10-Q

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 June 30, 2020  

OR

☐ 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)

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

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, $0.01 Par Value	AAWW	The NASDAQ Global Select Market

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 every Interactive Data File required to be submitted 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 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.

 Large accelerated filer ☒      Accelerated filer ☐     Non-accelerated filer ☐      Smaller reporting company ☐      Emerging growth company ☐

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 July 30, 2020, there were 26,136,036 shares of the registrant’s Common Stock outstanding.

TABLE OF CONTENTS

		Page
Part I. FINANCIAL INFORMATION
Item 1.	Financial Statements	3
	Consolidated Balance Sheets as of June 30, 2020 and December 31, 2019 (unaudited)	3
	Consolidated Statements of Operations for the Three and Six Months Ended June 30, 2020 and 2019 (unaudited)	4
	Consolidated Statements of Comprehensive Income for the Three and Six Months Ended June 30, 2020 and 2019 (unaudited)	5
	Consolidated Statements of Cash Flows for the Six Months ended June 30, 2020 and 2019 (unaudited)	6
	Consolidated Statements of Stockholders’ Equity as of and for the Three and Six Months ended June 30, 2020 and 2019 (unaudited)	7
	Notes to Unaudited Consolidated Financial Statements	8
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	21
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	37
Item 4.	Controls and Procedures	37
PART II. OTHER INFORMATION
Item 1.	Legal Proceedings	39
Item 1A.	Risk Factors	39
Item 6.	Exhibits	39
	Exhibit Index	40
	Signatures	41

PART I — FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

Atlas Air Worldwide Holdings, Inc.

Consolidated Balance Sheets

(in thousands, except share data)

(Unaudited)

	June 30, 2020			December 31, 2019
Assets
Current Assets
Cash and cash equivalents	$	726,402		$	103,029
Restricted cash		12,776			10,401
Short-term investments		-			879
Accounts receivable, net of allowance of $886 and $1,822, respectively		239,051			290,119
Prepaid expenses, assets held for sale and other current assets		177,978			228,103
Total current assets		1,156,207			632,531
Property and Equipment
Flight equipment		4,962,987			4,880,424
Ground equipment		86,341			83,584
Less:  accumulated depreciation		(1,068,347	)		(977,883	)
Flight equipment modifications in progress		26,960			67,101
Property and equipment, net		4,007,941			4,053,226
Other Assets
Operating lease right-of-use assets		200,194			231,133
Deferred costs and other assets		378,567			391,895
Intangible assets, net and goodwill		73,841			76,856
Total Assets	$	5,816,750		$	5,385,641
Liabilities and Equity
Current Liabilities
Accounts payable	$	73,812		$	79,683
Accrued liabilities		653,253			481,725
Current portion of long-term debt and finance leases		275,017			395,781
Current portion of long-term operating leases		143,225			141,973
Total current liabilities		1,145,307			1,099,162
Other Liabilities
Long-term debt and finance leases		2,238,664			1,984,902
Long-term operating leases		322,450			392,832
Deferred taxes		111,802			74,040
Financial instruments and other liabilities		68,160			42,526
Total other liabilities		2,741,076			2,494,300
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;     31,493,328 and 31,048,842 shares issued, 26,135,945 and 25,870,876     shares outstanding (net of treasury stock), as of June 30, 2020     and December 31, 2019, respectively		315			310
Additional paid-in-capital		801,002			761,715
Treasury stock, at cost; 5,357,383 and 5,177,966 shares, respectively		(217,711	)		(213,871	)
Accumulated other comprehensive loss		(2,347	)		(2,818	)
Retained earnings		1,349,108			1,246,843
Total stockholders’ equity		1,930,367			1,792,179
Total Liabilities and Equity	$	5,816,750		$	5,385,641

See accompanying Notes to Unaudited Consolidated Financial Statements

3

Atlas Air Worldwide Holdings, Inc.

Consolidated Statements of Operations

(in thousands, except per share data)

(Unaudited)

	For the Three Months Ended						For the Six Months Ended
	June 30, 2020			June 30, 2019			June 30, 2020			June 30, 2019
Operating Revenue	$	825,253		$	663,918		$	1,468,755		$	1,343,601
Operating Expenses
Salaries, wages and benefits		192,591			141,450			340,335			286,924
Maintenance, materials and repairs		168,300			113,471			262,452			217,091
Aircraft fuel		83,242			122,158			191,560			228,479
Depreciation and amortization		65,826			63,689			123,410			128,170
Travel		34,627			46,374			77,018			91,403
Navigation fees, landing fees and other rent		35,638			37,982			67,039			78,198
Passenger and ground handling services		30,130			30,525			62,089			62,685
Aircraft rent		24,316			40,335			48,283			82,223
Loss (gain) on disposal of aircraft		2			-			(6,715	)		-
Special charge		15,934			3,269			15,934			3,269
Transaction-related expenses		1,275			734			1,796			3,261
Other		52,710			54,961			103,822			106,054
Total Operating Expenses		704,591			654,948			1,287,023			1,287,757
Operating Income		120,662			8,970			181,732			55,844
Non-operating Expenses (Income)
Interest income		(224	)		(1,278	)		(704	)		(3,322	)
Interest expense		28,950			30,045			58,225			60,398
Capitalized interest		(132	)		(627	)		(325	)		(1,090	)
Loss on early extinguishment of debt		74			-			74			245
Unrealized loss (gain) on financial instruments		30,671			(42,300	)		29,747			4,275
Other (income) expense, net		(50,598	)		945			(49,392	)		(2,030	)
Total Non-operating Expenses (Income)		8,741			(13,215	)		37,625			58,476
Income (loss) before income taxes		111,921			22,185			144,107			(2,632	)
Income tax expense (benefit)		33,009			(64,683	)		41,842			(59,790	)
Net Income	$	78,912		$	86,868		$	102,265		$	57,158
Earnings per share:
Basic	$	3.02		$	3.36		$	3.93		$	2.22
Diluted	$	3.01		$	1.61		$	3.92		$	2.21
Weighted average shares:
Basic		26,129			25,851			26,048			25,794
Diluted		26,182			26,953			26,074			25,921

See accompanying Notes to Unaudited Consolidated Financial Statements

4

Atlas Air Worldwide Holdings, Inc.

Consolidated Statements of Comprehensive Income

(in thousands)

(Unaudited)

	For the Three Months Ended						For the Six Months Ended
	June 30, 2020			June 30, 2019			June 30, 2020			June 30, 2019
Net Income	$	78,912		$	86,868		$	102,265		$	57,158
Other comprehensive income:
Reclassification to interest expense		296			337			604			681
Income tax benefit		(70	)		(80	)		(133	)		(161	)
Other comprehensive income		226			257			471			520
Comprehensive Income	$	79,138		$	87,125		$	102,736		$	57,678

See accompanying Notes to Unaudited Consolidated Financial Statements

5

Atlas Air Worldwide Holdings, Inc.

Consolidated Statements of Cash Flows

(in thousands)

(Unaudited)

	For the Six Months Ended
	June 30, 2020			June 30, 2019
Operating Activities:
Net Income	$	102,265		$	57,158
Adjustments to reconcile Net Income to net cash provided by operating activities:
Depreciation and amortization		157,509			157,820
Amortization (accretion) of debt securities discount		(2	)		208
Provision for (reversal of) expected credit losses		(6	)		4
Loss on early extinguishment of debt		74			245
Special charge, net of cash payments		15,934			3,269
Unrealized loss (gain) on financial instruments		29,747			4,275
Loss (gain) on disposal of aircraft		(6,715	)		-
Deferred taxes		39,518			(60,122	)
Stock-based compensation		10,506			10,025
Changes in:
Accounts receivable		51,781			26
Prepaid expenses, current assets and other assets		(19,115	)		(23,835	)
Accounts payable, accrued liabilities and other liabilities		178,894			(40,076	)
Net cash provided by operating activities		560,390			108,997
Investing Activities:
Capital expenditures		(25,095	)		(76,754	)
Payments for flight equipment and modifications		(59,919	)		(99,161	)
Proceeds from insurance		-			38,133
Proceeds from investments		881			9,313
Proceeds from disposal of aircraft		44,110			-
Net cash used for investing activities		(40,023	)		(128,469	)
Financing Activities:
Proceeds from debt issuance		321,518			19,723
Payment of debt issuance costs		(3,910	)		(955	)
Payments of debt and finance lease obligations		(274,960	)		(160,091	)
Proceeds from revolving credit facility		75,000			50,000
Customer maintenance reserves and deposits received		6,010			8,039
Customer maintenance reserves paid		(14,437	)		-
Treasury shares withheld for payment of taxes		(3,840	)		(9,227	)
Net cash provided by (used for) financing activities		105,381			(92,511	)
Net increase (decrease) in cash, cash equivalents and restricted cash		625,748			(111,983	)
Cash, cash equivalents and restricted cash at the beginning of period		113,430			232,741
Cash, cash equivalents and restricted cash at the end of period	$	739,178		$	120,758
Noncash Investing and Financing Activities:
Acquisition of flight equipment included in Accounts payable and accrued liabilities	$	13,613		$	51,996
Acquisition of property and equipment acquired under operating leases	$	1,918		$	-
Customer maintenance reserves settled with sale of aircraft	$	6,497		$	-

See accompanying Notes to Unaudited Consolidated Financial Statements

6

Atlas Air Worldwide Holdings, Inc.

Consolidated Statements of Stockholders’ Equity

(in thousands, except share data)

(Unaudited)

	As of and for the Three Months Ended June 30, 2020
						Additional								Total
	Common		Treasury			Paid-In			Accumulated Other			Retained		Stockholders'
	Stock		Stock			Capital			Comprehensive Loss			Earnings		Equity
Balance at March 31, 2020	$	315	$	(217,705	)	$	782,517		$	(2,573	)	$	1,270,196	$	1,832,750
Net Income		-		-			-			-			78,912		78,912
Other comprehensive income		-		-			-			226			-		226
Stock-based compensation		-		-			6,646			-			-		6,646
Issuance of warrants		-		-			11,840			-			-		11,840
Treasury shares of 206 withheld for payment of taxes		-		(6	)		-			-			-		(6	)
Issuance of 9,919 shares of restricted stock				-			(1	)		-			-		(1	)
Balance at June 30, 2020	$	315	$	(217,711	)	$	801,002		$	(2,347	)	$	1,349,108	$	1,930,367

	As of and for the Three Months Ended June 30, 2019
						Additional							Total
	Common		Treasury			Paid-In		Accumulated Other			Retained		Stockholders'
	Stock		Stock			Capital		Comprehensive Loss			Earnings		Equity
Balance at March 31, 2019	$	310	$	(213,690	)	$	741,652	$	(3,569	)	$	1,510,246	$	2,034,949
Net Income		-		-			-		-			86,868		86,868
Other comprehensive income		-		-			-		257			-		257
Stock-based compensation		-		-			4,404		-			-		4,404
Issuance of warrant		-		-			669		-			-		669
Treasury shares of 743 withheld for payment of taxes		-		(38	)		-		-			-		(38	)
Issuance of 4,385 shares of restricted stock		-		-			-		-			-		-
Balance at June 30, 2019	$	310	$	(213,728	)	$	746,725	$	(3,312	)	$	1,597,114	$	2,127,109

	As of and for the Six Months Ended June 30, 2020
						Additional								Total
	Common		Treasury			Paid-In			Accumulated Other			Retained		Stockholders'
	Stock		Stock			Capital			Comprehensive Loss			Earnings		Equity
Balance at December 31, 2019	$	310	$	(213,871	)	$	761,715		$	(2,818	)	$	1,246,843	$	1,792,179
Net Income		-		-			-			-			102,265		102,265
Other comprehensive income		-		-			-			471			-		471
Stock-based compensation		-		-			10,506			-			-		10,506
Issuance of warrants		-		-			28,786			-			-		28,786
Treasury shares of 179,417 withheld for payment of taxes		-		(3,840	)		-			-			-		(3,840	)
Issuance of 444,486 shares of restricted stock		5		-			(5	)		-			-		-
Balance at June 30, 2020	$	315	$	(217,711	)	$	801,002		$	(2,347	)	$	1,349,108	$	1,930,367

	As of and for the Six Months Ended June 30, 2019
						Additional								Total
	Common		Treasury			Paid-In			Accumulated Other			Retained		Stockholders'
	Stock		Stock			Capital			Comprehensive Loss			Earnings		Equity
Balance at December 31, 2018	$	306	$	(204,501	)	$	736,035		$	(3,832	)	$	1,539,956	$	2,067,964
Net Income		-		-			-			-			57,158		57,158
Other comprehensive income		-		-			-			520			-		520
Stock-based compensation		-		-			10,025			-			-		10,025
Issuance of warrant		-		-			669			-			-		669
Treasury shares of 180,082 withheld for payment of taxes		-		(9,227	)		-			-			-		(9,227	)
Issuance of 443,929 shares of restricted stock		4		-			(4	)		-			-		-
Balance at June 30, 2019	$	310	$	(213,728	)	$	746,725		$	(3,312	)	$	1,597,114	$	2,127,109

See accompanying Notes to Unaudited Consolidated Financial Statements

7

Atlas Air Worldwide Holdings, Inc.

Notes to Unaudited Consolidated Financial Statements

June 30, 2020

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, 2019, which includes additional disclosures and a summary of our significant accounting policies.  The December 31, 2019 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 June 30, 2020, the results of operations for the three and six months ended June 30, 2020 and 2019, comprehensive income for the three and six months ended June 30, 2020 and 2019, cash flows for the six months ended June 30, 2020 and 2019, and stockholders’ equity as of and for the three and six months ended June 30, 2020 and 2019.

Our quarterly results are subject to seasonal and other fluctuations, including fluctuations resulting from the global COVID-19 pandemic (see Note 3 for further discussion), 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

Warrant Liability

Common stock warrants that are classified as a liability are marked-to-market at the end of each reporting period with changes in fair value recorded in Unrealized (gain) loss on financial instruments.  We utilize a Monte Carlo simulation approach to estimate the fair value of the warrant liability, 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.  Our earnings are affected by changes in our common stock price due to the impact those changes have on the fair value of our warrant liability (see Note 5 for further discussion).

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 $10.3 million and $5.3 million for the three months ended June 30, 2020 and 2019, respectively, and was $18.2 million and $9.7 million for the six months ended June 30, 2020 and 2019, respectively.

8

Deferred maintenance included within Deferred costs and other assets is as follows:  

Balance as of December 31, 2019	$	184,279
Deferred maintenance costs		24,307
Amortization of deferred maintenance		(18,237	)
Balance as of June 30, 2020	$	190,349

Recent Accounting Pronouncements Adopted in 2020

In November 2019, the Financial Accounting Standards Board (“FASB”) amended its accounting guidance for share-based payment awards issued to a customer. The amended guidance requires share-based payment awards issued to a customer to be recorded as a reduction of the transaction price in revenue based on the fair value at grant date and to be classified on the balance sheet using accounting guidance for stock-based compensation. The amended guidance was effective for fiscal years beginning after December 15, 2019. Effective January 1, 2020, we adopted the amended guidance and applied the modified retrospective approach to the most current period presented.  As a result, $14.6 million, or approximately 60% of our customer warrant liability of $24.3 million related to revenue contracts, which was included in Financial instruments and other liabilities as of December 31, 2019, was reclassified as Additional paid-in-capital within Total stockholders’ equity on January 1, 2020.  As a result, these customer warrants are no longer marked-to-market at the end of each reporting period with changes in fair value recorded as an unrealized (gain) loss on financial instruments.  The amended guidance did not impact the accounting for the remaining portion of our customer warrant liability related to Dry Lease contracts, which was approximately $9.7 million or approximately 40% of the total customer warrant liability as of December 31, 2019. The new guidance did not impact how we account for the amortization of the customer incentive asset (see Note 5 for further discussion).

In June 2016, the FASB amended its accounting guidance for the measurement of credit losses on financial instruments. The guidance requires entities to utilize an expected credit loss model for certain financial instruments, including most trade receivables, which replaces the incurred credit loss model previously used.  Under this new model, we are required to recognize estimated credit losses expected to occur over time using a broad range of information including historical information, current conditions and reasonable and supportable forecasts. Receivables related to lease contracts are not within the scope of this amended guidance. Effective January 1, 2020, we adopted the amended guidance under the modified retrospective approach and it did not have a material impact on our consolidated financial statements and related disclosures (see Note 6).

3. COVID-19 Pandemic

COVID-19

In December 2019, COVID-19 was first reported in China and has since spread to most other regions of the world.  In March 2020, COVID-19 was determined to be a global pandemic by the World Health Organization.  During the first six months of 2020, this public health crisis disrupted global manufacturing, supply chains, passenger travel and consumer spending, resulting in flight cancellations by our ACMI customers and lower U.S. Military Air Mobility Command (“AMC”) passenger flying as the military took precautionary measures to limit the movement of personnel.  A reduction of available cargo capacity in the market and increased demand for transporting goods due to the COVID-19 pandemic also resulted in increased commercial charter cargo yields, net of fuel, during the first six months of 2020.  We have incurred and expect to incur significant additional costs, including premium pay; other operational costs, including costs for continuing to provide a safe working environment for our employees; and higher crew costs related to increased pay rates resulting from our recent interim agreement with our pilots.  In addition, the availability of hotels and restaurants; evolving COVID-19-related travel restrictions and health screenings; and cancellations of passenger flights by other airlines globally or airport closures have impacted and could further impact our ability to position employees to operate our aircraft.    

