Air T Stock

Air T, Inc. engages in the overnight air cargo, ground equipment sales, and commercial jet engine and parts businesses.

Segments

Overnight Air Cargo

This segment operates in the air express delivery services industry. The company’s Overnight Air Cargo segment is operated through Air T and Mountain Air Cargo, Inc. (MAC) and CSA Air, Inc. (CSA). MAC and CSA have a relationship with FedEx spanning over 40 years and represent two of seven companies in the U.S. that have North American feeder airlines under contract with FedEx. MAC and CSA operate and maintain Cessna Caravan, ATR-42 and ATR-72 aircraft that fly daily small-package cargo routes throughout the eastern United States and upper Midwest, and in the Caribbean. MAC and CSA’s revenues are derived principally pursuant to ‘dry-lease’ service contracts with FedEx. In these ‘dry- lease’ contracts, FedEx provides the aircraft while MAC and CSA provide their own crew and exercise operational control of their flights.

On June 1, 2021, MAC and CSA entered into new dry-lease agreements with FedEx, which together cover all of the aircraft operated by MAC and CSA and replaced all prior dry-lease service contracts. These dry-lease agreements provide for the lease of specified aircraft by MAC and CSA in return for the payment of monthly rent with respect to each aircraft leased, which monthly rent reflected an estimate of a fair market rental rate. These dry-lease agreements provide that FedEx determines the type of aircraft and schedule of routes to be flown by MAC and CSA, with all other operational decisions made by MAC and CSA, respectively.

As of March 31, 2022, MAC and CSA had an aggregate of 72 aircraft under its dry-lease agreements with FedEx. Included within the 72 aircraft, 2 Cessna Caravan aircraft are considered soft-parked. Soft-parked aircraft remain covered under the company’s agreements with FedEx although at a reduced administrative fee compared to aircraft that are in operation. MAC and CSA continue to perform maintenance on soft-parked aircraft, but they are not crewed and do not operate on scheduled routes.

MAC and CSA are not contractually precluded from providing services to other parties and MAC occasionally provides third-party maintenance services to other airline customers and the U.S. military.

MAC and CSA operate under separate aviation certifications. MAC is certified to operate under Part 121, Part 135 and Part 145 of the regulations of the FAA. These certifications permit MAC to operate and maintain aircraft that can carry a maximum cargo capacity of 7,500 pounds on the Cessna Caravan 208B under Part 135 and a maximum cargo capacity of 14,000 pounds for the ATR-42 and 17,800 pounds for the ATR-72 aircraft under Part 121. CSA is certified to operate and maintain aircraft under Part 135 of the FAA regulations. This certification permits CSA to operate aircraft with a maximum cargo capacity of 7,500 pounds.

The Cessna Caravan 208B aircraft are maintained under an FAA Approved Aircraft Inspection Program (AAIP). The inspection intervals range from 100 to 200 hours. The engine overhaul period on the Cessna aircraft is 8,000 hours.

The ATR-42 and ATR-72 aircraft are maintained under a FAA Part 121 continuous airworthiness maintenance program. The program consists of A and C service checks, as well as calendar checks ranging from weekly to 12 years in duration. The engine overhaul period is 6,000 hours.

MAC and CSA operate in a niche market within a highly competitive contract cargo carrier market. MAC and CSA are two of nine carriers that operate within the United States as FedEx feeder carriers. MAC and CSA are benchmarked against the other five FedEx feeders based on safety, reliability, compliance with federal, state and applicable foreign regulations, price and other service-related measurements. FedEx conducts periodic audits of MAC and CSA, and these audits are an integral part of the relationship between the carrier and FedEx.

Ground Equipment Sales

This segment manufactures and provides mobile deicers and other specialized equipment products to passenger and cargo airlines, airports, the military and industrial customers.

Global Ground Support, LLC (GGS) is located in Olathe, Kansas and manufactures, sells and services aircraft deicers and other specialized equipment sold to domestic and international passenger and cargo airlines, ground handling companies, the United States Air Force (USAF), airports and industrial customers. GGS’s product line includes aircraft deicers, scissor-type lifts, military and civilian decontamination units, flight-line tow tractors, glycol recovery vehicles and other specialized equipment.

