customs or labor claims or investigations, or (C ) environmental, regulatory or compliance matters (including any related compliance or other costs or actions) resulting from changes in applic able law or otherwise. The ROIC ratio will exclude the unconsolidated results of Polar Air Cargo Worldwide, Inc.

(c) Delivery of Unit Delivered Shares . In connection with the completion of performance, the Committee shall certify, in accordance with Section 162(m) of the Internal Revenue Code of 1986, as amended from time to time (the “Code”), whether and at what level the Performance Criteria have been achieved. For the purposes of this Agreement, the term “Determination Date” means the date in 2020 on which the Committee makes such certification. Subject to the terms of this Agreement and satisfaction of any withholding tax liability pursuant to Section 5 hereof, as soon as reasonably practicable following the Determination Date, but in any event no later than March 15, 2020, the Company shall deliver to the Employee a certificate or certificates or shall credit the Employee’s account so as to evidence the number of Unit Delivered Shares and Deferred Dividend Shares, if any, to which the Employee is entitled hereunder, as calculated in accordance with Section 2(b) above.

(d) Death, Disability, Involuntary Termination not for Cause or Retirement .

(1) In the event of the termination of the Employee’s Employment (i) due to death, (ii) by the Company by reason of the Employee’s Disability or (iii) by reason of an involuntary termination by the Company not for Cause, in each case occurring after the date hereof, but before the end of the Performance Period and before the occurrence of a Change in Control of the Company, the portion of the Performance Share Award that will vest shall be calculated by dividing the number of days from January 1, 2017 until the date of such termination, by the total number of days in the Performance Period, multiplied by the number of Unit Delivered Shares and Deferred Dividend Shares in respect of each Performance Share Unit, if any, earned on the basis of actual achievement level of the Performance Criteria in the Performance Unit Plan Schedule.

(2) In the event of a termination of Employment by reason of the Employee’s Retirement before the end of the Performance Period and before the occurrence of a Change in Control of the Company, the Performance Share Award will vest in full, in respect of each Performance Share Unit, if any, earned on the basis of actual achievement level of the Performance Criteria in the Performance Plan Schedule.

(3) Any former Employee, upon Disability, involuntary termination by the Company not for cause Cause or Retirement, or the estate of an Employee, upon death, will continue to hold the vested portion of the Performance Share Award, subject to the restrictions and all terms and conditions of this Agreement, until delivery of Shares pursuant to Section 2(c). Subject to Section 2(e), the appropriate number of Unit Delivered Shares and Deferred Dividend Shares, if any (calculated as provided in Section 2(b)) shall not be delivered until the completion of the Performance Per iod and the Determination Date.

(4) Definitions . For purposes of this Agreement:

(a)

A termination of Employment shall be deemed to be by reason of “Disability” if immediately prior to such termination of Employment, the Employee shall have been continuously disabled from performing the duties assigned to the Employee for a period of not less than six consecutive calendar months, in which case such Disability shall be deemed to have commenced on the date following the end of such six consecutive calendar month period;

(b)

“Cause” shall mean (i) the Employee’s refusal or failure (other than during periods of illness or disability) to perform the Employee’s material duties and responsibilities to the Company or its subsidiaries, (ii) the conviction or plea of guilty or nolo contendere of the Employee in respect of any felony, other than a motor vehicle offense, (iii) the commission of any act which causes material injury to the reputation, business or business relationships of the Company or any of its subsidiaries including, without limitation, any breach of written policies of the Company with respect to trading in securities, (iv) any other act of fraud, including, without limitation, misappropriation, theft or embezzlement, or (v) a violation of any applicable material policy of the Company or any of its subsidiaries, including, without limitation, a violation of the laws against workplace discrimination; and

(c)

“Retirement” shall mean a termination of the Employee’s Employment with the Company for any reason other than Cause on or after the Employee’s attainment of age sixty (60) and ten (10) years of service with the Company; provided, however , that a voluntary resignation from Employment shall not be considered Retirement for purposes of this Agreement unless the Employee shall have given not less than six (6) months’ advance written notice of such resignation to the Chair of the Board (or such lesser period of notice as may be determined by the Board).

(e) Change in Control .

if this award is then outstanding, shall be deemed to have been satisfied based on assumed achievement at the 200% achievement level (“Deemed CIC Achievement”) and this award shall be deemed fully vested on such basis and the Unit Delivered Shares and Deferred Dividend Shares underlying this award shall be delivered or paid to the Employee within ten (10) days following the Change in Control of the Company. Notwithstanding the immediately preceding sentence, but subject to the fourth sentence of this Section 2(e)(1), if in connection with the Change in Control of the Company, this award is assumed (or a substitute award granted) pursuant to Section 7(a)(1) of the Plan, this award shall become vested only if (A) the Employee’s Employment continues until the end of the Performance Period, in which case this award will become fully vested at the end of the Performance Period, or (B) there is a Change in Control Termination before the end of the Performance Period, in which case this award will become fully vested in connection with the Change in Control Termination. In the case of either (A) or (B), there shall be delivered or paid to the Employee, within ten (10) days following vesting, the Unit Delivered Shares and Deferred Dividend Shares underlying this award, determined on the basis of the Deemed CIC Achievement. In the event of a Change in Control of the Company, notwithstanding anything in this Section 2(e)(1) to the contrary, if the Employee is or will become eligible for Retirement prior to the last day of the Performance Period, then this award shall become fully vested on, and the Unit Delivered Shares and Deferred Dividend Shares underlying this award, determined on the basis of the Deemed CIC Achievement, shall be delivered or paid to the Employee within ten (10) days following, the later of the date on which the Employee becomes eligible for Retirement and a Change in Control of the Company. The foregoing is intended to qualify such payment as a “short-term deferral” within the meaning of Section 1.409A-1(b)(4) of the Treasury R egulations. F or the avoidance of doubt, if there is a Change in Control Termination before the end of the Performance Period and before the date on which the Employee becomes eligible for Retirement, then this award will become fully vested in connection with the Change in Control Termination and the Unit Delivered Shares and Deferred Dividend Shares underlying this award, determined on the basis of the Deemed CIC Achievement, shall be delivered or paid to the Employee within ten (10) days following such C hange in Control Termination.