Our ability to continue to service our debt and meet our lease and other obligations as they come due is dependent on our continued ability to generate earnings and cash flows.  To mitigate the impact of any continuation or worsening of the COVID-19 pandemic disruptions, we have:

• significantly reduced nonessential employee travel;

• reduced the use of contractors;

• limited ground staff hiring;

• secured vendor pricing discounts for engine overhauls and other maintenance;

• implemented a number of other cost reduction initiatives;

• taken other actions, such as the sale of certain nonessential assets;

• entered into a Payroll Support Program Agreement (the “PSP Agreement”) with the U.S. Department of the Treasury (the “U.S. Treasury”), with respect to payroll support funding (the “Payroll Support Program”) available to cargo air carriers under the CARES Act (see discussion below); and

• begun to defer payment of the employer portion of social security taxes as provided for under the CARES Act through the end of 2020.  

9

If we are unable to implement these or additional initiatives, or comply with the requirements under the PSP Agreement, it could have a material adverse effect on our financial position, results of operations, and cash flows.  We believe the Company will generate sufficient liquidity to satisfy its obligations over the next twelve months.

Payroll Support Program under the CARES Act

As of May 29, 2020 (the “PSP Closing Date”), Atlas and Southern Air (the “PSP Recipients”) entered into a PSP Agreement with the U.S. Treasury.  As of the PSP Closing Date, AAWW also entered into a Warrant Agreement (the “Warrant Agreement”) with the U.S. Treasury, and AAWW issued a senior unsecured promissory note to the U.S. Treasury (the “Promissory Note”), with Atlas and Southern Air as guarantors.

In connection with the Payroll Support Program, we are required to comply with the relevant provisions of the CARES Act, including the requirement that funds provided pursuant to the PSP Agreement be used exclusively for the payment of certain employee wages, salaries and benefits of the PSP Recipients.  The Payroll Support Program subjects the PSP Recipients and certain of their affiliates to a number of restrictions, including prohibitions against reductions in certain employee salaries, wages and benefits, and certain involuntary terminations and furloughs of employees until September 30, 2020, prohibitions of repurchasing shares in the open market of, or making dividend payments with respect to, our common stock through September 30, 2021, as well as certain limitations on executive compensation until March 24, 2022.  Under the PSP Agreement, we must also maintain certain internal controls and records relating to the payroll support funding and we are subject to additional reporting obligations.

Pursuant to the PSP Agreement, the U.S. Treasury provided us with payroll support funding in three installments totaling $406.8 million.  The first installment of $203.4 million was received on June 1, 2020, the second installment of $101.7 million was received on June 29, 2020 and the third installment of $101.7 million was received on July 30, 2020.

As compensation for payroll support funding under the PSP Agreement, we issued the Promissory Note to the U.S. Treasury, which provides for our unconditional promise to pay to the U.S. Treasury a total of $142.9 million as of June 30, 2020 and a total of $199.8 million as of July 30, 2020, after all installments were received from the U.S. Treasury.

The Promissory Note bears interest on the outstanding principal amount at a rate of 1.00% per annum until the fifth anniversary of the PSP Closing Date and the applicable Secured Overnight Financing Rate (“SOFR”) plus 2.00% per annum thereafter, and interest accrued thereon will be payable in arrears on the last business day of March and September of each year, beginning on September 30, 2020.  The aggregate principal amount outstanding under the Promissory Note, together with all accrued and unpaid interest thereon and all other amounts payable under the Promissory Note, will be due and payable in May 2030.  The Promissory Note contains customary representations and warranties, covenants and events of default provisions.  Interest expense is recognized using the effective interest method over the term of the Promissory Note.

We may, at any time and from time to time, voluntarily prepay amounts outstanding under the Promissory Note, in whole or in part, without penalty or premium.  If certain change of control triggering events occur, we would be required to prepay the aggregate outstanding principal amount of the Promissory Note within 30 days, together with any accrued interest or other amounts owing under the Promissory Note.

As compensation for payroll support funding under the PSP Agreement, we also entered into a Warrant Agreement pursuant to which we granted the U.S. Treasury warrants to acquire shares of our common stock.  In connection with the first and second payroll support funding installments from the U.S. Treasury, we issued warrants to acquire up to 447,180 shares of our common stock as of June 30, 2020.  As of July 30, 2020, the warrants issued to the U.S. Treasury, after all installments were received, were for up to 625,452 shares of our common stock.  

The Warrant Agreement provides the U.S Treasury certain registration rights with respect to each warrant and the underlying common stock.  Each warrant is exercisable at an exercise price of $31.95 per share of common stock (which was the closing price of our common stock on the Nasdaq Global Select Market on May 1, 2020) and will expire on the fifth anniversary of the issue date of such warrant.  Each warrant may be settled through net share settlement or net cash settlement, at our option.  Each warrant includes customary antidilution provisions and is freely transferable with registration rights.  The U.S. Treasury is not permitted to vote any shares it acquires upon exercise of each warrant. The grant date fair value, as determined using the Black-Scholes model, of each warrant is recognized as Additional paid-in-capital and was $9.2 million as of June 30, 2020.  Each warrant will not be remeasured as long as it continues to meet the conditions for equity classification. As of June 30, 2020, no portion of the warrants has been exercised.

We recognized deferred grant income within Accrued liabilities for the difference between the PSP proceeds received and the amounts recognized for the Promissory Note and the Warrant Agreement for each installment. Grant income is subsequently recognized within Other (income) expense, net in the consolidated statement of operations on a pro-rata basis over the periods that the

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qualifying employee wages, salaries and benefits are paid.  For the three and six months ended June 30, 2020, we recognized grant income of $20.2 million.  We expect to recognize the remainder of the grant income through the first quarter of 2021.

4. Related Parties

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, 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, which began in 2008, 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				For the Six Months Ended
Revenue and Expenses:	June 30, 2020		June 30, 2019		June 30, 2020		June 30, 2019
Revenue from Polar	$	82,858	$	99,889	$	159,092	$	198,356
Ground handling and airport fees to Polar		1,067		545		1,593		1,063
Accounts receivable/payable as of:	June 30, 2020		December 31, 2019
Receivables from Polar	$	26,370	$	10,855
Payables to Polar		1,841		2,161
Aggregate Carrying Value of Polar Investment as of:	June 30, 2020		December 31, 2019
Aggregate Carrying Value of Polar Investment	$	4,870	$	4,870

In addition to the amounts in the table above, Atlas recognized revenue of $83.1 million and $23.1 million for the three months ended June 30, 2020 and 2019, respectively, and $110.5 million and $46.4 million for the six months ended June 30, 2020 and 2019, respectively, from flying on behalf of Polar.

Dry Leasing Joint Venture

We hold a 10% interest in a joint venture with an unrelated third party, which we entered into in December 2019, to develop a diversified freighter aircraft dry leasing portfolio.  Through Titan, we provide aircraft and lease management services to the joint venture for fees based upon aircraft assets under management, among other things.  Our investment in the joint venture is accounted for under the equity method of accounting. Under the joint venture, we have a commitment to provide up to $40.0 million of capital contributions before December 2022.  Our investment in the joint venture was $0.5 million and $1.5 million as of June 30, 2020 and December 31, 2019, respectively, and our maximum exposure to losses from the entity is limited to our investment. The joint venture does not currently have any third-party debt obligations and no capital contributions have been made as of June 30, 2020.  We had Accounts receivable from the joint venture of $1.3 million as of June 30, 2020 related to the reimbursement of certain expenses by the joint venture.  We have recognized no service fee income for the three and six months ended June 30, 2020.

Parts Joint Venture

We hold a 50% interest in a joint venture with an unrelated third party to purchase rotable parts and provide repair services for those parts, primarily for 747-8F aircraft.  Our investment in the joint venture is accounted for under the equity method of accounting.  As of June 30, 2020 and December 31, 2019, our investment in the joint venture was $18.9 million and $20.0 million, respectively.  We had Accounts payable to the joint venture of $1.1 million as of June 30, 2020 and $0.5 million as of December 31, 2019.

5. 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 up to 20 Boeing 767-300 freighter aircraft for Amazon by Atlas, as well as Dry Leasing by Titan.  The Dry Leases have a term of ten years from the commencement of each agreement, while the CMI operations are for seven years from the commencement of each agreement (with an option for Amazon to extend the term to ten years). Between August 2016 and November 2018, we placed all 20 767-300 freighter aircraft into service for Amazon.  In February 2019, the number of 767-300 freighters in CMI and Dry Lease service for Amazon was reduced to 19 with the

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loss of an aircraft.  In September 2019, the number of 767-300 freighters in CMI service for Amazon was reduced to 17 with the early termination of CMI services for two aircraft, which remain under dry lease.

In conjunction with the agreements entered into in May 2016, 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 $37.34 per share, as adjusted (“Warrant A”).  As of December 31, 2018, this warrant to purchase 7.5 million shares, as adjusted, had vested in full.  Warrant A is exercisable in accordance with its terms through May 2021.  As of June 30, 2020, no portion of Warrant A has been exercised.

The agreements entered into in May 2016 also provided 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 $37.34 per share, as adjusted (“Warrant B”).  This warrant to purchase 3.77 million shares, as adjusted, will vest in increments of 37,660 shares, as adjusted, each time Amazon has paid $4.2 million of revenue to us, up to a total of $420.0 million, for incremental business beyond the original 20 767-300 freighters.  As of June 30, 2020, 225,690 shares, as adjusted, of Warrant B have vested.  Upon vesting, Warrant B becomes exercisable in accordance with its terms through May 2023. As of June 30, 2020, no portion of Warrant B has been exercised.

In March 2019, we amended the agreements entered into in 2016 with Amazon, pursuant to which we began providing CMI services using Boeing 737-800 freighter aircraft provided by Amazon.  The 737-800 CMI operations are for a term of seven years from the commencement of each agreement (with an option for Amazon to extend the term to ten years).  As of June 30, 2020, five 737-800 freighter aircraft entered CMI service.  Amazon may, in its sole discretion, place up to 15 additional 737-800 freighter aircraft into service with us by May 31, 2021.

In connection with the amended agreements, we granted Amazon a warrant to acquire up to an additional 9.9% of our outstanding common shares, after giving effect to the issuance of shares pursuant to the warrants, for an exercise price of $52.67 per share, as adjusted (“Warrant C”).  When combined with Warrant A and Warrant B, this would allow Amazon to acquire up to a total of 39.9% (after the issuance) of our outstanding common shares and Amazon would be entitled to vote the shares it owns up to 14.9% of our outstanding common shares, in its discretion.  Amazon would be required to vote any shares it owns in excess of 14.9% of our outstanding common shares in accordance with the recommendation of our board of directors.  After Warrant B has vested in full, this warrant to purchase 6.66 million shares, as adjusted, would vest in increments of 45,623 shares, as adjusted, each time Amazon has paid $6.9 million of revenue to us, up to a total of $1.0 billion, for incremental business beyond Warrant A and Warrant B.  As of June 30, 2020, no portion of Warrant C has vested.  Upon vesting, Warrant C would become exercisable in accordance with its terms through March 2026.

In May 2020, the warrants issued to the U.S. Treasury (see Note 3 for further discussion) triggered an antidilution adjustment to certain terms of the Amazon warrants as reflected above.

Upon the vesting of Warrant A in previous years, the fair value of the warrant was recognized as a customer incentive asset within Deferred costs and other assets, net and is amortized as a reduction of Operating Revenue in proportion to the amount of revenue recognized over the terms of the Dry Leases and CMI agreements.  Determining the amount of amortization related to the CMI agreements requires significant judgment to estimate the total number of Block Hours expected over the terms of those agreements.  The fair value of Warrant A was also initially recorded as a warrant liability within Financial instruments and other liabilities (the “Amazon Warrant”). The Amazon Warrant liability is marked-to-market at the end of each reporting period with changes in fair value recorded in Unrealized (gain) loss on financial instruments.  

As described in Note 2, we adopted the new accounting guidance for share-based payment awards issued to a customer as of January 1, 2020.  Under the amended guidance, approximately 60% of the Amazon Warrant liability related to the CMI agreements as of January 1, 2020 was reclassified to Additional paid-in-capital and will no longer be marked-to-market at the end of each reporting period.  The amended guidance does not impact the accounting for the remaining portion of the Amazon Warrant liability related to Dry Lease contracts. We recognized net unrealized losses of $30.7 million and $29.7 million on the Amazon Warrant liability during the three and six months ended June 30, 2020, respectively. We recognized a net unrealized gain of $42.3 million and a net unrealized loss of $4.3 million on the Amazon Warrant during the three and six months ended June 30, 2019, respectively. The fair value of the Amazon Warrant liability was $39.5 million as of June 30, 2020 and $24.3 million as of December 31, 2019.  

When it becomes probable that an increment of either Warrant B or C will vest and the related revenue begins to be recognized, the grant date fair value of such portion is recognized as a customer incentive asset within Deferred costs and other assets, net and is amortized as a reduction of Operating Revenue in proportion to the amount of related revenue recognized.  The grant date fair value of such increment is also recorded as Additional paid-in-capital. At the time of vesting, any amounts recorded in Additional paid-in-capital related to Dry Lease contracts would be reclassified to the Amazon Warrant liability.

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We amortized $9.5 million and $6.9 million of the customer incentive asset as a reduction of Operating Revenue for the three months ended June 30, 2020 and 2019, respectively. We amortized $18.6 million and $13.2 million of the customer incentive asset for the six months ended June 30, 2020 and 2019, respectively

Customer incentive asset included within Deferred costs and other assets is as follows:

Balance at December 31, 2019	$	152,534
Initial value for estimate of vested or expected to vest warrants		5,186
Amortization of customer incentive asset		(18,556	)
Balance at June 30, 2020	$	139,164

6. Supplemental Financial Information

Accounts Receivable

Accounts receivable, net of allowance for expected credit losses related to customer contracts, excluding Dry Leasing contracts, was $189.5 million as of June 30, 2020 and $247.5 million as of December 31, 2019.

Allowance for expected credit losses, included within Accounts receivable, is as follows:

Balance as of December 31, 2019	$	1,822
Bad debt recovery		(6	)
Amounts written off, net of recoveries		(930	)
Balance as of June 30, 2020	$	886

Accrued Liabilities

Accrued liabilities consisted of the following as of: 

	June 30, 2020		December 31, 2019
Maintenance	$	161,975	$	136,315
Deferred grant income		132,877		-
Customer maintenance reserves		96,131		110,355
Salaries, wages and benefits		88,180		75,719
Deferred revenue		38,437		26,357
Aircraft fuel		34,726		28,821
Other		100,927		104,158
Accrued liabilities	$	653,253	$	481,725

Revenue Contract Liability

Deferred revenue for customer contracts, excluding Dry Leasing contracts, represents amounts collected from, or invoiced to, customers in advance of revenue recognition.  The balance of Deferred revenue will increase or decrease based on the timing of invoices and recognition of revenue.

Significant changes in our Revenue contract liability balances during the six months ended June 30, 2020 were as follows:

	Deferred Revenue
Balance as of December 31, 2019	$	19,234
Revenue recognized		(95,027	)
Amounts collected or invoiced		108,556
Balance as of June 30, 2020	$	32,763

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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 shown in the consolidated statements of cash flows:

	June 30, 2020		December 31, 2019
Cash and cash equivalents	$	726,402	$	103,029
Restricted cash		12,776		10,401
Total Cash, cash equivalents and restricted cash shown in Consolidated Statements of Cash Flows	$	739,178	$	113,430

7. Assets Held For Sale and Other Income

As of December 31, 2019, we had two 737-400 passenger aircraft previously used for training purposes, certain spare CF6-80 engines and three aircraft in our Dry Leasing portfolio classified as held for sale.  During the six months ended June 30, 2020, we received net proceeds of $44.1 million from the completion of the sales of some of the spare CF6-80 engines and two aircraft in our Dry Leasing portfolio, and recognized a net gain of $6.7 million. During the three and six months ended June 30, 2020, we recognized an impairment loss of $15.9 million related to fair value adjustments for assets held for sale, within Special charge in the consolidated statement of operations.  The carrying value of the assets held for sale as of June 30, 2020 and December 31, 2019 was $99.0 million and $155.9 million, respectively, which was included within Prepaid expense, held for sale and other current assets in the consolidated balance sheets.  Sales of the remaining aircraft and engines held for sale are expected to be completed in 2020.

During the three and six months ended June 30, 2020, we recognized refunds of $31.5 million and $32.9 million, respectively, related to aircraft rent paid in previous years within Other (income) expense, net.

8. Debt

Term Loans

In February 2020, we refinanced two secured term loans that were originally due later in 2020, with two new term loans.  One term loan is for 126 months in the amount of $82.0 million at a fixed interest rate of 3.27% with a final payment of $12.5 million due in July 2030 (the “First 2020 Term Loan”).  The other term loan is for 130 months in the amount of $82.0 million at a fixed interest rate of 3.28% with a final payment of $12.5 million due in November 2030 (the “Second 2020 Term Loan”). The First and Second 2020 Term Loans are each secured by a mortgage against a 777-200LRF aircraft and subject to usual and customary fees, covenants and events of default, with principal and interest payable quarterly.