GGS designs and engineers its products. Components acquired from third-party suppliers are used in the assembly of its finished products. Components are sourced from a diverse supply chain. The primary components for mobile deicing equipment are the chassis (which is a commercial medium or heavy-duty truck), the fluid storage tank, a boom system, the fluid delivery system and heating equipment. GGS utilizes continuous improvements and other techniques to improve efficiencies and designs to minimize product price increases to its customers, to respond to regulatory changes, such as emission standards, and to incorporate technological improvements to enhance the efficiency of GGS’s products. Improvements have included the development of single operator mobile deicing units to replace units requiring two operators, a patented premium deicing blend system and a more efficient forced-air deicing system.

GGS manufactures five basic models of mobile deicing equipment with capacities ranging from 700 to 2,800 gallons. GGS also offers fixed-pedestal-mounted deicers. Each model can be customized as requested by the customer, including single operator configuration, fire suppressant equipment, open basket or enclosed cab design, a patented forced-air deicing nozzle, on-board glycol blending system to substantially reduce glycol usage, and color and style of the exterior finish. GGS also manufactures five models of scissor-lift equipment, for catering, cabin service and maintenance service of aircraft; and has developed a line of decontamination equipment, flight-line tow tractors, glycol recovery vehicles and other special purpose mobile equipment.

GGS’s mobile deicing equipment business has historically been seasonal, with revenues typically being lower in the fourth and first fiscal quarters (year ended March 2022) as commercial deicers are typically delivered prior to the winter season. The company has continued its efforts to reduce GGS’s seasonal fluctuation in revenues and earnings by broadening its international and domestic customer base and its product line.

In October 2021, GGS was awarded a new contract to supply deicing trucks to the USAF. This agreement renewed GGS' original agreement with the USAF entered into in July 2009. Per the contract, GGS has to provide pricing that will be contractual for each one-year period within the years that the contract is awarded. Further, based upon volume of commercial items purchased during that year, there may be discounts calculated into the pricing and are reflective of the submitted pricing. With all option years expected to be executed by the government, this contract would expire on October 21, 2027.

GGS sold a total of 7 deicers under the previous contract with the USAF, including both GL 1800 and ER 2875 models during the year ended March 31, 2022 and all of the units were accepted by the USAF. GGS has already received confirmed orders of 18 deicers under the new agreement and currently expects delivery of both GL 1800 and ER 2875 models to begin in the second quarter of fiscal year 2023.

Commercial Jet Engines and Parts

This segment manages and leases aviation assets; supplies surplus and aftermarket commercial jet engine components; provides commercial aircraft disassembly/part-out services; commercial aircraft parts sales; procurement services; and overhaul and repair services to airlines.

Contrail Aviation Support, LLC (Contrail Aviation Support) and Jet Yard, LLC (Jet Yard) (acquired during 2017), AirCo (AirCo, LLC; AirCo 1, LLC; AirCo 2, LLC; and AirCo Services, LLC) (formed in May 2017), Worthington (Worthington Aviation, LLC) (acquired in May 2018), and Jet Yard Solutions, LLC (Jet Yard Solutions) (formed in January 2021) comprise the Commercial Jet Engines and Parts segment of the company’s operations.

Contrail Aviation Support is a commercial aircraft trading, leasing and parts solutions provider. Its primary focus revolves around the CFM International CFM56-3/-5/-7 engines and the International Aero Engines V2500A5 engine, which power the two most prevalent narrow body, single aisle aircraft that are flown commercially—the Boeing 737 Classic / 737 NG and the Airbus A320 family. Contrail Aviation Support acquires commercial aircraft, jet engines and components for the purposes of sale, trading, leasing and disassembly/overhaul. Contrail holds an ASA-100 accreditation from the Aviation Suppliers Association.