(2) For purposes of this Agreement, the following definitions shall apply:

(a)

“Change in Control Termination” means the termination of an Employee’s Employment following a Change in Control of the Company (i) by the Company and its subsidiaries not for Cause, (ii) by the Employee for Good Reason, or (iii) by reason of the Employee’s death or Disability.

(b)

the Company that , together with stock held by such person or group, constitutes more than 50% of the total fair market value or total voting power of the stock of the Company (however, if a person or group is considered to own more than 50% of the total fair market value or 30% of the total voting power of the stock of the Company, the acquisition of additional stock by the same person or group will not be considered a change in control for purposes of this Section 2(e));

(ii) the acquisition by a person or group, during the 12-month period ending on the date of the most recent acquisition by such person or group, of ownership of stock possessing 30% or more of the total voting power of the Company (however, if a person or group is considered to control the Company within the meaning of this sentence (i.e., owns stock of the Company possessing 30% or more of the total voting power of the Company), then the acquisition of additional control will not be considered a change in control for purposes of this Section 2(e));

(iii) the replacement of a majority of members of the Company’s Board of Directors during any 12-month period by directors whose appointment or election is not endorsed by a majority of the members of the Company’s Board of Directors before the appointment or election; or

(iv) the acquisition by a person or group, during the 12-month period ending on the date of the most recent acquisition by such person or group, of assets from the Company that have a total gross fair market value equal to or more than 40% of the total gross fair market value of all the assets of the Company, as determined under the Treasury Regulations (however, a transfer of assets to certain related persons, as provided under the Treasury Regulations, or to an entity that is controlled by the shareholders of the Company immediately after the transfer, will not be considered a change in control for purposes of this Section 2(e)).

(c)

she provides the Company with a notice of termination within 90 days of the initial existence of one of the conditions described above, following which the Company shall have 30 days from the receipt of the notice of termination to cure the event specified in the notice of termination and, if the Company fails to so cure the event, the Employee must terminate his or her Employment not later than 30 days following the end of such cure period.

(f) Other Terminations of Employment . Except as provided for herein or in the Plan, any termination of Employment of the Employee occurring prior to the end of the Performance Period (including a termination of Employment initiated by the Employee) shall result in the immediate and automatic termination and forfeiture of the Performance Share Award.

3. Transfer . Any shares of Stock underlying the Performance Share Award that are delivered pursuant to Section 2 may be sold, assigned, pledged, hypothecated, encumbered, or transferred or disposed of in any other manner, in whole or in part, only in compliance with the terms, conditions and restrictions as set forth in the governing instruments of the Company, applicable federal and state securities laws or any other applicable laws or regulations and the terms and conditions hereof. This award itself shall not be sold, assigned, pledged, hypothecated, encumbered, or transferred or disposed of in any other manner, in whole or in part.

4. Expenses of Issuance of Stock . The issuance of stock certificates hereunder shall be without charge to the Employee. The Company shall pay, and indemnify the Employee from and against any issuance, stamp or documentary taxes (other than transfer taxes) or other charges imposed by any governmental body, agency or official (other than taxes) by reason of the issuance of the Stock underlying the Performance Share Award.

5. Tax Withholding . No shares or cash will be issued or paid under this award unless the Employee pays (or makes provision acceptable to the Company for the prompt payment of) an amount sufficient to allow the Company to satisfy its tax withholding obligations, as determined by the Company. To this end, the Employee shall either:

(a)

pay the Company the amount of tax to be withheld (including through payroll withholding if the Company determines that such payment method is acceptable),

(b)

deliver to the Company other shares of Stock owned by the Employee prior to such date having a fair market value, as determined by the Committee, not less than the amount of the withholding tax due, which either have been owned by the Employee for more than six (6) months or were not acquired, directly or indirectly, from the Company,

(c)

make a payment to the Company consisting of a combination of cash and such shares of Stock, or

(d)

request that the Company cause to be withheld a number of vested shares of Stock having a then fair market value sufficient to discharge required federal, state and local tax withholding.

In no event shall the payment or withholding of taxes be made later than the end of the payment period prescribed in Sections 2(c) or 2(e), as applicable. In the event the Employee fails to timely pay or timely elect withholding of taxes in the manner described in Section 5(a), (b), (c) or (d), the Company reserves the right to withhold cash or a number of vested shares of Stock having a then fair market value sufficient to discharge required federal, state and local tax withholding.

6. Section 409A of the Code . Performance Share Awards granted pursuant to this Agreement are intended to be exempt from, or comply with, the requirements of Section 409A of the Code and guidance issued thereunder and shall be construed accordingly. Notwithstanding anything to the contrary in this Agreement, if at the time of the Employee’s termination of Employment, the Employee is a “specified employee,” as defined below, any and all amounts payable under this Agreement on account of such separation from service that constitute deferred compensation and would (but for this provision) be payable within six (6) months following the date of termination, shall instead be paid on the next business day following the expiration of such six (6) month period or, if earlier, upon the Participant’s death; except (A) to the extent of amounts that do not constitute a deferral of compensation within the meaning of Section 1.409A-1(b) of the Treasury Regulations, as determined by the Company in its reasonable good faith discretion or (B) other amounts or benefits that are not subject to the requirements of Section 409A. For purposes of this Agreement, all references to “termination of employment” and correlative phrases shall be construed to require a “separation from service” (as defined in Section 1.409A-1(h) of the Treasury Regulations after giving effect to the presumptions contained therein), and the term “specified employee” means an individual determined by the Atlas to be a specified employee under Section 1.409A-1(i) of the Treasury Regulations. Notwithstanding anything to the contrary in this Agreement, neither the Company, nor any subsidiary, nor the Committee, nor any person acting on behalf of the Company, any subsidiary, or the Committee, shall be liable to the Employee or to the estate or beneficiary of the Employee by reason of any acceleration of income, or any additional tax, asserted by reason of the failure of this Agreement or any payment hereunder to satisfy the requirements of Section 409A of the Code or by reason of Section 4999 of the Code.