In April 2020, we borrowed $14.6 million at a fixed interest rate of 1.15% under an unsecured five-year term loan due in April 2025 for GEnx engine performance upgrade kits and overhauls (the “Third 2020 Term Loan”).  The Third 2020 Term Loan is subject to customary fees, covenants and events of default, with principal and interest payable quarterly.

Promissory Note

See Note 3 for a discussion of the Promissory Note we issued to the U.S. Treasury during the three months ended June 30, 2020.

Convertible Notes

In May 2017, we issued $289.0 million aggregate principal amount of 1.875% convertible senior notes that mature on June 1, 2024 (the “2017 Convertible Notes”) in an underwritten public offering.  In June 2015, we issued $224.5 million aggregate principal amount of 2.25% convertible senior notes that mature on June 1, 2022 (the “2015 Convertible Notes”) in an underwritten public offering.  The 2017 Convertible Notes and the 2015 Convertible Notes (collectively, the “Convertible Notes”) are senior unsecured obligations and accrue interest payable semiannually on June 1 and December 1 of each year.  The Convertible Notes are due on their respective maturity dates, unless earlier converted or repurchased pursuant to their respective terms.

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The Convertible Notes consisted of the following as of June 30, 2020:

	2017 Convertible Notes			2015 Convertible Notes
Remaining life in months		47			23
Liability component:
Gross proceeds	$	289,000		$	224,500
Less: debt discount, net of amortization		(42,795	)		(16,934	)
Less: debt issuance cost, net of amortization		(3,318	)		(1,569	)
Net carrying amount	$	242,887		$	205,997
Equity component (1)	$	70,140		$	52,903

(1) Included in Additional paid-in-capital on the consolidated balance sheet as of June 30, 2020.

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

	For the Three Months Ended				For the Six Months Ended
	June 30, 2020		June 30, 2019		June 30, 2020		June 30, 2019
Contractual interest coupon	$	2,618	$	2,618	$	5,235	$	5,235
Amortization of debt discount		4,457		4,186		8,845		8,308
Amortization of debt issuance costs		391		375		777		747
Total interest expense recognized	$	7,466	$	7,179	$	14,857	$	14,290

Revolving Credit Facility

We have a $200.0 million secured revolving credit facility that matures in December 2022 (the “Revolver”). As of June 30, 2020, there was $175.0 million outstanding and we had $16.2 million of unused availability, based on the collateral borrowing base. In July 2020, our unused availability, based on the collateral borrowing base, increased to $25.0 million.  [In August 2020, we repaid $175.0 million and had $200.0 million of unused availability.]

9. Income Taxes

The effective income tax expense for the three and six months ended June 30, 2020 differed from tax at the U.S. statutory rate primarily due to $6.7 million and $6.5 million of nondeductible changes in the fair value of a customer warrant liability, respectively (see Note 5 for further discussion).

The effective income tax benefit for the three and six months ended June 30, 2019 differed from tax at the U.S. statutory rate primarily due to $59.8 million of tax benefits related to the favorable completion of an IRS examination of our 2015 income tax return and, for the three months ended June 30, 2019, $9.3 million of nontaxable changes in the fair value of a customer warrant liability (see Note 5 for further discussion).  For interim accounting purposes, we recognize income taxes using an estimated annual effective tax rate. When finalized, the complete operational merger of Atlas and Southern Air (see Note 12 for further discussion) would result in a material increase to our deferred tax liability.

10. 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.

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Term loans and notes consist of term loans, notes guaranteed by the Export-Import Bank of the United States, the Promissory Note issued to the U.S. Treasury and equipment enhanced trust certificates. The fair values of these debt instruments and the Revolver 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 a customer warrant liability and certain long-term performance-based restricted shares are 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:

	June 30, 2020
	Carrying Value		Fair Value		Level 1		Level 2		Level 3
Assets
Cash and cash equivalents	$	726,402	$	726,402	$	726,402	$	-	$	-
Restricted cash		12,776		12,776		12,776		-		-
	$	739,178	$	739,178	$	739,178	$	-	$	-
Liabilities
Term loans and notes	$	1,850,350	$	1,886,041	$	-	$	-	$	1,886,041
Revolver		175,000		170,057		-		-		170,057
Convertible notes (1)		448,883		479,134		479,134		-		-
Customer warrant		39,539		39,539		-		39,539		-
	$	2,513,772	$	2,574,771	$	479,134	$	39,539	$	2,056,098

	December 31, 2019
	Carrying Value		Fair Value		Level 1		Level 2		Level 3
Assets
Cash and cash equivalents	$	103,029	$	103,029	$	103,029	$	-	$	-
Short-term investments		879		879		-		-		879
Restricted cash		10,401		10,401		10,401		-		-
	$	114,309	$	114,309	$	113,430	$	-	$	879
Liabilities
Term loans and notes	$	1,800,911	$	1,885,750	$	-	$	-	$	1,885,750
Revolver		100,000		103,575		-		-		103,575
Convertible notes (1)		439,261		450,668		450,668		-		-
Customer warrant		24,345		24,345		-		24,345		-
	$	2,364,517	$	2,464,338	$	450,668	$	24,345	$	1,989,325

(1) Carrying value is net of debt discounts and debt issuance costs (see Note 8).

11. 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 called Direct Contribution, which shows the profitability of each segment after allocation of direct operating and ownership costs.  Direct Contribution includes Income (loss) from continuing operations before income taxes and excludes the following: Special charges, Transaction-related expenses, nonrecurring items, Gain (losses) 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, other non-operating costs and Payroll Support Program grant income.

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The following table sets forth Operating Revenue and Direct Contribution for our reportable segments reconciled to Operating Income and Income (loss) before income taxes:

	For the Three Months Ended						For the Six Months Ended
	June 30, 2020			June 30, 2019			June 30, 2020			June 30, 2019
Operating Revenue:
ACMI	$	291,951		$	307,278		$	570,695		$	613,845
Charter		497,547			315,679			825,176			620,793
Dry Leasing		40,906			43,535			82,832			113,481
Customer incentive asset amortization		(9,534	)		(6,936	)		(18,556	)		(13,222	)
Other		4,383			4,362			8,608			8,704
Total Operating Revenue	$	825,253		$	663,918		$	1,468,755		$	1,343,601

Direct Contribution:
ACMI	$	14,495		$	40,640		$	66,802		$	80,647
Charter		185,969			14,084			236,750			43,217
Dry Leasing		9,721			11,091			20,420			46,618
Total Direct Contribution for Reportable Segments		210,185			65,815			323,972			170,482
Unallocated expenses and (income), net		(50,308	)		(81,927	)		(139,029	)		(162,064	)
Loss on early extinguishment of debt		(74	)		-			(74	)		(245	)
Unrealized gain (loss) on financial instruments		(30,671	)		42,300			(29,747	)		(4,275	)
Special charge		(15,934	)		(3,269	)		(15,934	)		(3,269	)
Transaction-related expenses		(1,275	)		(734	)		(1,796	)		(3,261	)
Gain (loss) on disposal of aircraft		(2	)		-			6,715			-
Income (loss) before income taxes		111,921			22,185			144,107			(2,632	)
Add back (subtract):
Interest income		(224	)		(1,278	)		(704	)		(3,322	)
Interest expense		28,950			30,045			58,225			60,398
Capitalized interest		(132	)		(627	)		(325	)		(1,090	)
Loss on early extinguishment of debt		74			-			74			245
Unrealized (gain) loss on financial instruments		30,671			(42,300	)		29,747			4,275
Other (income) expense, net		(50,598	)		945			(49,392	)		(2,030	)
Operating Income	$	120,662		$	8,970		$	181,732		$	55,844

The following table disaggregates our Charter segment revenue by customer and service type:

	For the Three Months Ended
	June 30, 2020							June 30, 2019
		Cargo		Passenger		Total		Cargo		Passenger		Total
Commercial customers		$	394,062	$	17	$	394,079	$	133,178	$	3,054	$	136,232
AMC			49,762		53,706		103,468		92,017		87,430		179,447
Total Charter Revenue		$	443,824	$	53,723	$	497,547	$	225,195	$	90,484	$	315,679
	For the Six Months Ended
		June 30, 2020						June 30, 2019
		Cargo		Passenger		Total		Cargo		Passenger		Total
Commercial customers		$	568,551	$	3,122	$	571,673	$	282,082	$	10,661	$	292,743
AMC			112,236		141,267		253,503		149,463		178,587		328,050
Total Charter Revenue		$	680,787	$	144,389	$	825,176	$	431,545	$	189,248	$	620,793

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 AMC, Polar and DHL (see above and Note 4 to our Financial Statements for further discussion regarding Polar).  No other customer accounted for more than 10.0% of our Total Operating Revenue.  Revenue from DHL was $151.9 million for the three months ended June 30, 2020 and $87.4 million for the three months ended June 30, 2019.  Revenue from DHL was $250.2 million for the six months ended June 30, 2020 and $177.1 million for the six months ended June 30, 2019. We have not experienced any credit issues with these customers.

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12. 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.  The Atlas and Southern Air CBAs both have a defined and streamlined process for negotiating a joint CBA (“JCBA”) when a merger occurs, as in the case with the Atlas and Southern Air merger.  Pursuant to the merger provisions in both CBAs, joint negotiations for a single CBA for Atlas and Southern Air should commence promptly.  Further, once an integrated seniority list (“ISL”) of Atlas and Southern Air pilots is presented to the Company by the union, it triggers a nine month agreed-upon timeframe to negotiate a new JCBA with any unresolved issues promptly submitted to binding arbitration.  

The IBT has refused to follow the merger provisions in the Atlas and Southern Air CBAs. This has resulted in significant litigation, arbitrations and delay.  As more fully stated below, the Company has prevailed in all of the merger related proceedings.

After the merger process began, the IBT also 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 pilots.  We have opposed both mediation applications as they are not in accordance with the merger provisions in the parties’ existing CBAs.  The NMB conducted a premediation investigation on the IBT’s Atlas application in June 2016, which has remained pending (along with the IBT’s Southern Air application) since 2016.  

Due to the IBT’s refusal to adhere to the merger provisions of the respective CBAs, in February 2017, the Company 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.  On March 13, 2018, the U.S. District Court for the Southern District of New York (“NY District Court”) ruled in the Company’s favor and ordered arbitration of this issue.  The IBT appealed the NY District Court’s decision, and on November 21, 2019, the U.S. Court of Appeals for the Second Circuit Court issued its decision in the Company’s favor affirming the NY District Court’s decision.

The Company and the IBT conducted the Atlas and Southern Air arbitrations for this issue in October 2018.  The Company prevailed in both the Atlas and Southern Air management grievance arbitrations against the IBT, with decisions rendered on June 12, 2019 and August 26, 2019, respectively.  Both arbitrators ruled that the IBT violated the CBAs by refusing to follow merger provisions in the parties’ respective CBAs, which require formulation of a JCBA covering the combined pilot group.  The arbitrators each ordered the IBT to promptly comply with the CBAs by submitting an ISL to the Company within 45 days of each arbitration decision, respectively.  The IBT failed to comply with both deadlines for submitting the ISL, which passed on July 27, 2019 for Southern Air, and on October 10, 2019 for Atlas. As a result, on October 25, 2019, the Company filed an action in the U.S. District Court for the District of Columbia (“DC District Court”) to enforce the Atlas and Southern Air arbitration decisions. On March 31, 2020, the DC District Court ruled in the Company’s favor, enforcing the arbitration decisions and directing the IBT to produce the ISL by May 15, 2020.  

The IBT subsequently requested additional time from the Company to complete the ISL and the parties agreed to a joint stipulation.  As a result, on April 24, 2020, the DC District Court issued an order modifying its March 31st order, providing that the nine-month timeframe to bargain for a new JCBA will be triggered on May 15, 2020 and that the IBT must produce the ISL by March 31, 2021.  Any remaining open issues will then be determined by binding interest arbitration pursuant to the merger provisions in the CBAs.  On April 28, 2020, the IBT and Local 2750 filed a Notice of Appeal of the DC District Court’s March 31st order, which remains in place pending appeal.

In connection with its opposition to application of the merger provisions, the IBT commenced lawsuits in the DC District Court seeking to vacate both arbitration awards.  On January 28, 2020, the DC District Court ruled in the Company’s favor, granting its motions to dismiss both of the IBT’s lawsuits. On April 28, 2020, the IBT and Local 2750 filed a Notice of Appeal of the DC District Court’s January 28th orders, which remains in place pending appeal.

The Company and the IBT continue to meet virtually to move the process forward and bargain in good faith for a new JCBA.  Substantive progress has been made with tentative agreements for more than half of the articles in a new JCBA.  Despite repeated requests from the Company, the IBT has yet to provide the Company with a comprehensive economic proposal.

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In late September 2019, the Atlas pilots represented by the IBT formed a new local union, IBT Local 2750 to represent them. The Southern Air pilots continue to be represented by IBT Local 1224.  The Company continues to work with both Local 2750 and Local 1224 leadership groups.

On May 7, 2020, the Company announced that Atlas and Southern Air reached an agreement with IBT Locals 2750 and 1224, which provides for a ten percent pay increase for all pilots, effective as of May 1, 2020.  This pay increase provides interim additional compensation to our pilots until a new JCBA is reached.

In late November 2017, the DC District Court granted the Company’s request to issue a preliminary injunction to stop an illegal work slowdown and require the IBT to meet its obligations under the Railway Labor Act. Specifically, the DC District Court ordered the IBT to stop “authorizing, encouraging, permitting, calling, engaging in, or continuing” any illegal pilot slowdown activities, which were intended to gain leverage in pilot contract negotiations with the Company.  In addition, the Court ordered the IBT to take affirmative action to prevent and to refrain from continuing any form of interference with the Company’s operations or any other concerted refusal to perform normal pilot operations consistent with its status quo obligations under the Railway Labor Act.  In December 2017, the IBT appealed the District Court’s decision to the U.S. Court of Appeals for the District of Columbia Circuit (“Court of Appeals”).  On July 5, 2019, the Court of Appeals, in a unanimous three judge panel, affirmed the DC District Court’s ruling and denied the IBT’s appeal.

On May 22,^, 2020, the IBT filed a motion to dismiss the Company’s action for a preliminary injunction, asserting the Company’s claim for injunctive relief was mooted by the DC District Court’s March 31, 2020 decision in a separate case enforcing the management grievance arbitration awards in the Company’s favor.  The Company filed an opposition to the IBT’s motion on June 22, 2020, and the IBT’s reply was filed on July 3, 2020.  The preliminary injunction remains in full force and effect pending the court’s decision.  

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

Matters Related to Alleged Pricing Practices

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 allegedly unlawful pricing practices of such defendants.  In response, British Airways, KLM, Martinair, Air France and Lufthansa filed third-party indemnification lawsuits against Polar Air Cargo, LLC (“Old Polar”), a consolidated subsidiary of the Company, and Polar, seeking indemnification in the event the defendants are found to be liable in the main proceedings.  Another defendant, Thai Airways, filed a similar indemnification claim.  Activities in the case have focused on various procedural issues, some of which are awaiting court determination.  The Netherlands proceedings are likely to be affected by a decision readopted by the European Commission in March 2017, finding EU competition law violations by British Airways, KLM, Martinair, Air France and Lufthansa, among others, but not Old Polar or Polar.  If the Company, Old Polar or Polar were to incur an unfavorable outcome, 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 $3.8 million in aggregate based on June 30, 2020 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.  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.  In the other case, we received an administrative decision in favor of the Brazil customs authorities and we are in the process of appealing this decision to the Brazil courts.  As required to defend such claims, we have made deposits pending resolution of these matters.  The balance was $3.1 million as of June 30, 2020 and $4.1 million as of December 31, 2019, and is included in Deferred costs 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.

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Other

In addition to the matters described in this note, we have certain other contingencies incident to the ordinary course of business.  Unless disclosed otherwise, management does not expect that the ultimate disposition of such other contingencies or matters will materially affect our financial condition, results of operations or cash flows.

13. 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.  The calculations of basic and diluted EPS were as follows:

	For the Three Months Ended					For the Six Months Ended
Numerator:	June 30, 2020		June 30, 2019			June 30, 2020		June 30, 2019
Net Income	$	78,912	$	86,868		$	102,265	$	57,158
Less: Unrealized gain on financial instruments, net of tax		-		(43,379	)		-		-
Diluted Net income	$	78,912	$	43,489		$	102,265	$	57,158
Denominator:
Basic EPS weighted average shares outstanding		26,129		25,851			26,048		25,794
Effect of dilutive warrants		9		1,089			4		-
Effect of dilutive restricted stock		44		13			22		127
Diluted EPS weighted average shares outstanding		26,182		26,953			26,074		25,921
Earnings per share:
Basic	$	3.02	$	3.36		$	3.93	$	2.22
Diluted	$	3.01	$	1.61		$	3.92	$	2.21

Antidilutive shares related to warrants issued in connection with our Convertible Notes and warrants issued to a customer that were out of the money and excluded from the calculation of diluted EPS were 15.5 million for the three and six months ended June 30, 2020, respectively and 7.8 million for the three and six months ended June 30, 2019.  Diluted shares reflect the potential dilution that could occur from restricted shares using the treasury stock method.  The calculation of EPS does not include restricted share units and customer warrants in which performance or market conditions were not satisfied of 10.5 million for the three and six months ended June 30, 2020 and 10.6 million for the three and six months ended June 30, 2019.

