Revenue-generating block hours for this segment increased by 6 percent compared with the third quarter of 2010. Block hours increased due to additional CAM-owned and ATSG-operated 767 freighters added in the last 12 months, plus hours generated by four DHL-owned 767 freighters leased and operated by ABX Air under its Crew, Maintenance and Insurance (CMI) agreement with DHL, and one 767-300 freighter leased from a third party for ACMI service. These increases were offset in part by block hour reductions related to the DB Schenker restructuring.
Revenues from other businesses rose 14 percent to $26.3 million before elimination of inter-company results. These businesses had an aggregate pre-tax profit of $3.7 million in the third quarter of 2011, compared with $3.1 million a year earlier. Results reflect improved earnings from Airborne Maintenance and Engineering Services, ATSG's MRO business, compared with the prior year.
Impairment ChargesIn late July, DB Schenker announced its plan to adopt a new business model in September leading to the phase-out of its North American dedicated air cargo network operated by ATSG. As a result, sixteen ATSG aircraft - eight DC-8 and eight Boeing 727 freighters - operated by Air Transport International (ATI) and Capital Cargo International Airlines (CCIA) in DB Schenker's North American network were reduced to five DC-8 and four Boeing 727 aircraft effective September 2. On October 23, DB Schenker canceled scheduled operations for the remaining DC-8 aircraft, but retained two DC-8s as spare aircraft and the four scheduled Boeing 727 aircraft. ATSG's impairment testing during the third quarter examined the expected cash flows from its Boeing 727 and DC-8 aircraft, and the value of goodwill and customer relationships of its associated entities. With the support of independent advisers, ATSG determined that the carrying value of its 727 and DC-8 assets, recorded goodwill and customer relationship intangible assets was overstated, resulting in third quarter pre-tax charges totaling $27.1 million.
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