7. References . References herein to rights and obligations of the Employee shall apply, where appropriate, to the Employee’s legal representative or estate without regard to whether specific reference to such legal representative or estate is contained in a particular provision of this Agreement.

8. Notices . Any notice required or permitted to be given under this Agreement shall be in writing and shall be deemed to have been given when delivered personally or by courier, or sent by certified or registered mail, postage prepaid, return receipt requested, duly addressed to the party concerned at the address indicated below or to such changed address as such party may subsequently by similar process give notice of:

If to the Company:

Atlas Air Worldwide Holdings, Inc.

2000 Westchester Avenue

Purchase, New York 10577

Attention: General Counsel

If to the Employee:

At the Employee’s most recent address shown on the Company’s corporate records, or at any other address which the Employee may specify in a notice delivered to the Company in the manner set forth herein.

9. Governing Law . This Agreement shall be governed by and construed in accordance with the internal laws of the State of New York, without giving effect to principles of conflicts of laws of any jurisdiction which would cause the application of law, other than the State of New York, to be applied.

10. Rights of a Stockholder . The Employee shall have no right to transfer, pledge, hypothecate or otherwise encumber such Unit Delivered Shares or Deferred Dividend Shares. Once the Unit Delivered Shares and Deferred Dividend Shares vest and the shares of Stock underlying those units or shares have been delivered, but not until such time and only with respect to the shares of Stock so delivered, the Employee shall have the rights of a stockholder, including, but not limited to, the right to vote and to receive dividends.

11. No Right to Continued Employment . This Performance Share Award shall not confer upon the Employee any right with respect to continuance of employment by the Company nor shall this Performance Share Award interfere with the right of the Company to terminate the Employee’s employment at any time.

12. Provisions of the Plan . This Agreement and the awards and grants set forth herein shall be subject to and shall be governed by the terms set forth in the Plan, a copy of which has been furnished to the Employee and which is incorporated by reference into this Agreement. In the event of any conflict between this Agreement and the Plan, the Plan shall control.

13. Counterparts . This Agreement may be executed in two counterparts, each of which shall constitute one and the same instrument.

[SIGNATURE PAGE FOLLOWS AS A SEPARATE PAGE]

IN WITNESS WHEREOF, the undersigned have executed this Performance Share Unit Agreement as of the date first above written.


ATLAS AIR WORLDWIDE HOLDINGS, INC.

By:
	Name:	Adam R. Kokas
	Title:	Executive Vice President, General Counsel, Secretary and Chief Human Resources Officer

William J. Flynn

Exhibit 10.4

ATLAS AIR WORLDWIDE HOLDINGS, INC.

RESTRICTED STOCK UNIT AGREEMENT

THIS RESTRICTED STOCK UNIT AGREEMENT, dated as of [●], 2017 (the “Agreement), is between Atlas Air Worldwide Holdings, Inc. (the “Company”), a Delaware corporation, and William J. Flynn (the “Employee”).

WHEREAS, the Employee has been granted the following award under the Company’s 2016 Incentive Plan (the “Plan”) as of [●], 2017 (the “Date of Grant”);

NOW, THEREFORE, in consideration of the premises and mutual covenants contained herein, and for other good and valuable consideration, the parties hereto agree as follows.

1. Award of Restricted Stock Units . Pursuant to the provisions of the Plan, the terms of which are incorporated herein by reference and subject to the other provisions of this Agreement, the Employee is hereby awarded [●] restricted stock units (“Restricted Stock Units”), which constitute the right to receive, without payment by the Employee therefor, (i) [●] shares of Stock (the “Unit Delivered Shares”), and (ii) the right to receive, without payment by the Employee therefor, additional shares of Stock on the same basis as the Unit Delivered Shares, equal in value (determined as hereafter provided) to the dividends, if any, which would have been paid with respect to the shares of Stock underlying the Unit Delivered Shares had such Unit Delivered Shares been issued to the Employee on the Date of Grant (the “Deferred Dividend Shares”), in each case subject to the terms and conditions of the Plan and those set forth herein. For purposes of clause (ii) of the immediately preceding sentence, the number of Deferred Dividend Shares with respect to any dividend shall be calculated as of the date on which the dividend is paid to holders of Stock. For the avoidance of doubt, no shares of Stock (including Deferred Dividend Shares) shall be payable in respect of the Unit Delivered Shares if the Unit Delivered Shares are forfeited, and no Deferred Dividend Shares shall be payable in respect of any dividend for which the record date falls on or after the date on which the Employee or other person entitled to the Unit Delivered Shares becomes the record owner of such shares of Stock for dividend record-date purposes. If the number of shares of Stock (including Deferred Dividend Shares) deliverable with respect to the Restricted Stock Units includes a fractional share, the value of such fractional share (determined as of the trading day immediately preceding the delivery date described in Section 2(d) below) shall be payable in cash in lieu of such fractional share. Except as otherwise expressly provided, all terms used herein shall have the same meaning as in the Plan.

The Unit Delivered Shares and the Deferred Dividend Shares are collectively referred to herein as the “Award” or “this award.”

2. Vesting of Award; Delivery of Stock, Termination of Employment . Unless otherwise provided by the Committee, the Award under this Agreement shall be subject to the vesting schedule in this Section 2.

(a) Vesting; Delivery of Shares .

(1) Subject to the following provisions of this Section 2 and the other terms and conditions of this Agreement, the Award shall become vested (meaning that the Employee shall be entitled to receive a certain number of shares of Stock as provided in Section 2(a)(iii) or Section 2(c)) on the basis of one Restricted Stock Unit to one share of Stock, and any related Deferred Dividend Shares shall become vested only upon the vesting of the underlying Restricted Stock Unit. The Award will vest in four annual installments as follows:

[●] Restricted Stock Units shall vest on [●], 2018;

[●] Restricted Stock Units shall vest on [●], 2019;

[●] Restricted Stock Units shall vest on [●], 2020; and

[●] Restricted Stock Units shall vest on [●], 2021.