14. 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, 2018	$	(3,841	)	$	9	$	(3,832	)
Reclassification to interest expense		681			-		681
Tax effect		(161	)		-		(161	)
Balance as of June 30, 2019	$	(3,321	)	$	9	$	(3,312	)
Balance as of December 31, 2019	$	(2,827	)	$	9	$	(2,818	)
Reclassification to interest expense		604			-		604
Tax effect		(133	)		-		(133	)
Balance as of June 30, 2020	$	(2,356	)	$	9	$	(2,347	)

Interest Rate Derivatives

As of June 30, 2020, there was $3.1 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 both $0.3 million for the three months ended June 30, 2020 and 2019.  Net realized losses reclassified into earnings were $0.6 million and $0.7 million for the six months ended June 30, 2020 and 2019, respectively. Net realized losses expected to be reclassified into earnings within the next 12 months are $1.1 million as of June 30, 2020.

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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 2019 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	“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	“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 that are extensive in scope and are primarily based on time or usage intervals, which 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.
Utilization	The average number of Block Hours operated per day per aircraft.
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 and 737 aircraft for domestic, regional and international cargo and passenger operations.  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 generally 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, generally 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 generally responsible 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 generally 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.

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

• Delivering superior service quality to our valued customers;

• Focusing on securing long-term customer contracts;

• Managing our fleet with a focus on leading-edge aircraft;

• Leveraging our flexible business model to maximize utilization;

• Driving significant and ongoing productivity improvements;

• Selectively pursuing and evaluating future acquisitions and alliances; while

• Appropriately managing capital allocation and delivering value to shareholders.

See “Business Overview” and “Business Strategy” in our 2019 Annual Report on Form 10-K for additional information.

Business Developments

In December 2019, COVID-19 was first reported in China and has since spread to many other regions of the world. In March 2020, COVID-19 was determined to be a global pandemic by the World Health Organization. During the first six months of 2020, this public health crisis disrupted global manufacturing, supply chains, passenger travel and consumer spending, resulting in flight cancellations by our ACMI customers and lower AMC passenger flying as the military took precautionary measures to limit the movement of personnel, as well as increased operating costs.  

Our Charter results for the first half of 2020, compared with 2019 were significantly impacted by the reduction of available cargo capacity in the market and the disruption of global supply chains due to the COVID-19 pandemic resulting in significantly higher commercial charter cargo Yields, net of fuel. Due to this strong demand, we reactivated three 747-400BCF aircraft that had been temporarily parked and began Charter operations for a 777-200 freighter aircraft in our Dry Leasing business.  During the second quarter of 2020, we entered into several long-term charter programs with customers seeking to secure committed cargo capacity utilizing aircraft redeployed from our ACMI segment.  These long-term charter programs provide us with guaranteed revenue and include indexed fuel price adjustments to mitigate our exposure to fuel price volatility.

Safety is our top priority.  We are closely monitoring the COVID-19 pandemic and taking numerous precautions to ensure the safety of our operations around the world, including:

• implementing frequent deep cleaning of all aircraft and facilities;

• providing full safety kits for each crewmember and all aircraft;

• adjusting routes to limit exposure to regions significantly impacted by the COVID-19 pandemic;

• implementing significant workforce social distancing and protection measures at all Company facilities; and

• having employees who can work remotely do so based on local conditions.

In March 2020, the Department of Homeland Security stated that transportation is an essential critical infrastructure sector, which includes all aviation workers.  We play an important role in facilitating the movement of essential goods around the world during this challenging time, including the delivery of pharmaceuticals, medical equipment, education supplies, food and other daily necessities.  

Given the dynamic nature of this pandemic, the duration of business disruption, the extent of customer cancellations and the related financial impact cannot be reasonably estimated at this time.  We have incurred and expect to incur significant additional costs, including premium pay; other operational costs, including costs for continuing to provide a safe working environment for our employees; and higher crew costs related to increased pay rates resulting from our recent interim agreement with our pilots.  In addition, the availability of hotels and restaurants; evolving COVID-19-related travel restrictions and health screenings; and cancellations of passenger flights by other airlines globally or airport closures have impacted and could further impact our ability to position employees to operate our aircraft.  In response to these challenging times, we have:

• significantly reduced nonessential employee travel;

• reduced the use of contractors;

• limited ground staff hiring;

• secured vendor pricing discounts for engine overhauls and other maintenance;

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• implemented a number of other cost reduction initiatives;

• taken other actions, such as the sale of certain nonessential assets;

• entered into a Payroll Support Program Agreement with the U.S. Treasury; and

• begun to defer payment of the employer portion of social security taxes as provided for under the CARES Act through the end of 2020.  

The continuation or worsening of the aforementioned and other factors, including restrictions on travel and transportation, could materially affect our results for the duration of the crisis. We also continually assess our aircraft requirements and will make adjustments to our capacity as necessary.  Some of these actions may involve grounding or disposing of aircraft or engines, which could result in asset impairments or other charges in future periods.

Our ACMI results for the first half of 2020, compared with 2019, were also impacted by increased flying from the following:

• In January 2019, we entered into an agreement to operate three incremental 747-400 freighters for Nippon Cargo Airlines on transpacific routes.  The first two aircraft entered service in April and August 2019, and the third is expected to enter service during the second half of 2020.

• In March 2019, we entered into agreements with Amazon, which include CMI operation of five 737-800 freighter aircraft and up to 15 additional aircraft by May 2021.  Between May and December 2019, we placed five aircraft into service.

• In June 2019, we entered into a CMI agreement with DHL to operate two 777-200 freighter aircraft on key global routes, both of which entered service near the end of the second quarter of 2019.

• In June 2019, we began flying a third 747-400 freighter for Asiana Cargo on transpacific routes following its return from DHL.

• In January 2020, we entered into an ACMI agreement with EL AL Israel Airline Ltd. for a 747-400 freighter to provide additional capacity for its freight network.  The aircraft entered service in January 2020.

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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 June 30, 2020 and 2019

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 June 30:

Segment Operating Fleet	2020			2019			Inc/(Dec)
ACMI*
747-8F Cargo		8.8			8.2			0.6
747-400 Cargo		13.1			18.4			(5.3	)
747-400 Dreamlifter		1.8			3.6			(1.8	)
777-200 Cargo		8.1			6.4			1.7
767-300 Cargo		23.7			25.0			(1.3	)
767-200 Cargo		9.0			9.0			-
767-200 Passenger		1.0			1.0			-
737-800 Cargo		5.0			1.8			3.2
737-400 Cargo		4.6			5.0			(0.4	)
Total		75.1			78.4			(3.3	)
Charter
747-8F Cargo		1.1			1.6			(0.5	)
747-400 Cargo		19.4			15.2			4.2
747-400 Passenger		5.0			4.0			1.0
777-200 Cargo		0.6			-			0.6
767-300 Cargo		0.3			-			0.3
767-300 Passenger		4.8			4.9			(0.1	)
Total		31.2			25.7			5.5
Dry Leasing
777-200 Cargo		7.0			7.0			-
767-300 Cargo		21.0			21.0			-
757-200 Cargo		-			1.0			(1.0	)
737-300 Cargo		1.0			1.0			-
737-800 Passenger		-			1.0			(1.0	)
Total		29.0			31.0			(2.0	)
Less: Aircraft Dry Leased to CMI customers		(21.0	)		(23.0	)		(2.0	)
Total Operating Average Aircraft Equivalents		114.3			112.1			2.2
Out-of-service**		1.7			1.0			0.7

* ACMI average fleet excludes spare aircraft provided by CMI customers.

** Out-of-service includes aircraft that are either temporarily parked or held for sale.

Block Hours	2020		2019		Inc/(Dec)		% Change
Total Block Hours***		84,966		80,282		4,684		5.8	%

*** Includes ACMI, Charter and other Block Hours.

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Operating Revenue

The following table compares our Operating Revenue for the three months ended June 30 (in thousands):

	2020			2019			Inc/(Dec)			% Change
Operating Revenue
ACMI	$	291,951		$	307,278		$	(15,327	)		(5.0	)%
Charter		497,547			315,679			181,868			57.6	%
Dry Leasing		40,906			43,535			(2,629	)		(6.0	)%
Customer incentive asset amortization		(9,534	)		(6,936	)		2,598			37.5	%
Other		4,383			4,362			21			0.5	%
Total Operating Revenue	$	825,253		$	663,918

ACMI

	2020		2019		Inc/(Dec)			% Change
ACMI Block Hours		59,531		61,942		(2,411	)		(3.9	)%
ACMI Revenue Per Block Hour	$	4,904	$	4,961	$	(57	)		(1.1	)%

ACMI revenue decreased $15.3 million, or 5.0%, primarily due to decreased flying.  The decrease in Block Hours flown was primarily driven by the redeployment of 747-400 aircraft to Charter to support long-term charter programs with customers seeking to secure committed cargo capacity, partially offset by an increase in CMI flying.  Revenue per Block Hour was relatively unchanged.

Charter

	2020		2019		Inc/(Dec)			% Change
Charter Block Hours:
Cargo		20,876		12,888		7,988			62.0	%
Passenger		3,108		4,773		(1,665	)		(34.9	)%
Total		23,984		17,661		6,323			35.8	%
Charter Revenue Per Block Hour:
Cargo	$	21,260	$	17,473	$	3,787			21.7	%
Passenger	$	17,285	$	18,957	$	(1,672	)		(8.8	)%
Charter	$	20,745	$	17,874	$	2,871			16.1	%

Charter revenue increased $181.9 million, or 57.6%, primarily due to increased flying and an increase in Revenue per Block Hour.  The increase in Charter Block Hours flown was primarily driven by increased demand for freighter aircraft reflecting a reduction of available cargo capacity in the market, the disruption of global supply chains due to the COVID-19 pandemic and our ability to increase utilization.   Due to this increased demand and in support of long-term charter programs with customers seeking to secure committed cargo capacity, we redeployed 747-400 aircraft from ACMI and began operating a 777-200 freighter aircraft in our Dry Leasing business.  Partially offsetting these improvements was lower AMC passenger flying for 747-400 aircraft as the U.S. military took precautionary measures to limit the movement of military personnel.  Revenue per Block Hour increased primarily due to higher commercial cargo Yields driven by the factors impacting commercial cargo demand noted above, partially offset by a reduction in passenger charter Revenue per Block Hour related to a decrease in higher-yielding 747-400 flying for the AMC.  

Dry Leasing

Dry Leasing revenue decreased $2.6 million, or 6.0%, primarily due to changes in leases and the disposition of certain nonessential Dry Leased aircraft during the first quarter of 2020.

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Operating Expenses

The following table compares our Operating Expenses for the three months ended June 30 (in thousands):

	2020		2019		Inc/(Dec)			% Change
Operating Expenses
Salaries, wages and benefits	$	192,591	$	141,450	$	51,141			36.2	%
Maintenance, materials and repairs		168,300		113,471		54,829			48.3	%
Aircraft fuel		83,242		122,158		(38,916	)		(31.9	)%
Depreciation and amortization		65,826		63,689		2,137			3.4	%
Travel		34,627		46,374		(11,747	)		(25.3	)%
Navigation fees, landing fees and other rent		35,638		37,982		(2,344	)		(6.2	)%
Passenger and ground handling services		30,130		30,525		(395	)		(1.3	)%
Aircraft rent		24,316		40,335		(16,019	)		(39.7	)%
Loss on disposal of aircraft		2		-		(2	)	NM
Special charge		15,934		3,269		12,665		NM
Transaction-related expenses		1,275		734		541			73.7	%
Other		52,710		54,961		(2,251	)		(4.1	)%
Total Operating Expenses	$	704,591	$	654,948

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

Salaries, wages and benefits increased $51.1 million, or 36.2%, primarily due to higher pilot costs related to premium pay for pilots operating in certain areas significantly impacted by COVID-19, increased pay rates from our recent interim agreement with our pilots, and increased flying.  

Maintenance, materials and repairs increased $54.8 million, or 48.3%, primarily reflecting $52.2 million of increased Heavy Maintenance expense. Heavy Maintenance expense on 747-400 aircraft increased $42.8 million primarily due to an increase in the number of engine overhauls, C Checks and other maintenance to take advantage of availability and opportunities for vendor pricing discounts.  Heavy Maintenance expense on 747-8F aircraft increased $7.2 million primarily due to an increase in the number of D Checks.  In addition, Line Maintenance expense increased $1.5 million reflecting an increase of $3.7 million related to increased cargo flying, partially offset by a $2.2 million decrease related to reduced passenger flying.  Heavy airframe maintenance checks and engine overhauls impacting Maintenance, materials and repairs for the three months ended June 30 were:

Heavy Maintenance Events	2020		2019		Inc/(Dec)
747-400 C Checks		7		6		1
767 C Checks		3		1		2
747-8F D Checks		3		1		2
747-400 D Checks		1		1		-
CF6-80 engine overhauls		12		4		8
PW4000 engine overhauls		1		-		1

Aircraft fuel decreased $38.9 million, or 31.9%, primarily due to a decrease in the average fuel cost per gallon, partially offset by an increase in consumption related to increased Charter flying.  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 June 30 were:

	2020		2019		Inc/(Dec)			% Change
Average fuel cost per gallon	$	1.10	$	2.37	$	(1.27	)		(53.6	)%
Fuel gallons consumed (000s)		75,769		51,596		24,173			46.9	%

Depreciation and amortization increased $2.1 million, or 3.4%, primarily due to an increase in the amortization of deferred maintenance costs related to 747-8F engine overhauls (see Note 2 to our Financial Statements) and an increase in the scrapping of rotable parts.  Partially offsetting these increases was a reduction in depreciation related to the 747-400 freighter asset group that was written down during the fourth quarter of 2019, and certain spare CF6-80 engines and aircraft that were classified as held for sale during the fourth quarter of 2019.

Travel decreased $11.7 million, or 25.3%, primarily due to decreased rates and travel related to the impact of the COVID-19 pandemic, partially offset by an increase in flying.

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Navigation fees, landing fees and other rent decreased $2.3 million, or 6.2%, primarily due to a decrease in purchased capacity, which is a component of other rent, partially offset by increased flying.

Aircraft rent decreased $16.0 million, or 39.7%, primarily due to a reduction in the amortization of operating lease right-of-use assets related to the 747-400 freighter asset group that was written down during the fourth quarter of 2019.

Special charge in 2020 primarily represented a $15.9 million impairment charge related to fair value adjustments for assets held for sale including spare engines and 737-400 passenger aircraft for training purposes. Special charge in 2019 primarily represented a $2.5 million impairment loss on an engine trade-in as part of our engine acquisition program. See Note 7 to our Financial Statements for additional discussion. We may sell additional flight equipment, which could result in additional charges in future periods.

Transaction-related expenses in 2020 primarily related to professional fees in support of the Payroll Support Program under the CARES Act (see Note 3 to our Financial Statements).  Transaction-related expenses in 2019 primarily related to professional fees for a customer transaction with warrants (see Note 5 to our Financial Statements).  

Other decreased $2.3 million, or 4.1%, primarily due to a reduction in commission expense related to decreased revenue from the AMC.

Non-operating Expenses (Income)

The following table compares our Non-operating Expenses (Income) for the three months ended June 30 (in thousands):

	2020			2019			Inc/(Dec)			% Change
Non-operating Expenses (Income)
Interest income	$	(224	)	$	(1,278	)	$	(1,054	)		(82.5	)%
Interest expense		28,950			30,045			(1,095	)		(3.6	)%
Capitalized interest		(132	)		(627	)		(495	)		(78.9	)%
Loss on early extinguishment of debt		74			-			74		NM
Unrealized loss (gain) on financial instruments		30,671			(42,300	)		(72,971	)		(172.5	)%
Other (income) expense, net		(50,598	)		945			51,543		NM

Unrealized loss (gain) on financial instruments represents the change in fair value of a customer warrant liability (see Note 5 to our Financial Statements) primarily due to changes in our common stock price.

Other (income) expense, net increased $51.5 million primarily due to a $31.5 million refund of aircraft rent paid in previous years and CARES Act grant income of $20.2 million (see Note 3 to our Financial Statements).

Income taxes.  The effective income tax expense for the three months ended June 30, 2020 differed from tax at the U.S. statutory rate primarily due to $6.7 million of nondeductible changes in the fair value of a customer warrant liability (see Note 5 to our Financial Statements).  The effective income tax benefit for the three months ended June 30, 2019 differed from tax at the U.S. statutory rate primarily due to $59.8 million of tax benefits related to the favorable completion of an IRS examination of our 2015 income tax return and $9.3 million of nontaxable changes in the fair value of a customer warrant liability.