Jet Yard and Jet Yard Solutions offer commercial aircraft storage, storage maintenance and aircraft disassembly/part-out services at facilities leased at the Pinal Air Park in Marana, Arizona. The prevailing climate in this area of Arizona provides conditions conducive to long-term storage of aircraft. Jet Yard Solutions is registered to operate a repair station under Part 145 of the regulations of the FAA. Jet Yard leases approximately 48.5 acres of land under a lease agreement with Pinal County, Arizona. Jet Yard was organized in 2014, entered into the lease in June 2016 and had maintained de minimus operations from formation through the date it was acquired by the company. Effective January 1, 2021, Jet Yard subleased the aforementioned lease with Pinal County to Jet Yard Solutions.

AirCo operates an established business offering commercial aircraft parts sales, exchanges, procurement services, consignment programs and overhaul and repair services. AirCo Services, a wholly-owned subsidiary of AirCo (AirCo Services), holds FAA and European Aviation Safety Agency certifications covering aircraft instrumentation, avionics and a range of electrical accessories for civilian, military transport, regional/commuter and business/commercial jet and turboprop aircraft. Customers of AirCo include airlines and commercial aircraft leasing companies.

Worthington, like AirCo, operates an established business, which supplies spare parts, repair programs and aircraft maintenance services to the global aviation community of regional and business aircraft fleets. Worthington offers a globally networked infrastructure and 24/7 support, ensuring fast delivery of spare parts and service, with four locations strategically located in the United States, the United Kingdom and Australia. In addition, Worthington operates two FAA and EASA Certificated Repair Stations. The Tulsa maintenance, repair and overhaul (MRO) facility provides composite aircraft structures, repair and support services. As a strategic resource for flight control, exhaust system and line replacement components, Worthington offers a wide array of services for complex operations. At the Eagan, Minnesota-based Repair Station, Worthington Repair Services offers a wide range of capabilities for repair and overhaul of airframe, accessories and power plant components in the support of external and internal sales.

Governmental Regulation

The Transportation Security Administration requires MAC and CSA to comply with a Full All-Cargo Aircraft Operator Standard Security Plan, which contains evolving and strict security requirements.

The company, through its subsidiaries, holds all operating airworthiness and other FAA certificates that are required for the conduct of its business, although these certificates may be suspended or revoked for cause. The FAA periodically conducts routine reviews of MAC and CSA’s operating procedures and flight and maintenance records.

The FAA has authority under the Noise Control Act of 1972, as amended, to monitor and regulate aircraft engine noise. The aircraft operated by the company are in compliance with all such regulations promulgated by the FAA. Aircraft operated by the company also comply with standards for aircraft exhaust emissions promulgated by the U.S. Environmental Protection Agency (EPA) pursuant to the Clean Air Act of 1970, as amended.

Jet Yard, Jet Yard Solutions and AirCo, like Worthington, operate repair stations licensed under Part 145 of the regulations of the FAA. Because of the extensive use of radio and other communication facilities in its aircraft operations, the company is also subject to the Federal Communications Act of 1934, as amended.

Maintenance and Insurance

The company has secured public liability and property damage insurance in excess of minimum amounts required by the United States Department of Transportation. In March 2014, the company formed SAIC, a captive insurance company licensed in Utah.

Customers

The company’s Air Cargo business is significantly dependent on a contractual relationship with FedEx Corporation (FedEx). In the year ended March 31, 2022, 41% of the company’s consolidated operating revenues, and 97% of the operating revenues for the company’s Overnight Air Cargo segment, arose from services the company provided to FedEx.

Acquisitions

On December 2, 2021, the company, through its wholly-owned subsidiary, Wolfe Lake HQ, LLC (Wolfe Lake), completed the purchase of the real estate located at 5000 36th Street West, St. Louis Park, Minnesota.

On February 10, 2022, the company acquired GdW Beheer B.V. (GdW), a Dutch holding company in the business of providing global aviation data and information. The acquisition was completed through a wholly-owned subsidiary of the company, Air T Acquisition 22.1, LLC (Air T Acquisition 22.1), a Minnesota limited liability company, through its Dutch subsidiary, Shanwick B.V. (Shanwick).

History

Air T, Inc. was founded in 1980. The company was incorporated under the laws of the state of Delaware in 1980.