(2) Except as provided in Section 2(b) and 2(c) below, in the event of termination of the Employee’s Employment prior to the applicable date above, all unvested Restricted Stock Units shall immediately and automatically terminate and be forfeited (and no shares of Stock in respect of such Award that have not previously vested shall thereafter be issued).

(iii) Subject to Section 2(d) below, shares of Stock will be delivered as soon as reasonably practicable following a vesting date described above, but no later than December 31 of the year in which such vesting date occurs.

(b) Death, Disability or Retirement .

(1) In the event of death or termination by the Company of the Employee’s Employment by reason of the Employee’s Disability occurring after the date hereof and before the occurrence of a Change in Control of the Company, the Award shall become immediately and fully vested and shares of Stock will be delivered, subject to Section 2(d), as soon as practicable following such death or termination of Employment by reason of the Employee’s Disability, but no later than December 31 of such year. For purposes of this Agreement, a termination of Employment shall be deemed to be by reason of “Disability” if immediately prior to such termination of Employment, the Employee shall have been continuously disabled from performing the duties assigned to the Employee for a period of not less than six consecutive calendar months, in which case such Disability shall be deemed to have commenced on the date following the end of such six consecutive calendar month period.

(2) In the event of a termination of Employment by reason of the Employee’s Retirement before the occurrence of a Change in Control of the Company (as defined below), the Award shall become immediately and fully vested and shares of Stock will be delivered as soon

as practicable following such Retirement, but in any event no later than December 31 of such year. For purposes of this Agreement, “Retirement” shall mean the a termination of the Employee’s Employment with the Company for any reason other than Cause on or after the Employee’s attainment of age sixty (60) and ten (10) years of service with the Company; provided , however , that a voluntary resignation from Employment shall not be considered Retirement for purposes of this Agreement unless the Employee shall have given not less than six (6) months’ advance written notice of such resignation to the Chair of the Board (or such lesser period of notice as may be dete rmined by the Board ) .

(1) Immediately prior to a Change in Control of the Company unless in connection therewith this Award is assumed (or a substitute award granted) pursuant to Section 7(a)(1) of the Plan, this Award, if then outstanding, shall vest in full and shares of Stock will be delivered or paid to the Employee, subject to Section 2(d), within ten (10) days following the Change in Control of the Company. Notwithstanding the immediately preceding sentence but subject to the immediately following sentence, if in connection with the Change in Control of the Company, this Award is assumed (or a substitute award granted) pursuant to Section 7(a)(1) of the Plan, this Award shall continue to vest pursuant to its terms and shares of Stock will be delivered or paid to the Employee, subject to Section 2(d), within ten (10) days following the applicable vesting dates described in Section 2(a), except that upon a Change in Control Termination before the occurrence of the last vesting date specified in Section 2(a) above, this Award will become fully vested immediately prior to the Change in Control Termination and the corresponding shares of Stock shall be delivered or paid to the Employee, subject to Section 2(d) below, within ten (10) days following the Change in Control Termination. In the event of a Change in Control of the Company, notwithstanding anything in this Section 2(c)(1) to the contrary, if the Employee is or will become eligible for Retirement prior to the latest vesting date described in Section 2(a), then this Award will become fully vested immediately prior to the Change in Control of the Company and shares of Stock will be delivered or paid to the Employee, subject to Section 2(d), within ten (10) days following a Change in Control of the Company.

(2) Definitions . For purposes of this Agreement, the following definitions shall apply:

(a)

“Cause” means (i) the Employee’s refusal or failure (other than during periods of illness or disability) to perform the Employee’s material duties and responsibilities to the Company or its subsidiaries, (ii) the conviction or plea of guilty or nolo contendere of the Employee in respect of any felony, other than a motor vehicle offense, (iii) the commission of any act which causes material injury to the reputation, business or business relationships of the Company or any of its subsidiaries including, without limitation, any breach of written policies of the Company with respect to trading in securities, (iv) any other act of fraud, including, without limitation, misappropriation, theft or embezzlement, or (v) a violation of any applicable material policy of the Company or any of its subsidiaries, including, without limitation, a violation of the laws against workplace discrimination.

(b)

“Change in Control Termination” means the termination of an Employee’s Employment following a Change in Control of the Company (i) by the Company and its subsidiaries not for C ause, (ii) by the Employee for Good Reason, or (iii) by reason of the Employee’s death or Disability.

(c)

“Change in Control of the Company” means a “change in control event” (as that term is defined at Section 1.409A-3(i)(5) of the Treasury Regulations) with respect to the Company, which generally will include the following events, subject to such additional rules and requirements as may be set forth in the Treasury Regulations and related guidance: (i) a transfer or issuance of stock of the Company, where stock in the Company remains outstanding after the transaction, and one person, or more than one person acting as a group (as determined under the Treasury Regulations), acquires ownership of stock in the Company that, together with stock held by such person or group, constitutes more than 50% of the total fair market value or total voting power of the stock of the Company (however, if a person or group is considered to own more than 50% of the total fair market value or 30% of the total voting power of the stock of the Company, the acquisition of additional stock by the same person or group will not be considered a change in control for purposes of this Section 2(c)); (ii) the acquisition by a person or group, during the 12-month period ending on the date of the most recent acquisition by such person or group, of ownership of stock possessing 30% or more of the total voting power of the Company (however, if a person or group is considered to control the Company within the meaning of this sentence (i.e., owns stock of the Company possessing 30% or more of the total voting power of the Company), then the acquisition of additional control will not be considered a change in control for purposes of this Section 2(c)); (iii) the replacement of a majority of members of the Company’s Board of Directors during any 12-month period by directors whose appointment or election is not endorsed by a majority of the members of the Company’s Board of Directors before the appointment or election; or (iv) the acquisition by a person or group, during the 12-month period ending on the date of the most recent acquisition by such person or group, of assets from the Company that have a total gross fair market value equal to or more than 40% of the total gross fair market value of all the assets of the Company, as determined under the Treasury Regulations (however, a transfer of assets to certain related persons, as provided under the Treasury Regulations, or to an entity that is controlled by the shareholders of the Company immediately after the transfer, will not be considered a change in control for purposes of this Section 2(c)).