Segments

The following table compares the Direct Contribution for our reportable segments for the three months ended June 30 (see Note 11 to our Financial Statements for the reconciliation to Operating income) (in thousands):

	2020		2019		Inc/(Dec)			% Change
Direct Contribution:
ACMI	$	14,495	$	40,640	$	(26,145	)		(64.3	)%
Charter		185,969		14,084		171,885		NM
Dry Leasing		9,721		11,091		(1,370	)		(12.4	)%
Total Direct Contribution	$	210,185	$	65,815	$	144,370			219.4	%
Unallocated expenses and (income), net	$	50,308	$	81,927	$	(31,619	)		(38.6	)%

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ACMI Segment

ACMI Direct Contribution decreased $26.1 million, or 64.3%, primarily due to higher heavy maintenance, including additional engine overhauls and other maintenance to take advantage of availability and opportunities for vendor pricing discounts.  In addition, ACMI Direct Contribution reflected higher pilot costs related to increased pay rates resulting from our recent interim agreement with our pilots and premium pay for pilots operating in certain areas significantly impacted by COVID-19.  We also redeployed 747-400 aircraft to Charter to support long-term charter programs with customers seeking to secure committed cargo capacity. Partially offsetting these items was an increase in CMI flying and a reduction in aircraft rent and depreciation.

Charter Segment

Charter Direct Contribution increased $171.9 million, primarily due to an increase in commercial cargo Yields, net of fuel, and demand reflecting a reduction of available capacity in the market, the disruption of global supply chains due to the COVID-19 pandemic and our ability to increase utilization.  Charter Direct Contribution also benefited from a reduction in aircraft rent and depreciation, and the redeployment of 747-400 aircraft from ACMI and the operation of a 777-200 freighter aircraft in our Dry Leasing business.  Partially offsetting these improvements were higher heavy maintenance, including additional engine overhauls and other maintenance to take advantage of availability and opportunities for vendor pricing discounts, and lower passenger demand from the AMC as the COVID-19 pandemic disrupted the movement of military personnel.  In addition, Charter Direct Contribution reflected higher pilot costs related to increased pay rates resulting from our recent interim agreement with our pilots and premium pay for pilots operating in certain areas significantly impacted by COVID-19.

Dry Leasing Segment

Dry Leasing Direct Contribution decreased $1.4 million, or 12.4%, primarily due to a reduction in revenue related to changes in leases and the disposition of certain nonessential Dry Leased aircraft during the first quarter of 2020.

Unallocated expenses and (income), net

Unallocated expenses and (income), net decreased $31.6 million, or 38.6%, primarily due to a refund of aircraft rent paid in previous years.

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Six Months Ended June 30, 2020 and 2019

Operating Statistics

The following tables compare our Segment Operating Fleet (average aircraft equivalents during the period) and total Block Hours operated for the six months ended June 30:

Segment Operating Fleet	2020			2019			Inc/(Dec)
ACMI*
747-8F Cargo		8.9			8.6			0.3
747-400 Cargo		13.0			18.0			(5.0	)
747-400 Dreamlifter		2.7			3.6			(0.9	)
777-200 Cargo		8.1			6.2			1.9
767-300 Cargo		23.8			25.3			(1.5	)
767-200 Cargo		9.0			9.0			-
767-200 Passenger		1.0			1.0			-
737-800 Cargo		5.0			0.9			4.1
737-400 Cargo		4.8			5.0			(0.2	)
Total		76.3			77.6			(1.3	)
Charter
747-8F Cargo		1.1			1.3			(0.2	)
747-400 Cargo		18.8			15.1			3.7
747-400 Passenger		5.0			4.0			1.0
777-200 Cargo		0.3			-			0.3
767-300 Cargo		0.2			-			0.2
767-300 Passenger		4.8			4.9			(0.1	)
Total		30.2			25.3			4.9
Dry Leasing
777-200 Cargo		7.0			7.5			(0.5	)
767-300 Cargo		21.0			21.3			(0.3	)
757-200 Cargo		0.2			1.0			(0.8	)
737-300 Cargo		1.0			1.0			-
737-800 Passenger		0.3			1.0			(0.7	)
Total		29.5			31.8			(2.3	)
Less: Aircraft Dry Leased to CMI customers		(21.0	)		(23.3	)		(2.3	)
Total Operating Average Aircraft Equivalents		115.0			111.4			3.6
Out-of-service**		3.5			0.5			3.0

* ACMI average fleet excludes spare aircraft provided by CMI customers.

** Out-of-service includes aircraft that are either temporarily parked or held for sale.

Block Hours	2020		2019		Inc/(Dec)		% Change
Total Block Hours***		158,213		157,342		871		0.6	%

*** Includes ACMI, Charter and other Block Hours.

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Operating Revenue

The following table compares our Operating Revenue for the six months ended June 30 (in thousands):

	2020			2019			Inc/(Dec)			% Change
Operating Revenue
ACMI	$	570,695		$	613,845		$	(43,150	)		(7.0	)%
Charter		825,176			620,793			204,383			32.9	%
Dry Leasing		82,832			113,481			(30,649	)		(27.0	)%
Customer incentive asset amortization		(18,556	)		(13,222	)		5,334			40.3	%
Other		8,608			8,704			(96	)		(1.1	)%
Total Operating Revenue	$	1,468,755		$	1,343,601

ACMI

	2020		2019		Inc/(Dec)			% Change
ACMI Block Hours		113,910		121,722		(7,812	)		(6.4	)%
ACMI Revenue Per Block Hour	$	5,010	$	5,043	$	(33	)		(0.7	)%

ACMI revenue decreased $43.2 million, or 7.0%, primarily due to decreased flying.  The decrease in Block Hours flown was primarily driven by the redeployment of 747-400 aircraft to Charter to support long-term charter programs with customers seeking to secure committed cargo capacity, partially offset by an increase in CMI flying.  In addition, Block Hours were negatively impacted from flight cancellations by certain of our ACMI customers caused by the COVID-19 pandemic.  Revenue per Block Hour was relatively unchanged.

Charter

	2020		2019		Inc/(Dec)			% Change
Charter Block Hours:
Cargo		34,416		24,367		10,049			41.2	%
Passenger		7,834		9,954		(2,120	)		(21.3	)%
Total		42,250		34,321		7,929			23.1	%
Charter Revenue Per Block Hour:
Cargo	$	19,781	$	17,710	$	2,071			11.7	%
Passenger	$	18,431	$	19,012	$	(581	)		(3.1	)%
Charter	$	19,531	$	18,088	$	1,443			8.0	%

Charter revenue increased $204.4 million, or 32.9%, primarily due to increased flying and an increase in Revenue per Block Hour.  The increase in Charter Block Hours flown was primarily driven by increased demand for freighter aircraft reflecting a reduction of available cargo capacity in the market, the disruption of global supply chains due to the COVID-19 pandemic and our ability to increase utilization.  Due to this increased demand and to support long-term charter programs with customers seeking to secure committed cargo capacity, we redeployed 747-400 aircraft from ACMI and began operation of a 777-200 freighter aircraft in our Dry Leasing business.  Partially offsetting these improvements was lower AMC passenger flying for 747-400 aircraft as the U.S. military took precautionary measures to limit the movement of military personnel. Revenue per Block Hour increased primarily due to higher commercial cargo Yields driven by the factors impacting commercial cargo demand noted above, partially offset by a reduction in passenger charter Revenue per Block Hour related to a decrease in higher-yielding 747-400 flying for the AMC.

Dry Leasing

Dry Leasing revenue decreased $30.6 million, or 27.0%, primarily due to $22.3 million of revenue in 2019 from maintenance payments related to the scheduled return of a 777-200 freighter aircraft, changes in leases and the disposition of certain nonessential Dry Leased aircraft during the first quarter of 2020.

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Operating Expenses

The following table compares our Operating Expenses for the six months ended June 30 (in thousands):

	2020			2019		Inc/(Dec)			% Change
Operating Expenses
Salaries, wages and benefits	$	340,335		$	286,924	$	53,411			18.6	%
Maintenance, materials and repairs		262,452			217,091		45,361			20.9	%
Aircraft fuel		191,560			228,479		(36,919	)		(16.2	)%
Depreciation and amortization		123,410			128,170		(4,760	)		(3.7	)%
Travel		77,018			91,403		(14,385	)		(15.7	)%
Navigation fees, landing fees and other rent		67,039			78,198		(11,159	)		(14.3	)%
Passenger and ground handling services		62,089			62,685		(596	)		(1.0	)%
Aircraft rent		48,283			82,223		(33,940	)		(41.3	)%
Gain on disposal of aircraft		(6,715	)		-		(6,715	)	NM
Special charge		15,934			3,269		12,665		NM
Transaction-related expenses		1,796			3,261		(1,465	)		(44.9	)%
Other		103,822			106,054		(2,232	)		(2.1	)%
Total Operating Expenses	$	1,287,023		$	1,287,757

Salaries, wages and benefits increased $53.4 million, or 18.6%, primarily due to higher pilot costs related to premium pay for pilots operating in certain areas significantly impacted by COVID-19, increased pay rates from our recent interim agreement with our pilots and increased flying.

Maintenance, materials and repairs increased by $45.4 million, or 20.9%, primarily reflecting $50.6 million of increased Heavy Maintenance expense, partially offset by $4.6 million of decreased Line Maintenance expense due to decreased passenger flying.  Heavy Maintenance expense on 747-400 aircraft increased $40.9 million primarily due to an increase in the number of engine overhauls and other maintenance to take advantage of availability and opportunities for vendor pricing discounts.  Heavy Maintenance expense on 747-8F aircraft increased $7.2 million primarily due to an increase in the number of D Checks, partially offset by a reduction in the number of C Checks.  The lower Line Maintenance expense primarily reflected a decrease of $9.4 million related to reduced passenger flying, partially offset by $4.8 million of increased Line Maintenance expense related to increased cargo flying.  Heavy airframe maintenance checks and engine overhauls impacting Maintenance, materials and repairs for the six months ended June 30 were:

Heavy Maintenance Events	2020		2019		Inc/(Dec)
747-8F C Checks		-		2		(2	)
747-400 C Checks		11		11		-
767 C Checks		6		2		4
747-8F D Checks		3		1		2
747-400 D Checks		4		1		3
CF6-80 engine overhauls		13		9		4
PW4000 engine overhauls		1		-		1

Aircraft fuel decreased $36.9 million, or 16.2%, primarily due to a decrease in the average fuel cost per gallon, partially offset by an increase in consumption related to increased Charter flying.  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 six months ended June 30 were:

	2020		2019		Inc/(Dec)			% Change
Average fuel cost per gallon	$	1.47	$	2.30	$	(0.83	)		(36.1	)%
Fuel gallons consumed (000s)		130,047		99,468		30,579			30.7	%

Depreciation and amortization decreased $4.8 million, or 3.7%, primarily due to a reduction in depreciation related to the 747-400 freighter asset group that was written down during the fourth quarter of 2019, and certain spare CF6-80 engines and aircraft that were classified as held for sale during the fourth quarter of 2019.  Partially offsetting these decreases was an increase in the amortization of deferred maintenance costs related to 747-8F engine overhauls (see Note 2 to our Financial Statements).

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Travel decreased $14.4 million, or 15.7%, primarily due to decreased rates and travel related to the impact of the COVID-19 pandemic, partially offset by an increase in flying.

Navigation fees, landing fees and other rent decreased $11.2 million, or 14.3%, primarily due to a decrease in purchased capacity, which is a component of other rent, partially offset by increased flying.

Aircraft rent decreased $33.9 million, or 41.3%, primarily due to a reduction in the amortization of operating lease right-of-use assets related to the 747-400 freighter asset group that was written down during the fourth quarter of 2019.

Gain on disposal of aircraft in 2020 represented a net gain of $6.7 million from the sale of certain nonessential assets that were classified as held for sale during the fourth quarter of 2019 (see Note 7 to our Financial Statements).  

Special charge in 2020 primarily represented a $15.9 million impairment charge related to fair value adjustments for assets held for sale, including spare engines and 737-400 passenger aircraft for training purposes. Special charge in 2019 primarily represented a $2.5 million impairment loss on an engine trade in as part of our engine acquisition program. See Note 7 to our Financial Statements for additional discussion. We may sell additional flight equipment, which could result in additional charges in future periods.

Transaction-related expenses in 2020 primarily related to professional fees in support of the Payroll Support Program under the CARES Act (see Note 3 to our Financial Statements).  Transaction-related expenses in 2019 primarily related to professional fees for a customer transaction with warrants (see Note 5 to our Financial Statements).  

Other decreased $2.2 million or 2.1%, primarily due to a reduction in commission expense related to decreased revenue from the AMC.

Non-operating Expenses (Income)

The following table compares our Non-operating Expenses (Income) for the six months ended June 30 (in thousands):

	2020			2019			Inc/(Dec)			% Change
Non-operating (Income) Expenses
Interest income	$	(704	)	$	(3,322	)	$	(2,618	)		(78.8	)%
Interest expense		58,225			60,398			(2,173	)		(3.6	)%
Capitalized interest		(325	)		(1,090	)		(765	)		(70.2	)%
Loss on early extinguishment of debt		74			245			(171	)		(69.8	)%
Unrealized loss (gain) on financial instruments		29,747			4,275			25,472		NM
Other (income) expense, net		(49,392	)		(2,030	)		47,362		NM

Unrealized loss (gain) on financial instruments represents the change in fair value of a customer warrant liability (see Note 5 to our Financial Statements) primarily due to changes in our common stock price.

Other (income) expense, net increased $47.4 million primarily due to a $32.9 million refund of aircraft rent paid in previous years and CARES Act grant income of $20.2 million (see Note 3 to our Financial Statements).

Income taxes.  The effective income tax expense for the six months ended June 30, 2020 differed from tax at the U.S. statutory rate primarily due to $6.5 million of nondeductible changes in the fair value of a customer warrant liability (see Note 5 to our Financial Statements).  The income tax benefit for the six months ended June 30, 2019 differed from tax at the U.S. statutory rate primarily due to $59.8 million of tax benefits related to the favorable completion of an IRS examination of our 2015 income tax return.

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Segments

The following table compares the Direct Contribution for our reportable segments for the six months ended June 30 (see Note 11 to our Financial Statements for the reconciliation to Operating income) (in thousands):

	2020		2019		Inc/(Dec)			% Change
Direct Contribution:
ACMI	$	66,802	$	80,647	$	(13,845	)		(17.2	)%
Charter		236,750		43,217		193,533		NM
Dry Leasing		20,420		46,618		(26,198	)		(56.2	)%
Total Direct Contribution	$	323,972	$	170,482	$	153,490			90.0	%
Unallocated expenses and (income), net	$	139,029	$	162,064	$	(23,035	)		(14.2	)%

ACMI Segment

ACMI Direct Contribution decreased $13.8 million, or 17.2%, primarily due to higher heavy maintenance, including additional engine overhauls and other maintenance to take advantage of availability and opportunities for vendor pricing discounts.  In addition, ACMI Direct Contribution reflected higher pilot costs related to premium pay for pilots operating in certain areas significantly impacted by COVID-19 and increased pay rates from our recent interim agreement with our pilots.  We also redeployed 747-400 aircraft to Charter to support long-term Charter programs with customers seeking to secure committed cargo capacity.  Partially offsetting these items was an increase in CMI flying and a reduction in aircraft rent and depreciation.

Charter Segment

Charter Direct Contribution increased $193.5 million primarily due to an increase in commercial cargo Yields, net of fuel, and demand reflecting a reduction of available capacity in the market, the disruption of global supply chains due to the COVID-19 pandemic and our ability to increase utilization.  Charter Direct Contribution also benefited from a reduction in aircraft rent and depreciation, and the redeployment of 747-400 aircraft from ACMI and the operation of a 777-200 freighter aircraft in our Dry Leasing business.  Partially offsetting these improvements were higher heavy maintenance, including additional engine overhauls and other maintenance to take advantage of availability and opportunities for vendor pricing discounts, and lower passenger demand from the AMC as the COVID-19 pandemic disrupted the movement of military personnel.  In addition, Charter Direct Contribution reflected higher pilot costs related to premium pay for pilots operating in certain areas significantly impacted by COVID-19 and increased pay rates resulting from our recent interim agreement with our pilots.

Dry Leasing Segment

Dry Leasing Direct Contribution decreased $26.2 million, or 56.2%, primarily due to $22.3 million of revenue in 2019 from maintenance payments related to the scheduled return of a 777-200 freighter aircraft, changes in leases and the disposition of certain nonessential Dry Leased aircraft during the first quarter of 2020.

Unallocated expenses and (income), net

Unallocated expenses and (income), net decreased $23.0 million, or 14.2%, primarily due to a refund of aircraft rent paid in previous years.

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 Net Income, Adjusted Diluted EPS and Adjusted earnings before interest, taxes, depreciation and amortization (“Adjusted EBITDA”), 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, net of taxes which are the most directly comparable measures of performance prepared in accordance with GAAP. Effective during the three months ended September 30, 2019, we changed our method of calculating Adjusted EBITDA to include Other non-operating expenses (income) to enhance the usefulness for investors and analysts, and the comparability of the calculation to that of other companies.  Prior period amounts have been adjusted for comparability.

We use these non-GAAP financial measures in assessing the performance of our ongoing operations and in planning and forecasting future periods.  These adjusted measures provide a more comparable basis to analyze operating results and earnings and are measures commonly used by shareholders to measure our performance.  In addition, management’s incentive compensation is

33

determined, in part, by using Adjusted Net Income and Adjusted EBITDA. 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 Net Income and Diluted EPS to the corresponding non-GAAP financial measures (see Note 13 to our Financial Statements for the calculation of Diluted EPS) (in thousands, except per share data):

	For the Three Months Ended
	June 30, 2020			June 30, 2019			Percent Change
Net Income	$	78,912		$	86,868			(9.2	)%
Impact from:
CARES Act grant income (a)		(20,167	)		-
Customer incentive asset amortization		9,534			6,936
Special charge		15,934			3,269
Costs associated with transactions (b)		1,275			734
Leadership transition costs		3,156			541
Noncash expenses and income, net (c)		4,458			4,579
Unrealized loss (gain) on financial instruments		30,671			(42,300	)
Other, net (d)		279			1,815
Income tax effect of reconciling items		(863	)		(3,652	)
Special tax item (e)		-			(54,272	)
Adjusted Net Income	$	123,189		$	4,518		NM
Adjusted weighted average diluted shares outstanding		26,182			26,953
Adjusted Diluted EPS	$	4.71		$	0.17		NM

	For the Six Months ended
	June 30, 2020			June 30, 2019			Percent Change
Net Income	$	102,265		$	57,158			78.9	%
Impact from:
CARES Act grant income (a)		(20,167	)		-
Customer incentive asset amortization		18,556			13,222
Special charge		15,934			3,269
Costs associated with transactions (b)		1,796			3,261
Leadership transition costs		3,757			541
Noncash expenses and income, net (c)		8,844			9,047
Unrealized loss on financial instruments		29,747			4,275
Other, net (d)		(6,103	)		(979	)
Income tax effect of reconciling items		(1,559	)		(3,681	)
Special tax item (e)		-			(54,272	)
Adjusted Net Income	$	153,070		$	31,841		NM
Adjusted weighted average diluted shares outstanding		26,074			27,437
Adjusted Diluted EPS	$	5.87		$	1.16		NM

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	For the Three Months Ended
	June 30, 2020			June 30, 2019			Percent Change
Net Income	$	78,912		$	86,868			(9.2	)%
Interest expense, net		28,594			28,140
Depreciation and amortization		65,826			63,689
Income tax expense (benefit)		33,009			(64,683	)
EBITDA		206,341			114,014
CARES Act grant income (a)		(20,167	)		-
Customer incentive asset amortization		9,534			6,936
Special charge		15,934			3,269
Costs associated with transactions (b)		1,275			734
Leadership transition costs		3,156			541
Unrealized loss (gain) on financial instruments		30,671			(42,300	)
Other, net (d)		279			954
Adjusted EBITDA	$	247,023		$	84,148			193.6	%

	For the Six Months ended
	June 30, 2020			June 30, 2019			Percent Change
Net Income	$	102,265		$	57,158			78.9	%
Interest expense, net		57,196			55,986
Depreciation and amortization		123,410			128,170
Income tax expense (benefit)		41,842			(59,790	)
EBITDA		324,713			181,524
CARES Act grant income (a)		(20,167	)		-
Customer incentive asset amortization		18,556			13,222
Special charge		15,934			3,269
Costs associated with transactions (b)		1,796			3,261
Leadership transition costs		3,757			541
Unrealized loss on financial instruments		29,747			4,275
Other, net (d)		(6,103	)		(1,580	)
Adjusted EBITDA	$	368,233		$	204,512			80.1	%

(a) CARES Act grant income in 2020 related to income associated with the Payroll Support Program (see Note 3 to our Financial Statements).

(b) Costs associated with transactions in 2020 primarily related to costs associated with the Payroll Support Program (see Note 3 to our Financial Statements) and our acquisition of Southern Air.  Costs associated with transactions in 2019 primarily related to a customer transaction with warrants (see Note 5 to our Financial Statements) and other costs associated with our acquisition of Southern Air.

(c) Noncash expenses and income, net in 2020 and 2019 primarily related to amortization of debt discount on the convertible notes (see Note 8 to our Financial Statements).  

(d) Other, net in 2020 primarily related to a $6.7 million net gain on the sale of aircraft, costs associated with the refinancing of debt and accrual for legal matters and professional fees.  Other, net in 2019 primarily related to a net insurance recovery, loss on early extinguishment of debt, unique training aircraft costs required for a customer contract (see Note 5 to our Financial Statements) and accrual for legal matters and professional fees.

(e) Special tax item in 2019 represented income tax benefits from the completion of the 2015 IRS examination that are not related to ongoing operations (see Note 9 to our Financial Statements).

(f) Dilutive warrants in 2019 represented potentially dilutive common shares related to warrants issued to a customer (see Note 5 to our Financial Statements).  These warrants are excluded from Diluted EPS prepared in accordance with GAAP when they would have been antidilutive.

Liquidity and Capital Resources

The most significant liquidity events during the first half of 2020 were as follows:

In February 2020, we refinanced two secured term loans that were originally due later in 2020, with two new term loans.  One term loan is for 126 months in the amount of $82.0 million at a fixed interest rate of 3.27% with a final payment of $12.5 million due

35

in July 2030.  The other term loan is for 130 months in the amount of $82.0 million at a fixed interest rate of 3.28% with a final payment of $12.5 million due in November 2030.  

In March 2020, as a precautionary measure due to uncertainty arising from the COVID-19 pandemic, we drew $75.0 million under our revolving credit facility. As of June 30, 2020, there was $175.0 million outstanding and we had $16.2 million of unused availability, based on the collateral borrowing base.  In July 2020, we increased our unused availability, based on the collateral borrowing base, to $25.0 million.  [In August 2020, we repaid $175.0 million and had $200.0 million of unused availability.]

In April 2020, we borrowed $14.6 million related to GEnx engine performance upgrade kits and overhauls under an unsecured five-year term loan at a fixed interest rate of 1.15%.

In May 2020, we entered into the PSP Agreement with the U.S. Treasury that provided us with payroll support funding in three installments totaling $406.8 million, of which $207.0 million is in the form of direct payroll support and $199.8 million is in the form of the Promissory Note.  As of June 30, 2020, the first two installments totaling $305.1 million were received. The third installment of $101.7 million was received on July 30, 2020.  The Promissory Note is due in May 2030 and bears interest on the outstanding principal amount at a rate equal to 1.00% per annum until the fifth anniversary of the PSP Closing Date and the applicable Secured Overnight Financing Rate (“SOFR”) plus 2.00% per annum thereafter (see Note 3 to our Financial Statements).

Operating Activities. Net cash provided by operating activities was $560.4 million for the first half of 2020, which primarily reflected Net Income of $102.3 million, noncash adjustments of $157.5 million for Depreciation and amortization, $39.5 million for Deferred taxes and $29.7 million for Unrealized loss on financial instruments, a $178.9 million increase in Accounts payable, accrued liabilities and other liabilities, and a $51.8 million decrease in Accounts receivable, partially offset by a $19.1 million increase in Prepaid expenses, current assets and other assets.  Net cash provided by operating activities was $109.0 million for the first half of 2019, which primarily reflected Net Income of $57.2 million, noncash adjustments of $157.8 million for Depreciation and amortization, $60.0 million for Deferred taxes and $4.3 million for Unrealized loss on financial instruments, partially offset by a $40.1 million decrease in Accounts payable, accrued liabilities and other liabilities, and a $23.8 million increase in Prepaid expenses, current assets and other assets.  

Investing Activities. Net cash used for investing activities was $40.0 million for the first half of 2020, consisting primarily of $59.9 million of payments for flight equipment and $25.1 million of payments for core capital expenditures, excluding flight equipment, partially offset by $44.1 million of proceeds from the disposal of aircraft. Payments for flight equipment and modifications during the first half of 2020 were primarily related to spare engines and GEnx engine performance upgrade kits.  All capital expenditures for 2020 were funded through working capital and the financings discussed above.  Net cash used for investing activities was $128.5 million for the first half of 2019, consisting primarily of $99.2 million of payments for flight equipment and modifications and $76.8 million of core capital expenditures, excluding flight equipment, partially offset by $38.1 million of proceeds from insurance.  Payments for flight equipment and modifications during the first half of 2019 were primarily related to 767-300 passenger aircraft and related freighter conversion costs, spare engines and GEnx engine performance upgrade kits.

Financing Activities. Net cash provided by financing activities was $105.4 million for the first half of 2020, which primarily reflected $321.5 million from debt issuance and $75.0 million of proceeds from our revolving credit facility, partially offset by $275.0 million of payments on debt and $14.4 million in payments of maintenance reserves.  Net cash used for financing activities was $92.5 million for the first half of 2019, which primarily reflected $160.1 million of payments on debt, including a $20.7 million repayment of two term loans, and $9.2 million related to the treasury shares withheld for payment of taxes, partially offset by $50.0 million of proceeds from our revolving credit facility and $19.7 million from debt issuance.

In response to the COVID-19 pandemic, we have significantly reduced nonessential employee travel, reduced the use of contractors, limited ground staff hiring, implemented a number of other cost reduction initiatives and taken actions to increase liquidity and strengthen our financial position, including participation in the Payroll Support Program and deferral of the payment of the employer portion of social security taxes as provided for under the CARES Act.  In connection with our participation in the Payroll Support Program, we agreed not to repurchase shares in the open market of, or make dividend payments with respect to, our common stock through September 30, 2021. We consider Cash and cash equivalents (excluding Payroll Support Program proceeds to be used exclusively for the payment of certain employee wages, salaries and benefits of the PSP Recipients), Net cash provided by operating activities and availability under our revolving credit facility to be sufficient to meet our debt and lease obligations, and to fund committed and core capital expenditures for the remainder of 2020.  Commitments to acquire engines are approximately $66.3 million. Core capital expenditures for the remainder of 2020 are expected to range between $55.0 to $65.0 million, which excludes flight equipment and capitalized interest.  

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 April 2020 that enables us to sell debt and/or equity securities on a registered basis over the subsequent three years, depending on

36

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 in this decade.  Our business operations are subject to income tax in several foreign jurisdictions and in many states.  We do not expect to pay any significant cash income taxes for at least several years in these foreign jurisdictions and states.  We may repatriate the unremitted earnings of our foreign subsidiaries to the extent taxes are insignificant.

Contractual Obligations and Debt Agreements

See Notes 3 and 8 to our Financial Statements for a description of our new debt.  See our 2019 Annual Report on Form 10-K for a tabular disclosure of our contractual obligations as of December 31, 2019 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 six months ended June 30, 2020.

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, 2019.  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.  Such forward-looking statements speak only as of the date of this report.  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 and expressly disclaims any obligation to revise or update publicly any forward-looking statement to reflect future events or circumstances.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

There have been no material changes to our market risk during the six months ended June 30, 2020.  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 2019 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 June 30, 2020.  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.

37

Changes in Internal Control Over Financial Reporting

In connection with entering into an agreement with the U.S. Treasury under the Payroll Support Program of the CARES Act, we implemented new processes and internal controls related to the payroll support funding received and compliance with the requirements of the agreement.

Except as described above, 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 June 30, 2020 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

38

PART II — OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

With respect to the fiscal quarter ended June 30, 2020, the information required in response to this Item is set forth in Note 12 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

The following is an update of our risk factors that are set forth in Item 1A — Risk Factors of our 2019 Annual Report on Form 10-K.  The update reflects an additional risk factor related to entering into an agreement with the U.S. Treasury under the Payroll Support Program of the CARES Act.  For additional risk factors that may cause actual results to differ materially from those anticipated, please refer to our 2019 Annual Report on Form 10-K.

Our agreements with the U.S. Treasury under the Payroll Support Program contain certain requirements and restrictions. If we are unable to comply with these requirements and restrictions, it could have a material adverse effect on our business, results of operations and financial condition

In connection with the Payroll Support Program, we are required to comply with the relevant requirements of the CARES Act, including the requirement that funds provided pursuant to the PSP Agreement be used exclusively for the payment of certain employee wages, salaries and benefits of the PSP Recipients.  The Payroll Support Program subjects the PSP Recipients and certain of their affiliates to a number of restrictions, including prohibitions against reductions in certain employee salaries, wages and benefits, and certain involuntary terminations and furloughs of employees until September 30, 2020, prohibitions of repurchasing shares in the open market of, or making dividend payments with respect to, our common stock through September 30, 2021, as well as certain limitations on executive compensation until March 24, 2022.  Under the PSP Agreement, we must also maintain certain internal controls and records relating to the payroll support funding and we are subject to additional reporting obligations.  If we are unable to comply with the requirements and restrictions within the Payroll Support Program, the U.S. Treasury could require repayment of amounts previously provided to us, among other actions, which could have a material adverse effect on our business, results of operations and financial condition.

ITEM 6. EXHIBITS

a. Exhibits

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

39

EXHIBIT INDEX

Exhibit Number	Description
4.1	Warrant Agreement, dated as of May 29, 2020, between Atlas Air Worldwide Holdings, Inc. and the United States Department of the Treasury.
4.2	Form of Warrant Agreement (incorporated by reference to Annex B to Exhibit 4.1).
10.1	Payroll Support Program Agreement, dated as of May 29, 2020, between Atlas Air, Inc. and the United States Department of the Treasury.
10.2	Promissory Note, dated as of May 29, 2020, issued by Atlas Air Worldwide Holdings, Inc. In the name of the United States Department of the Treasury.
10.3	Proposal No. 4 – Approval of Amendment to the Atlas Air Worldwide Holdings, Inc. 2018 Incentive Plan, effective as of June 9, 2020, included in the Company’s Definitive Proxy Statement on Schedule 14A filed with the SEC on May 8, 2020 and incorporated herein by reference.
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	Inline XBRL Instance Document – the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document. *
101.SCH	Inline XBRL Taxonomy Extension Schema Document. *
101.CAL	Inline XBRL Taxonomy Extension Calculation Linkbase Document. *
101.DEF	Inline XBRL Taxonomy Extension Definition Linkbase Document.  *
101.LAB	Inline XBRL Taxonomy Extension Labels Linkbase Document. *
101.PRE	Inline XBRL Taxonomy Extension Presentation Linkbase Document. *
104	Cover Page Interactive Data File – the cover page interactive data file does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document (included in Exhibit 101).

* Attached as Exhibit 101 to this report are the following formatted in Inline XBRL (Extensible Business Reporting Language): (i) Consolidated Balance Sheets as of June 30, 2020 and December 31, 2019, (ii) Consolidated Statements of Operations for the three and six months ended June 30, 2020 and 2019, (iii) Consolidated Statements of Comprehensive Income (Loss) for the three and six months ended June 30, 2020 and 2019, (iv) Consolidated Statements of Cash Flows for the six months ended June 30, 2020 and 2019, (v) Consolidated Statements of Stockholders’ Equity as of and for the three and six months ended June 30, 2020 and 2019 and (vi) Notes to the Unaudited Consolidated Financial Statements.

40

SIGNATURES

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

	Atlas Air Worldwide Holdings, Inc.
Dated:  August 6, 2020	/s/  John W. Dietrich
	John W. Dietrich
	President and Chief Executive Officer
Dated:  August 6, 2020	/s/  Spencer Schwartz
	Spencer Schwartz
	Executive Vice President and Chief Financial Officer

41

EX-4.1

Exhibit 4.1

WARRANT AGREEMENT

TABLE OF CONTENTS

Page

Article I
Closing

1.1 Issuance1

1.2 Initial Closing; Warrant Closing Date.1

1.3 Interpretation2

Article II
Representations and Warranties

2.1 Representations and Warranties of the Company3

Article III
Covenants

3.1 Commercially Reasonable Efforts6

3.2 Expenses7

3.3 Sufficiency of Authorized Common Stock; Exchange Listing8

Article IV
Additional Agreements

4.1 Investment8

4.2 Legends8

4.3 Certain Transactions9

4.4 Transfer of Warrants and Warrant Shares.9

4.5 Registration Rights9

4.6 Voting of Warrant Shares21

Article V
Miscellaneous

5.1 Survival of Representations and Warranties21

5.2 Amendment21

5.3 Waiver of Conditions21

5.4 Governing Law: Submission to Jurisdiction, Etc.21

5.5 Notices21

5.6 Definitions22

5.7 Assignment23

5.8 Severability23

-i-

5.9 No Third Party Beneficiaries23

-ii-

LIST OF ANNEXES

ANNEX A:FORM OF OPINION

ANNEX B:FORM OF WARRANT

SCHEDULE 1:WARRANT SHARES FORMULA

SCHEDULE 2:CAPITALIZATION

SCHEDULE 3: REQUIRED STOCKHOLDER APPROVALS

-iii-

INDEX OF DEFINED TERMS

Term	Location of Definition
Affiliate	Annex B
Agreement	Recitals
Appraisal Procedure	Annex B
Board of Directors	2.1(i)
Business Combination	Annex B
Business Day	Annex B
Capitalization Date	2.1(b)
Closing	1.2(a)
Common Stock	Annex B
Company	Recitals
Company Reports	2.1(j)(i)
Exchange Act	Annex B
Governmental Authority	5.6(a)
Holder	4.5(k)(i)
Indemnitee	4.5(g)(i)
Initial Closing	1.2(a)
Lien	5.6(c)
Material Adverse Effect	5.6(d)
Organizational Documents	5.6(e)
Pending Underwritten Offering	4.5(l)
Piggyback Registration	4.5(a)(iv)
Promissory Note	Recitals
register; registered; registration	4.5(k)(ii)
Registrable Securities	4.5(k)(iii)
Registration Commencement Date	4.5(a)(i)
Registration Expenses	4.5(k)(iv)
Rule 144; Rule 144A; Rule 159A; Rule 405; Rule 415	4.5(k)(v)
SEC	2.1(c)
Securities Act	Annex B
Selling Expenses	4.5(k)(vi)
Shelf Registration Statement	4.5(a)(ii)
Special Registration	4.5(i)
Stockholder Proposals	3.1(b)
Subsidiary	5.6(f)
Transfer	4.4
Treasury	Recitals
Warrant Closing Date	1.2(a)
Warrants	Recitals
Warrant Shares	Annex B

-iv-

-

WARRANT AGREEMENT dated as of May 29,2020 (this “Agreement”), between ATLAS AIR WORLDWIDE HOLDINGS, INC., a corporation organized under the laws of Delaware (the “Company”) and the UNITED STATES DEPARTMENT OF THE TREASURY (“Treasury”).