(d)

Employment other than in connection with a reduction as part of a general reduction applicable to all similarly-situated employees of the Company, or (iii) a relocation of the Employee to a position that is located greater than 40 miles from the location of such Employee’s most recent principal location of Employment with the Company; provided, however, that the Employee will be treated as having resigned for Good Reason only if he or she provides the Company with a notice of termination within 90 days of the initial existence of one of the conditions described above, following which the Company shall have 30 days from the receipt of the notice of termination to cure the event specified in the notice of termination and, if the Company fails to so cure the event, the Employee must terminate his or her Employment not later than 30 days following the end of such cure period.

(d) Delivery of Shares . Subject to the terms of this Agreement and satisfaction of any withholding tax liability pursuant to Section 5 hereof, when shares of Stock are delivered, the Company shall deliver to the Employee a certificate or shall credit the Employee’s account so as to evidence the number of shares of Stock, if any, to which the Employee is entitled hereunder, as calculated in accordance with this Section 2.

3. Transfer . Any shares of Stock that are delivered pursuant to Section 2(d) may be sold, assigned, pledged, hypothecated, encumbered, or transferred or disposed of in any other manner, in whole or in part, only in compliance with the terms, conditions and restrictions as set forth in the governing instruments of the Company, applicable federal and state securities laws or any other applicable laws or regulations and the terms and conditions hereof. This award itself shall not be sold, assigned, pledged, hypothecated, encumbered, or transferred or disposed of in any other manner, in whole or in part.

5. Tax Withholding . No shares or cash will be issued or paid under this Award until the Employee pays (or makes provision acceptable to the Company for the prompt payment of) an amount sufficient to allow the Company to satisfy its tax withholding obligations, as determined by the Company. To this end, the Employee shall either:

(a)

pay the Company the amount of tax to be withheld (including through payroll withholding if the Company determines that such payment method is acceptable),

(b)

either have been owned by the Employee for more than six (6) months or were not acquired, directly or indirectly, from the Company,

(c)

make a payment to the Company consisting of a combination of cash and such shares of Stock, or

(d)

request that the Company cause to be withheld a number of vested shares of Stock having a then-fair market value sufficient to discharge required federal, state and local tax withholding.

In no event shall the payment or withholding of taxes be made later than the end of the payment period prescribed in Section 2(d). In the event the Employee fails to timely pay or timely elect withholding of taxes in the manner described in Section 5(a), (b), (c) or (d), the Company reserves the right to withhold cash or a number of vested shares of Stock having a then fair market value sufficient to discharge required federal, state and local tax withholding.

6. Section 409A of the Code . Awards granted pursuant to this Agreement are intended to be exempt from, or comply with, the requirements of Section 409A of Code and guidance issued thereunder and shall be construed accordingly. Notwithstanding anything to the contrary in this Agreement, if at the time of the Employee’s termination of Employment, the Employee is a “specified employee,” as defined below, any and all amounts payable under this Agreement on account of such separation from service that constitute deferred compensation and would (but for this provision) be payable within six (6) months following the date of termination, shall instead be paid on the next business day following the expiration of such six (6) month period or, if earlier, upon the Participant’s death; except (i) to the extent of amounts that do not constitute a deferral of compensation within the meaning of Section 1.409A-1(b) of the Treasury Regulations, as determined by the Company in its reasonable good faith discretion or (ii) other amounts or benefits that are not subject to the requirements of Section 409A. For purposes of this Agreement, all references to “termination of employment” and correlative phrases shall be construed to require a “separation from service” (as defined in Section 1.409A-1(h) of the Treasury Regulations after giving effect to the presumptions contained therein), and the term “specified employee” means an individual determined by the Atlas to be a specified employee under Section 1.409A-1(i) of the Treasury Regulations. Notwithstanding anything to the contrary in this Agreement, neither the Company, nor any subsidiary, nor the Committee, nor any person acting on behalf of the Company, any subsidiary, or the Committee, shall be liable to the Employee or to the estate or beneficiary of the Employee by reason of any acceleration of income, or any additional tax, asserted by reason of the failure of this Agreement or any payment hereunder to satisfy the requirements of Section 409A of the Code or by reason of Section 4999 of the Code.

If to the Company:

Atlas Air Worldwide Holdings, Inc.

2000 Westchester Avenue

Purchase, New York 10577

Attention: General Counsel

If to the Employee:

11. No Right to Continued Employment . This Award shall not confer upon the Employee any right with respect to continuance of employment by the Company nor shall this Award interfere with the right of the Company to terminate the Employee’s employment at any time.

13. Counterparts . This Agreement may be executed in two counterparts, each of which shall constitute one and the same instrument.

[SIGNATURE PAGE FOLLOWS AS A SEPARATE PAGE]

IN WITNESS WHEREOF, the undersigned have executed this Restricted Stock Unit Agreement as of the date first above written.

ATLAS AIR WORLDWIDE HOLDINGS, INC.

By:
	Name:	Adam R. Kokas
	Title:	Executive Vice President, General Counsel, Secretary and Chief Human Resources Officer


William J. Flynn

Exhibit 10.5

ATLAS AIR WORLDWIDE HOLDINGS, INC.

PERFORMANCE SHARE UNIT AGREEMENT

THIS PERFORMANCE SHARE UNIT AGREEMENT, dated as of [●], 2017 (the “Agreement”), is between Atlas Air Worldwide Holdings, Inc. (the “Company”), a Delaware corporation, and [●] (the “Employee).

WHEREAS, the Employee has been granted the following award under the Company’s 2016 Incentive Plan (the “Plan”) as of [●], 2017 (the “Date of Grant”);

NOW, THEREFORE, in consideration of the premises and mutual covenants contained herein, and for other good and valuable consideration, the parties hereto agree as follows.