WHEREAS, the Company has requested that Treasury provide financial assistance to the Recipient (as defined in the PSP Agreement) that shall exclusively be used for the continuation of payment of employee wages, salaries, and benefits as is permissible under Section 4112(a) of Title IV of the Coronavirus Aid, Relief, and Economic Security Act, Pub. L. 116-136 (Mar. 27, 2020), as the same may be amended form time to time (the “CARES Act”), and Treasury is willing to do so on the terms and conditions set forth in the Payroll Support Program Agreement dated as of May 29, 2020, between Atlas Air, Inc., SOUTHERN AIR INC. and Treasury (the “PSP Agreement”); and

WHEREAS, as appropriate compensation to the Federal Government of the United States of America for the provision of financial assistance under the PSP Agreement, the Company has agreed to issue a note to be repaid to Treasury on the terms and conditions set forth in the promissory note dated as of May 29, 2020, issued by the Company, in the name of Treasury as the holder (the “Promissory Note”) and agreed to issue in a private placement warrants to purchase the number of shares of its Common Stock determined in accordance with Schedule 1 to this Agreement (the “Warrants”) to Treasury;

NOW, THEREFORE, in consideration of the premises, and of the representations, warranties, covenants and agreements set forth herein, the parties agree as follows:

Article I
Closing

Issuance

.

(a)On the terms and subject to the conditions set forth in this Agreement, the Company agrees to issue to Treasury, on each Warrant Closing Date, Warrants for a number of shares of Common Stock determined by the formula set forth in Schedule 1.

1.2Initial Closing; Warrant Closing Date.

(a)On the terms and subject to the conditions set forth in this Agreement, the closing of the initial issuance of the Warrants (the “Initial Closing”) will take place on the Closing Date (as defined in the Promissory Note) or, if on the Closing Date the principal amount of the Promissory Note is $0, the first date on which such principal amount is increased. A subsequent closing will take place on the date of each increase, if any, of the principal amount of the Promissory Note (each subsequent closing, together with the Initial Closing, a “Closing” and each such date a “Warrant Closing Date”).

(b)On each Warrant Closing Date, the Company will issue to Treasury a duly executed Warrant or Warrants for a number of shares of Common Stock determined by the formula set forth in Schedule 1, as evidenced by one or more certificates dated the Warrant

Closing Date and bearing appropriate legends as hereinafter provided for and in substantially the form attached hereto as Annex B.

(c)On each Warrant Closing Date, the Company shall deliver to Treasury (i) a written opinion from counsel to the Company (which may be internal counsel) addressed to Treasury and dated as of such Warrant Closing Date, in substantially the form attached hereto as Annex A and (ii) a certificate executed by the chief executive officer, president, executive vice president, chief financial officer, principal accounting officer, treasurer or controller confirming that the representations and warranties of the Company in this Agreement are true and correct with the same force and effect as though expressly made at and as of such Warrant Closing Date and the Company has complied with all agreements on its part to be performed or satisfied hereunder at or prior to such Closing.

(d)On the initial Warrant Closing Date, the Company shall deliver to Treasury (i) such customary certificates of resolutions or other action, incumbency certificates and/or other certificates of the chief executive officer, president, executive vice president, chief financial officer, principal accounting officer, treasurer or controller as Treasury may require evidencing the identity, authority and capacity of each such officer thereof authorized to act as such officer in connection with this Agreement and (ii) customary resolutions or evidence of corporate authorization, secretary's certificates and such other documents and certificates (including Organizational Documents and good standing certificates) as Treasury may reasonably request relating to the organization, existence and good standing of the Company and any other legal matters relating to the Company, this Agreement, the Warrants or the transactions contemplated hereby or thereby.

Interpretation

.

(a)When a reference is made in this Agreement to “Recitals,” “Articles,” “Sections,” or “Annexes” such reference shall be to a Recital, Article or Section of, or Annex to, this Warrant Agreement, unless otherwise indicated. The terms defined in the singular have a comparable meaning when used in the plural, and vice versa. References to “herein”, “hereof”, “hereunder” and the like refer to this Agreement as a whole and not to any particular section or provision, unless the context requires otherwise. The table of contents and headings contained in this Agreement are for reference purposes only and are not part of this Agreement. Whenever the words “include,” “includes” or “including” are used in this Agreement, they shall be deemed followed by the words “without limitation.” No rule of construction against the draftsperson shall be applied in connection with the interpretation or enforcement of this Agreement, as this Agreement is the product of negotiation between sophisticated parties advised by counsel. All references to “$” or “dollars” mean the lawful currency of the United States of America. Except as expressly stated in this Agreement, all references to any statute, rule or regulation are to the statute, rule or regulation as amended, modified, supplemented or replaced from time to time (and, in the case of statutes, include any rules and regulations promulgated under the statute) and to any section of any statute, rule or regulation include any successor to the section.

(b)Capitalized terms not defined herein have the meanings ascribed thereto in Annex B.

- 2

Article II
Representations and Warranties

Representations and Warranties of the Company

. The Company represents and warrants to Treasury that as of the date hereof and each Warrant Closing Date (or such other date specified herein):

Existence, Qualification andPower

.  The Company is duly organized or formed, validly existing and, if applicable, in good standing under the Laws of the jurisdiction of its incorporation or organization, and the Company and each Subsidiary (a) has all requisite power and authority and all requisite governmental licenses, authorizations, consents and approvals to (i) own or lease its assets and carry on its business and (ii) execute, deliver and perform its obligations under the this Agreement and the Warrants, and (b) is duly qualified and is licensed and, as applicable, in good standing under the Laws of each jurisdiction where its ownership, lease or operation of properties or the conduct of its business requires such qualification or license, except, in each case referred to in clause (a)(i) or (b), to the extent that failure to do so could not reasonably be expected to have a Material Adverse Effect.

Capitalization

(i) . The authorized capital stock of the Company, and the outstanding capital stock of the Company (including securities convertible into, or exercisable or exchangeable for, capital stock of the Company) as of the most recent fiscal month-end preceding the date hereof (the “Capitalization Date”) is set forth in Schedule 2. The outstanding shares of capital stock of the Company have been duly authorized and are validly issued and outstanding, fully paid and nonassessable, and subject to no preemptive rights (and were not issued in violation of any preemptive rights). Except as provided in the Warrants, as of the date hereof, the Company does not have outstanding any securities or other obligations providing the holder the right to acquire Common Stock that is not reserved for issuance as specified on Schedule 2, and the Company has not made any other commitment to authorize, issue or sell any Common Stock. Since the Capitalization Date, the Company has not issued any shares of Common Stock, other than (i) shares issued upon the exercise of stock options or delivered under other equity-based awards or other convertible securities or warrants which were issued and outstanding on the Capitalization Date and disclosed on Schedule 2 and (ii) shares disclosed on Schedule 2 as it may be updated by written notice from the Company to Treasury in connection with each Warrant Closing Date.

(c)Listing. The Common Stock has been registered pursuant to Section 12(b) of the Exchange Act and the shares of the Common Stock outstanding on the date hereof are listed on a national securities exchange. The Company has taken no action designed to, or likely to have the effect of, terminating the registration of the Common Stock under the Exchange Act or the listing of the Common Stock on such national securities exchange, nor has the Company received any notification that the Securities and Exchange Commission (the “SEC”) or such exchange is contemplating terminating such registration or listing. The Company is in compliance with applicable continued listing requirements of such exchange in all material respects.

Governmental Authorization; Other Consents

.  No approval, consent, exemption, authorization, or other action by, or notice to, or filing with, any Governmental Authority or any other Person is necessary or required in connection with the execution, delivery or performance

- 3

by, or enforcement against, the Company of this Agreement, except for such approvals, consents, exemptions, authorizations, actions or notices that have been duly obtained, taken or made and in full force and effect.

Execution and Delivery; Binding Effect

(f).  This Agreement has been duly authorized, executed and delivered by the Company.  This Agreement constitutes a legal, valid and binding obligation of the Company, enforceable against the Company in accordance with its terms, except as such enforceability may be limited by bankruptcy, insolvency, reorganization, receivership, moratorium or other Laws affecting creditors’ rights generally and by general principles of equity.

T

he Warrants and Warrant Shares

(h). Each Warrant has been duly authorized and, when executed and delivered as contemplated hereby, will constitute a valid and legally binding obligation of the Company enforceable against the Company in accordance with its terms, except as such enforceability may be limited by bankruptcy, insolvency, reorganization, receivership, moratorium or other Laws affecting creditors’ rights generally and by general principles of equity. The Warrant Shares have been duly authorized and reserved for issuance upon exercise of the Warrants and when so issued in accordance with the terms of the Warrants will be validly issued, fully paid and non-assessable, subject, if applicable, to the approvals of its stockholders set forth on Schedule 3.

Authorization, Enforceability

.

(i)The Company has the corporate power and authority to execute and deliver this Agreement and the Warrants and, subject, if applicable, to the approvals of its stockholders set forth on Schedule 3, to carry out its obligations hereunder and thereunder (which includes the issuance of the Warrants and Warrant Shares). The execution, delivery and performance by the Company of this Agreement and the Warrants and the consummation of the transactions contemplated hereby and thereby have been duly authorized by all necessary corporate or other organizational action on the part of the Company and its stockholders, and no further approval or authorization is required on the part of the Company, subject, in each case, if applicable, to the approvals of its stockholders set forth on Schedule 3.

(ii)The execution, delivery and performance by the Company of this Agreement do not and will not (a) contravene the terms of its Organizational Documents, (b) conflict with or result in any breach or contravention of, or the creation of any Lien (as defined in the Promissory Note) under, or require any payment to be made under (i) any material Contractual Obligation to which the Company is a party or affecting the Company or the properties of the Company or any Subsidiary or (ii) any material order, injunction, writ or decree of any Governmental Authority or any arbitral award to which the Company or any Subsidiary or its property is subject or (c) violate any Law, except to the extent that such violation could not reasonably be expected to have a Material Adverse Effect.

(iii)Other than any current report on Form 8-K required to be filed with the SEC (which shall be made on or before the date on which it is required to be filed), such

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filings and approvals as are required to be made or obtained under any state “blue sky” laws, the filing of any proxy statement contemplated by Section 3.1 and such filings and approvals as have been made or obtained, no notice to, filing with, exemption or review by, or authorization, consent or approval of, any Governmental Authority is required to be made or obtained by the Company in connection with the execution, delivery and performance by the Company of this Agreement and the consummation by the Company of the issuance of the Warrants except for any such notices, filings, exemptions, reviews, authorizations, consents and approvals the failure of which to make or obtain would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect.

Anti-takeover Provisions and Rights Plan

. The Board of Directors of the Company (the “Board of Directors”) has taken all necessary action, and will in the future take any necessary action, to ensure that the transactions contemplated by this Agreement and the Warrants and the consummation of the transactions contemplated hereby and thereby, including the exercise of the Warrants in accordance with their terms, will be exempt from any anti-takeover or similar provisions of the Company’s Organizational Documents, and any other provisions of any applicable “moratorium”, “control share”, “fair price”, “interested stockholder” or other anti-takeover laws and regulations of any jurisdiction, whether existing on the date hereof or implemented after the date hereof.  The Company has taken all actions necessary, and will in the future take any necessary action, to render any stockholders’ rights plan of the Company inapplicable to this Agreement and the Warrants and the consummation of the transactions contemplated hereby and thereby, including the exercise of the Warrants by Treasury in accordance with its terms.

Reports

.

(i)Since December 31, 2017, the Company and each Subsidiary has timely filed all reports, registrations, documents, filings, statements and submissions, together with any amendments thereto, that it was required to file with any Governmental Authority (the foregoing, collectively, the “Company Reports”) and has paid all fees and assessments due and payable in connection therewith, except, in each case, as would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect. As of their respective dates of filing, the Company Reports complied in all material respects with all statutes and applicable rules and regulations of the applicable Governmental Authority. In the case of each such Company Report filed with or furnished to the SEC, such Company Report (A) did not, as of its date or if amended prior to the date hereof, as of the date of such amendment, contain an untrue statement of a material fact or omit to state a material fact necessary in order to make the statements made therein, in light of the circumstances under which they were made, not misleading, and (B) complied as to form in all material respects with the applicable requirements of the Securities Act and the Exchange Act. With respect to all other Company Reports, the Company Reports were complete and accurate in all material respects as of their respective dates. No executive officer of the Company or any Subsidiary has failed in any respect to make the certifications required of him or her under Section 302 or 906 of the Sarbanes-Oxley Act of 2002.

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(ii)The Company (A) has implemented and maintains disclosure controls and procedures (as defined in Rule 13a‑15(e) of the Exchange Act) to ensure that material information relating to the Company, including its Subsidiaries, is made known to the chief executive officer and the chief financial officer of the Company by others within those entities, and (B) has disclosed, based on its most recent evaluation prior to the date hereof, to the Company’s outside auditors and the audit committee of the Board of Directors (x) any significant deficiencies and material weaknesses in the design or operation of internal controls over financial reporting (as defined in Rule 13a-15(f) of the Exchange Act) that are reasonably likely to adversely affect the Company’s ability to record, process, summarize and report financial information and (y) any fraud, whether or not material, that involves management or other employees who have a significant role in the Company’s internal controls over financial reporting.

(j)Offering of Securities. Neither the Company nor any person acting on its behalf has taken any action (including any offering of any securities of the Company under circumstances which would require the integration of such offering with the offering of any of the Warrants under the Securities Act, and the rules and regulations of the Securities and Exchange Commission (the “SEC”) promulgated thereunder), which might subject the offering, issuance or sale of any of the Warrants to Treasury pursuant to this Agreement to the registration requirements of the Securities Act.

Brokers and Finders

. No broker, finder or investment banker is entitled to any financial advisory, brokerage, finder’s or other fee or commission in connection with this Agreement or the Warrants or the transactions contemplated hereby or thereby based upon arrangements made by or on behalf of the Company or any Subsidiary for which Treasury could have any liability.

Article III
Covenants

Commercially Reasonable Efforts

.

(a)Subject to the terms and conditions of this Agreement, each of the parties will use its commercially reasonable efforts in good faith to take, or cause to be taken, all actions, and to do, or cause to be done, all things necessary, proper or desirable, or advisable under applicable laws, to enable consummation of the transactions contemplated hereby and shall use commercially reasonable efforts to cooperate with the other party to that end.

(b)If the Company is required to obtain any stockholder approvals set forth on Schedule 3, then the Company shall comply with this Section 3.1(b) and Section 3.1(c). The Company shall call a special meeting of its stockholders, as promptly as practicable following the Initial Closing, to vote on proposals (collectively, the “Stockholder Proposals”) to (i) approve the exercise of the Warrants for Common Stock for purposes of the rules of the national securities exchange on which the Common Stock is listed and/or (ii) amend the Company’s Organizational Documents to increase the number of authorized shares of Common Stock to at least such number as shall be sufficient to permit the full exercise of the Warrants for Common Stock and comply with the other provisions of this Section 3.1(b) and Section 3.1(c). The Board

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of Directors shall recommend to the Company’s stockholders that such stockholders vote in favor of the Stockholder Proposals. In connection with such meeting, the Company shall prepare (and Treasury will reasonably cooperate with the Company to prepare) and file with the SEC as promptly as practicable (but in no event more than ten Business Days after the Initial Closing) a preliminary proxy statement, shall use its reasonable best efforts to respond to any comments of the SEC or its staff thereon and to cause a definitive proxy statement related to such stockholders’ meeting to be mailed to the Company’s stockholders not more than five Business Days after clearance thereof by the SEC, and shall use its reasonable best efforts to solicit proxies for such stockholder approval of the Stockholder Proposals. The Company shall notify Treasury promptly of the receipt of any comments from the SEC or its staff with respect to the proxy statement and of any request by the SEC or its staff for amendments or supplements to such proxy statement or for additional information and will supply Treasury with copies of all correspondence between the Company or any of its representatives, on the one hand, and the SEC or its staff, on the other hand, with respect to such proxy statement. If at any time prior to such stockholders’ meeting there shall occur any event that is required to be set forth in an amendment or supplement to the proxy statement, the Company shall as promptly as practicable prepare and mail to its stockholders such an amendment or supplement. Each of Treasury and the Company agrees promptly to correct any information provided by it or on its behalf for use in the proxy statement if and to the extent that such information shall have become false or misleading in any material respect, and the Company shall as promptly as practicable prepare and mail to its stockholders an amendment or supplement to correct such information to the extent required by applicable laws and regulations. The Company shall consult with Treasury prior to filing any proxy statement, or any amendment or supplement thereto, and provide Treasury with a reasonable opportunity to comment thereon. In the event that the approval of any of the Stockholder Proposals is not obtained at such special stockholders meeting, the Company shall include a proposal to approve (and the Board of Directors shall recommend approval of) each such proposal at a meeting of its stockholders no less than once in each subsequent six‑month period beginning on September 30, 2020 until all such approvals are obtained or made.