The Unit Delivered Shares and the Deferred Dividend Shares are collectively referred to herein as the “Performance Share Award” or “this award.”

2. Vesting; Delivery of Stock; Termination of Employment .

(1) “ROIC” for the Company shall be an average of the Company’s actual ROIC for 2017, 2018 and 2019 and shall mean a fraction where the numerator is NOPAT and the denominator is Average Invested Capital, as determined by the Committee. “NOPAT” is defined as adjusted operating income, as included in the Company’s press release, minus Cash Tax Paid. “Cash Tax Paid” is defined as income taxes as reflected on the income statement minus deferred taxes as reflected on the cash flow statement. “Average Invested Capital” is defined as the average of the beginning and ending Invested Capital during the year. “Invested Capital” is defined as capital lease obligations, plus short and long term debt plus total stockholders’ equity minus an amount equal to cash, cash equivalents, restricted cash, and short‑term investments. Invested Capital shall exclude investment amounts associated with aircraft acquisition until the first time that such aircraft is flown under a customer contract at which time all amounts accrued with respect to such aircraft shall be considered in the Average Invested Capital calculation from such date. Invested Capital shall be reduced by the amount of any investments held in the Company’s direct or indirect debt securities that remain outstanding and that have not otherwise been defeased.

(3) In the calculation of EBITDA Growth and ROIC, amounts objectively demonstrated to be attributable to the following items will not be taken into account: (i) any benefit or detriment resulting from changes in the Company ’s financial reporting (including but not limited to changes in accounting principles) or from statutory changes in federal, state or foreign income tax rates; (ii) any a ggregate costs in excess of $5 00,000 for business initiatives not specified in the Company’s operating plans; (iii) any costs related to retention, recruitment, or termination of executive officers; (iv) any costs related to collective bargaining, other labor negotiations, grievances or other disputes including labor unions in excess of the Company’s operating plans; and (v) any costs or the payment of any fines, penalties, deposits or settleme nt amounts in connection with (A ) foreign or domestic antitrust investi gations and related lawsuits, (B ) Brazilian customs or labor claims or investigations, or (C ) environmental, regulatory or compliance matters (including any related compliance or other costs or actions) resulting from changes in applic able law or otherwise. The ROIC ratio will exclude the unconsolidated results of Polar Air Cargo Worldwide, Inc.

(d) Death, Disability or Involuntary Termination not for Cause .

(2) Any former Employee, upon Disability or involuntary termination by the Company not for cause Cause, or the estate of an Employee, upon death, will continue to hold the vested portion of the Performance Share Award, subject to the restrictions and all terms and conditions of this Agreement, until delivery of Shares pursuant to Section 2(c). Subject to Section 2(e), the appropriate number of Unit Delivered Shares and Deferred Dividend Shares, if any (calculated as provided in Section 2(b)) shall not be delivered until the completion of the Performance Period and the Determination Date.

(3) Definitions . For purposes of this Agreement:

(a)

(b)

(e) Change in Control .

(1) Immediately prior to a Change in Control of the Company unless in connection therewith this award is assumed (or a substitute award granted) pursuant to Section 7(a)(1) of the Plan, the Performance Criteria in the Performance Criteria Schedule of this award, if this award is then outstanding, shall be deemed to have been satisfied based on assumed achievement at the 200% achievement level (“Deemed CIC Achievement”) and this award shall be deemed fully vested on such basis and the Unit Delivered Shares and Deferred Dividend Shares underlying this award shall be delivered or paid to the Employee within ten (10) days following the Change in Control of the Company. Notwithstanding the immediately preceding sentence, if in connection with the Change in Control of the Company, this award is assumed (or a substitute award granted) pursuant to Section 7(a)(1) of the Plan, this award shall become vested only if (A) the Employee’s Employment continues until the end of the Performance Period, in which case this award will become fully vested at the end of the Performance Period, or (B) there is a Change in Control Termination before the end of the Performance Period, in which case this award will become fully vested in connection with the Change in Control Termination. In the case of either (A) or (B), there shall be delivered or paid to the Employee, within ten (10) days following vesting, the Unit Delivered Shares and Deferred Dividend Shares underlying this award, determined on the basis of the Deemed CIC Achievement.

(2) For purposes of this Agreement, the following definitions shall apply:

(a)

(b)

(i) a transfer or issuance of stock of the Company, where stock in the Company remains outstanding after the transaction, and one person, or more than one person acting as a group (as determined under the Treasury Regulations), acquires ownership of stock in the Company that, together with stock held by such person or group, constitutes more than 50% of the total fair market value or total voting power of the stock of the Company (however, if a person or group is considered to own more than 50% of the total fair market value or 30% of the total voting power of the stock of the Company, the acquisition of additional stock by the same person or group will not be considered a change in control for purposes of this Section 2(e));

determined under the Treasury Regulations (however, a transfer of assets to certain related persons, as provided under the Treasury Regulations, or to an entity that is controlled by the shareholders of the Company immediately after the transfer, will not be considered a change in control for purposes of this Section 2(e)).

(c)

“Good Reason” means (i) a material reduction in the Employee’s duties and responsibilities from those of the Employee’s most recent position with the Company, (ii) a reduction of the Employee’s aggregate salary, benefits and other compensation (including any incentive opportunity) from that which the Employee was most recently entitled during Employment other than in connection with a reduction as part of a general reduction applicable to all similarly-situated employees of the Company, or (iii) a relocation of the Employee to a position that is located greater than 40 miles from the location of such Employee’s most recent principal location of Employment with the Company; provided , however , that the Employee will be treated as having resigned for Good Reason only if he or she provides the Company with a notice of termination within 90 days of the initial existence of one of the conditions described above, following which the Company shall have 30 days from the receipt of the notice of termination to cure the event specified in the notice of termination and, if the Company fails to so cure the event, the Employee must terminate his or her Employment not later than 30 days following the end of such cure period.

(a)

pay the Company the amount of tax to be withheld (including through payroll withholding if the Company determines that such payment method is acceptable),

(b)

(c)

make a payment to the Company consisting of a combination of cash and such shares of Stock, or

(d)

request that the Company cause to be withheld a number of vested shares of Stock having a then fair market value sufficient to discharge required federal, state and local tax withholding.

subsidiary, nor the Committee, nor any person acting on behalf of the Company, any subsidiary, or the Committee, shall be liable to the Employee or to the estate or beneficiary of the Employee by reason of any acceleration of income, or any additional tax, asserted by reason of the failure of this Agreement or any payment hereunder to satisfy the requirements of Section 409A of the Code or by reason of Section 4999 of the Code .

If to the Company:

Atlas Air Worldwide Holdings, Inc.

2000 Westchester Avenue

Purchase, New York 10577

Attention: General Counsel

If to the Employee:

13. Counterparts . This Agreement may be executed in two counterparts, each of which shall constitute one and the same instrument.

[SIGNATURE PAGE FOLLOWS AS A SEPARATE PAGE]

IN WITNESS WHEREOF, the undersigned have executed this Performance Share Unit Agreement as of the date first above written.

ATLAS AIR WORLDWIDE HOLDINGS, INC.

By:
	Name:	Adam R. Kokas
	Title:	Executive Vice President, General Counsel, Secretary and Chief Human Resources Officer


Employee

Exhibit 10.6

ATLAS AIR WORLDWIDE HOLDINGS, INC.

RESTRICTED STOCK UNIT AGREEMENT

THIS RESTRICTED STOCK UNIT AGREEMENT, dated as of [●], 2017, between Atlas Air Worldwide Holdings, Inc. (the “Company”), a Delaware corporation, and [●] (the “Director”).

WHEREAS, the Director has been granted the following award under the Company’s 2016 Incentive Plan (the “Plan”) on [Date] (the “Date of Grant”).

NOW, THEREFORE, in consideration of the premises and mutual covenants contained herein, and for other good and valuable consideration, the parties hereto agree as follows.

1. Award of Restricted Stock Units. Pursuant to the provisions of the Plan, the terms of which are incorporated herein by reference, the Director is hereby awarded [●] restricted stock units (“Restricted Stock Units”), which constitute the right to receive, without payment by the Director therefor, [●] shares of Stock on a deferred basis (the “Unit Award”), and the right to receive, without payment by the Director therefor, additional shares of Stock on a deferred basis, equal in value to the dividends, if any, which would have been paid with respect to the shares of Stock underlying the Unit Award had such shares of Stock been issued to the Director on the Date of Grant (the “Deferred Dividend Shares”), in each case subject to the terms and conditions of the Plan and those herein set forth. The Unit Award and the Deferred Dividend Shares are individually and collectively referred to herein as the “Award.” Capitalized terms used herein and not defined shall have the meanings set forth in the Plan. In the event of any conflict between this Agreement and the Plan, the Plan shall control.

2. Forfeiture Risk. If the Director ceases to remain a member of the Board of Directors of the Company for any reason other than death or Disability (as defined below), any unvested portion of the Award (determined after taking account of the provisions of Section 3) shall automatically and immediately be forfeited and terminated.

3. Vesting of Award; Treatment Upon Termination of Service. Unless otherwise provided by the Compensation Committee, the Award shall be subject to the vesting schedule described in this Section 3.

(a) Vesting Generally. Subject to the following provisions of this Section 3 and the other terms and conditions of this Agreement, the Unit Award shall become vested on the basis of one Restricted Stock Unit to one share of Stock, and the Deferred Dividend Shares shall become vested only upon the vesting of the underlying Restricted Stock Unit and only if a dividend has actually been declared and paid on the Stock as of the vesting date of the Restricted Stock Unit. The Unit Award will vest in its entirety on the first to occur of the following: (i) the first anniversary of the Date of Grant; (ii) the day of the Director’s death; (iii) the day of the Director’s Disability; or (iv) a Change in Control of the Company (as defined below). The number of shares of Stock to be delivered in respect of Deferred Dividend Shares shall be determined based on the fair market value of the Stock based on the closing price of shares of Stock on the day such Deferred Dividend Shares shall vest.

(b) Change in Control. For purposes of this Agreement, “ Change in Control of the Company ” means a “ change in control event ” (as that term is defined at Section 1 .409A ‑ 3(i)(5) of the Treasury Regulations) with respect to the Company, which generally will include the following events, subject to such additional rules and requirements as may be set forth in the Treasury Regulations and related guidance : (1 ) a transfer or issuance of stock of the Company, where stock in the Company remains outstanding after the transaction, and one person, or more than one person acting as a group (as determined under the Treasury Regulations), acquires ownership of stock in the Company that, together with stock held by such person or group, constitutes more than 50% of the total fair market value or total voting power of the stock of the Company (however, if a person or group is considered to own more than 50% of the total fair market value or 30% of the total voting power of the stock of the Company, the acquisition of additional stock by the same person or group will not be considered a change in control for purposes of this Section 3 (b)); (2 ) the acquisition by a person or group, during the 12 ‑ month period ending on the date of the most recent acquisition by such person or group, of ownership of stock possessing 30% or more of the total voting power of the Company (however, if a person or group is considered to control the Company within the meaning of this sentence (i.e., owns stock of the Company possessing 30% or more of the total voting power of the Company), then the acquisition of additional control will not be considered a change in control for purposes of this Section 3 (b)); (3 ) the replacement of a majority of members of the Company ’ s Board of Directors during any 12 ‑ month period by directors whose appointment or election is not endorsed by a majority of the members of the Company ’ s Board of Directors before the appointment or election; or (4 ) the acquisition by a person or group, during the 12 ‑ month period ending on the date of the most recent acquisition by such person or group, of assets from the Company that have a total gross fair market value equal to or more than 40% of the total gross fair market value of all the assets of the Company, as determined under the Treasury Regulations (however, a transfer of assets to certain related persons, as provided under the Treasury Regulations, or to an entity that is controlled by the shareholders of the Company immediately after the transfer, will not be considered a change in control for purposes of this Section 3 (b)).

(c) Disability. For purposes of this Agreement, “Disability” means (i) the inability of the Director to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment which can be expected to result in death or can be expected to last for a continuous period of not less than twelve months, or (ii) by reason of such impairment the Administrator determines that the Director would be entitled to income replacement benefits for a period of not less than three months if the Director were a participant in the Company’s Long Term Disability Plan.

4. Other Terms and Conditions. It is understood and agreed that the Award of Restricted Stock Units evidenced hereby is subject to the following terms and conditions:

(a) Settlement. As soon as practicable after vesting of the Unit Award, but in no event later than March 15 of the year following such vesting, the Company shall deliver to the Director, or shall credit to the Director’s account uncertificated shares evidencing, shares of Stock equal to the number of Restricted Stock Units and Deferred Dividend Shares previously vested. Notwithstanding the immediately preceding sentence, the Compensation Committee may, but is not required to, prescribe rules pursuant to which the Director may elect to defer

settlement of the Award . Any such deferral election must be made in compliance with such rules and procedures as the Compensation Committee deems advisable.

(b) Rights of a Stockholder. The Director shall have no right to transfer, pledge, hypothecate or otherwise encumber such Restricted Stock Unit or Deferred Dividend Shares. Once the Restricted Stock Unit and Deferred Dividend Shares vest and the shares of Stock have been delivered, but not until such time and only with respect to the shares of Stock so delivered, the Director shall have the rights of a stockholder, including, but not limited to, the right to vote and to receive dividends, but only with respect to the shares of Stock delivered.

5. Expenses of Issuance of Shares. The issuance of stock certificates hereunder shall be without charge to the Director. The Company shall pay, and indemnify the Director from and against any issuance, stamp or documentary taxes (other than transfer taxes) or charges imposed by any governmental body, agency or official (other than income taxes) by reason of the issuance of shares.

6. Certain Tax Matters. The Director expressly acknowledges that:

(a) the Award shall be construed in a manner that complies with the requirements of, or an exemption from, Section 409A of the Code, including, but not limited to, the short-term deferral exception as set forth in Treas. Reg. 1.409A‑1(b)(4); and

(b) notwithstanding the immediately preceding provision, neither the Company, nor any Affiliate, nor the Compensation Committee nor any person acting on behalf of any of them, shall be liable to the Director by any reason of any acceleration of income, or any tax or additional tax, asserted by reason of any failure of the Award or any portion thereof to satisfy the requirements for exemption from, or compliance with, Section 409A or by reason of Section 4999 of the Code.

7. References. References herein to rights and obligations of the Director shall apply, where appropriate, to the Director’s legal representative or estate without regard to whether specific reference to such legal representative or estate is contained in a particular provision of this Agreement.

8. Notices. Any notice required or permitted to be given under this Agreement shall be in writing and shall be deemed to have been given when delivered personally or by courier, or sent by certified or registered mail, postage prepaid, return receipt requested, duly addressed to the party concerned at the address indicated below or to such changed address as such party may subsequently by similar process give notice of:

If to the Company:

Atlas Air Worldwide Holdings, Inc.

2000 Westchester Avenue

Purchase, New York 10577

Attention: General Counsel

If to the Director:

At the Director’s most recent address shown on the Company’s corporate records, or at any other address which the Director may specify in a notice delivered to the Company in the manner set forth herein.

9. Governing Law. This Agreement shall be governed by and construed in accordance with the internal laws of New York, without giving effect to principles of conflict of laws of any jurisdiction which would cause the application of law, other than the State of New York, to be applied.

10. Counterparts. This Agreement may be executed in two counterparts, each of which shall constitute one and the same instrument.

[SIGNATURE PAGE FOLLOWS AS A SEPARATE PAGE]

IN WITNESS WHEREOF, the undersigned have executed this Restricted Stock Unit Agreement as of the date first above written.

ATLAS AIR WORLDWIDE HOLDINGS, INC.

By:
		Adam R. Kokas
		Executive Vice President, General Counsel, Secretary and Chief Human Resources Officer


		[●]

Exhibit 31.1

Rule 13a-14(a)/15d-14(a) Certification of the Chief Executive Officer

I, William J. Flynn, certify that:

1.	I have reviewed this Quarterly Report on Form 10-Q of Atlas Air Worldwide Holdings, Inc.;

2.	Based on my knowledge, this Report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this Report;

3.	Based on my knowledge, the Financial Statements, and other financial information included in this Report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this Report;

The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this Report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this Report based on such evaluation; and

d) Disclosed in this Report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.	The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Dated: May 3, 2017		/s/ William J. Flynn
		William J. Flynn
		President and Chief Executive Officer

Exhibit 31.2

Rule 13a-14(a)/15d-14(a) Certification of the Chief Financial Officer

I, Spencer Schwartz, certify that:

1.	I have reviewed this Quarterly Report on Form 10-Q of Atlas Air Worldwide Holdings, Inc.;

2.	Based on my knowledge, this Report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this Report;

3.	Based on my knowledge, the Financial Statements, and other financial information included in this Report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this Report;

The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting ( as defined in Exchange Act Rules 13a-15(f) and 15d-15(f) for the registrant and have:

5.	The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Dated: May 3, 2017		/s/ Spencer Schwartz
		Spencer Schwartz
		Executive Vice President and Chief Financial Officer

Exhibit 32.1

Section 1350 Certifications

Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

In connection with the Quarterly Report of Atlas Air Worldwide Holdings, Inc. (the “Company”) on Form 10-Q for the period ending March 31, 2017 as filed with the Securities and Exchange Commission (the “Report”), we, William J. Flynn and Spencer Schwartz, Chief Executive Officer and Chief Financial Officer, respectively, of the Company certify that to our knowledge:

1. the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

2. the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: May 3, 2017

/s/ William J. Flynn

William J. Flynn

President and Chief Executive Officer

/s/ Spencer Schwartz

Spencer Schwartz

Executive Vice President and Chief Financial Officer