(c)None of the information supplied by the Company or any of the Company Subsidiaries for inclusion in any proxy statement in connection with any such stockholders meeting of the Company will, at the date it is filed with the SEC, when first mailed to the Company’s stockholders and at the time of any stockholders meeting, and at the time of any amendment or supplement thereof, contain any untrue statement of a material fact or omit to state any material fact necessary in order to make the statements therein, in light of the circumstances under which they are made, not misleading.

Expenses

. The Company shall pay (i) all reasonable out‑of‑pocket expenses incurred by Treasury (including the reasonable fees, charges and disbursements of any counsel for Treasury) in connection with the preparation, negotiation, execution, delivery and administration of this Agreement and the Warrants, any other agreements or documents executed in connection herewith or therewith, or any amendments, modifications or waivers of the provisions hereof or thereof (whether or not the transactions contemplated hereby or thereby shall be consummated), and (ii) all out‑of‑pocket expenses incurred by Treasury (including the fees, charges and disbursements of any counsel for Treasury), in connection with the enforcement or protection of its rights in connection with this Agreement and the Warrants, any other agreements or documents executed in connected herewith or therewith, or any

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amendments, modifications or waivers of the provisions hereof or thereof (whether or not the transactions contemplated hereby or thereby shall be consummated), including all such out-of-pocket expenses incurred during any workout, restructuring, negotiations or enforcement in respect of such Warrant Agreement, Warrant and other agreements or documents executed in connection herewith or therewith.

Sufficiency of Authorized Common Stock; Exchange Listing

.

During the period from each Warrant Closing Date (or, if the approval of the Stockholder Proposals is required, the date of such approval) until the date on which no Warrants remain outstanding, the Company shall at all times have reserved for issuance, free of preemptive or similar rights, a sufficient number of authorized and unissued Warrant Shares to effectuate such exercise. Nothing in this Section 3.3 shall preclude the Company from satisfying its obligations in respect of the exercise of the Warrants by delivery of shares of Common Stock which are held in the treasury of the Company. As soon as reasonably practicable following each Warrant Closing Date, the Company shall, at its expense, cause the Warrant Shares to be listed on the same national securities exchange on which the Common Stock is listed, subject to official notice of issuance, and shall maintain such listing for so long as any Common Stock is listed on such exchange.  The Company will use commercially reasonable efforts to maintain the listing of Common Stock on such national securities exchange so long as any Warrants or Warrant Shares remain outstanding. Neither the Company nor any of its Subsidiaries shall take any action which would be reasonably expected to result in the delisting or suspension of the Common Stock on such exchange.  The foregoing shall not preclude the Company from undertaking any transaction set forth in Section 4.3 subject to compliance with that provision.

Article IV
Additional Agreements

Investment

Purposes. Treasury acknowledges that the Warrants and the Warrant Shares have not been registered under the Securities Act or under any state securities laws. Treasury (a) is acquiring the Warrants pursuant to an exemption from registration under the Securities Act solely for investment without a view to sell and with no present intention to distribute them to any person in violation of the Securities Act or any applicable U.S. state securities laws; (b) will not sell or otherwise dispose of any of the Warrants or the Warrant Shares, except in compliance with the registration requirements or exemption provisions of the Securities Act and any applicable U.S. state securities laws; and (c) has such knowledge and experience in financial and business matters and in investments of this type that it is capable of evaluating the merits and risks of the Warrants and the Warrant Shares and of making an informed investment decision.

Legends

.

(a)Treasury agrees that all certificates or other instruments representing the Warrants and the Warrant Shares will bear a legend substantially to the following effect:

“THE SECURITIES REPRESENTED BY THIS INSTRUMENT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE

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SECURITIES LAWS OF ANY STATE AND MAY NOT BE TRANSFERRED, SOLD OR OTHERWISE DISPOSED OF EXCEPT WHILE A REGISTRATION STATEMENT RELATING THERETO IS IN EFFECT UNDER SUCH ACT AND APPLICABLE STATE SECURITIES LAWS OR PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER SUCH ACT AND SUCH LAWS.”

(b)In the event that any Warrants or Warrant Shares (i) become registered under the Securities Act or (ii) are eligible to be transferred without restriction in accordance with Rule 144 or another exemption from registration under the Securities Act (other than Rule 144A), the Company shall issue new certificates or other instruments representing such Warrants or Warrant Shares, which shall not contain the legend in Section 4.2(a) above; provided that Treasury surrenders to the Company the previously issued certificates or other instruments.

Certain Transactions

. The Company will not merge or consolidate with, or sell, transfer or lease all or substantially all of its property or assets to, any other party unless the successor, transferee or lessee party (or its ultimate parent entity), as the case may be (if not the Company), expressly assumes the due and punctual performance and observance of each and every covenant, agreement and condition of this Agreement and the Warrants to be performed and observed by the Company.

4.4Transfer of Warrants and Warrant Shares. Subject to compliance with applicable securities laws, Treasury shall be permitted to transfer, sell, assign or otherwise dispose of (“Transfer”) all or a portion of the Warrants or Warrant Shares at any time, and the Company shall take all steps as may be reasonably requested by Treasury to facilitate the Transfer of the Warrants and the Warrant Shares.

Registration Rights

.

Registration

.

(i)Subject to the terms and conditions of this Agreement, the Company covenants and agrees that on or before the earlier of (A) 30 days after the date on which all Warrants that may be issued pursuant to this Agreement have been issued and (B) September 30, 2020 (the end of such period, the “Registration Commencement Date”), the Company shall prepare and file with the SEC a Shelf Registration Statement covering the maximum number of Registrable Securities (or otherwise designate an existing Shelf Registration Statement filed with the SEC to cover the Registrable Securities) that may be issued pursuant to this Agreement and any Warrants outstanding at that time, and, to the extent the Shelf Registration Statement has not theretofore been declared effective or is not automatically effective upon such filing, the Company shall use reasonable best efforts to cause such Shelf Registration Statement to be declared or become effective and to keep such Shelf Registration Statement continuously effective and in compliance with the Securities Act and usable for resale of such Registrable Securities for a period from the date of its initial effectiveness until such time as there are no Registrable Securities remaining (including by refiling such Shelf Registration Statement (or a new Shelf Registration Statement) if the initial Shelf Registration Statement expires). So long as the Company is a well-known seasoned issuer (as defined in Rule 405 under the Securities

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Act) at the time of filing of the Shelf Registration Statement with the SEC, such Shelf Registration Statement shall be designated by the Company as an automatic Shelf Registration Statement. Notwithstanding the foregoing, if on the date hereof the Company is not eligible to file a registration statement on Form S-3, then the Company shall not be obligated to file a Shelf Registration Statement unless and until it is so eligible and is requested to do so in writing by Treasury.

(ii)Any registration pursuant to Section 4.5(a)(i) shall be effected by means of a shelf registration on an appropriate form under Rule 415 under the Securities Act (a “Shelf Registration Statement”). If Treasury or any other Holder intends to distribute any Registrable Securities by means of an underwritten offering it shall promptly so advise the Company and the Company shall take all reasonable steps to facilitate such distribution, including the actions required pursuant to Section 4.5(c); provided that the Company shall not be required to facilitate an underwritten offering of Registrable Securities unless the total number of Warrant Shares and Warrants expected to be sold in such offering exceeds, or are exercisable for, at least 20% of the total number of Warrant Shares for which Warrants issued under this Agreement could be exercised (giving effect to the anti-dilution adjustments in Warrants); and provided, further that the Company shall not be required to facilitate more than two completed underwritten offerings within any 12-month period. The lead underwriters in any such distribution shall be selected by the Holders of a majority of the Registrable Securities to be distributed.

(iii)The Company shall not be required to effect a registration (including a resale of Registrable Securities from an effective Shelf Registration Statement) or an underwritten offering pursuant to Section 4.5(a): (A) prior to the Registration Commencement Date; (B) with respect to securities that are not Registrable Securities; or (C) if the Company has notified Treasury and all other Holders that in the good faith judgment of the Board of Directors, it would be materially detrimental to the Company or its securityholders for such registration or underwritten offering to be effected at such time, in which event the Company shall have the right to defer such registration or offering for a period of not more than 45 days after receipt of the request of Treasury or any other Holder; provided that such right to delay a registration or underwritten offering shall be exercised by the Company (1) only if the Company has generally exercised (or is concurrently exercising) similar black-out rights against holders of similar securities that have registration rights and (2) not more than three times in any 12-month period and not more than 90 days in the aggregate in any 12-month period.  The Company shall notify the Holders of the date of any anticipated termination of any such deferral period prior to such date.

(iv)If during any period when an effective Shelf Registration Statement is not available, the Company proposes to register any of its equity securities, other than a registration pursuant to Section 4.5(a)(i) or a Special Registration, and the registration form to be filed may be used for the registration or qualification for distribution of Registrable Securities, the Company will give prompt written notice to Treasury and all other Holders of its intention to effect such a registration (but in no event less than ten days prior to the anticipated filing date) and will include in such registration all Registrable Securities with respect to which the Company has received written requests

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for inclusion therein within ten Business Days after the date of the Company’s notice (a “Piggyback Registration”). Any such person that has made such a written request may withdraw its Registrable Securities from such Piggyback Registration by giving written notice to the Company and the managing underwriter, if any, on or before the fifth Business Day prior to the planned effective date of such Piggyback Registration. The Company may terminate or withdraw any registration under this Section 4.5(a)(iv) prior to the effectiveness of such registration, whether or not Treasury or any other Holders have elected to include Registrable Securities in such registration.

(v)If the registration referred to in Section 4.5(a)(iv) is proposed to be underwritten, the Company will so advise Treasury and all other Holders as a part of the written notice given pursuant to Section 4.5(a)(iv). In such event, the right of Treasury and all other Holders to registration pursuant to Section 4.5(a) will be conditioned upon such persons’ participation in such underwriting and the inclusion of such person’s Registrable Securities in the underwriting if such securities are of the same class of securities as the securities to be offered in the underwritten offering, and each such person will (together with the Company and the other persons distributing their securities through such underwriting) enter into an underwriting agreement in customary form with the underwriter or underwriters selected for such underwriting by the Company; provided that Treasury (as opposed to other Holders) shall not be required to indemnify any person in connection with any registration. If any participating person disapproves of the terms of the underwriting, such person may elect to withdraw therefrom by written notice to the Company, the managing underwriters and Treasury (if Treasury is participating in the underwriting).

(vi)If either (x) the Company grants “piggyback” registration rights to one or more third parties to include their securities in an underwritten offering under the Shelf Registration Statement pursuant to Section 4.5(a)(ii) or (y) a Piggyback Registration under Section 4.5(a)(iv) relates to an underwritten offering on behalf of the Company, and in either case the managing underwriters advise the Company that in their reasonable opinion the number of securities requested to be included in such offering exceeds the number which can be sold without adversely affecting the marketability of such offering (including an adverse effect on the per share offering price), the Company will include in such offering only such number of securities that in the reasonable opinion of such managing underwriters can be sold without adversely affecting the marketability of the offering (including an adverse effect on the per share offering price), which securities will be so included in the following order of priority: (A) first, in the case of a Piggyback Registration under Section 4.5(a)(iv), the securities the Company proposes to sell, (B) then the Registrable Securities of Treasury and all other Holders who have requested inclusion of Registrable Securities pursuant to Section 4.5(a)(ii) or Section 4.5(a)(iv), as applicable, pro rata on the basis of the aggregate number of such securities or shares owned by each such person and (C) lastly, any other securities of the Company that have been requested to be so included, subject to the terms of this Agreement; provided, however, that if the Company has, prior to the date hereof, entered into an agreement with respect to its securities that is inconsistent with the order of priority contemplated hereby then it shall apply the order of priority in such conflicting agreement to the extent that this Agreement would otherwise result in a breach under such agreement.

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Expenses of Registration

. All Registration Expenses incurred in connection with any registration, qualification or compliance hereunder shall be borne by the Company. All Selling Expenses incurred in connection with any registrations hereunder shall be borne by the holders of the securities so registered pro rata on the basis of the aggregate offering or sale price of the securities so registered.

Obligations of the Company

. The Company shall use its reasonable best efforts, for so long as there are Registrable Securities outstanding, to take such actions as are under its control to not become an ineligible issuer (as defined in Rule 405 under the Securities Act) and to remain a well-known seasoned issuer (as defined in Rule 405 under the Securities Act) if it has such status on the date hereof or becomes eligible for such status in the future. In addition, whenever required to effect the registration of any Registrable Securities or facilitate the distribution of Registrable Securities pursuant to an effective Shelf Registration Statement, the Company shall, as expeditiously as reasonably practicable:

(i)Prepare and file with the SEC a prospectus supplement with respect to a proposed offering of Registrable Securities pursuant to an effective registration statement, subject to Section 4.5(d), keep such registration statement effective and keep such prospectus supplement current until the securities described therein are no longer Registrable Securities. The plan of distribution included in such registration statement shall include, among other things, an underwritten offering, ordinary brokerage transactions and transactions in which the broker-dealer solicits purchasers, block trades, privately negotiated transactions, the writing or settlement of options or other derivative transactions and any other method permitted pursuant to applicable law, and any combination of any such methods of sale.

(ii)Prepare and file with the SEC such amendments and supplements to the applicable registration statement and the prospectus or prospectus supplement used in connection with such registration statement as may be necessary to comply with the provisions of the Securities Act with respect to the disposition of all securities covered by such registration statement.

(iii)Furnish to the Holders and any underwriters such number of copies of the applicable registration statement and each such amendment and supplement thereto (including in each case all exhibits) and of a prospectus, including a preliminary prospectus, in conformity with the requirements of the Securities Act, and such other documents as they may reasonably request in order to facilitate the disposition of Registrable Securities owned or to be distributed by them.

(iv)Use its reasonable best efforts to register and qualify the securities covered by such registration statement under such other securities or Blue Sky laws of such jurisdictions as shall be reasonably requested by the Holders or any managing underwriter(s), to keep such registration or qualification in effect for so long as such registration statement remains in effect, and to take any other action which may be reasonably necessary to enable such seller to consummate the disposition in such jurisdictions of the securities owned by such Holder; provided that the Company shall not

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be required in connection therewith or as a condition thereto to qualify to do business or to file a general consent to service of process in any such states or jurisdictions.

(v)Notify each Holder of Registrable Securities at any time when a prospectus relating thereto is required to be delivered under the Securities Act of the happening of any event as a result of which the applicable prospectus, as then in effect, includes an untrue statement of a material fact or omits to state a material fact required to be stated therein or necessary to make the statements therein not misleading in light of the circumstances then existing.

(vi)Give written notice to the Holders:

(A)when any registration statement filed pursuant to Section 4.5(a) or any amendment thereto has been filed with the SEC (except for any amendment effected by the filing of a document with the SEC pursuant to the Exchange Act) and when such registration statement or any post-effective amendment thereto has become effective;

(B)of any request by the SEC for amendments or supplements to any registration statement or the prospectus included therein or for additional information;

(C)of the issuance by the SEC of any stop order suspending the effectiveness of any registration statement or the initiation of any proceedings for that purpose;

(D)of the receipt by the Company or its legal counsel of any notification with respect to the suspension of the qualification of the Common Stock for sale in any jurisdiction or the initiation or threatening of any proceeding for such purpose;

(E)of the happening of any event that requires the Company to make changes in any effective registration statement or the prospectus related to the registration statement in order to make the statements therein not misleading (which notice shall be accompanied by an instruction to suspend the use of the prospectus until the requisite changes have been made); and

(F)if at any time the representations and warranties of the Company contained in any underwriting agreement contemplated by Section 4.5(c)(x) cease to be true and correct.

(vii)Use its reasonable best efforts to prevent the issuance or obtain the withdrawal of any order suspending the effectiveness of any registration statement referred to in Section 4.5(c)(vi)(C) at the earliest practicable time.

(viii)Upon the occurrence of any event contemplated by Section 4.5(c)(v), 4.5(c)(vi)(E) or 4.5(d), promptly prepare a post-effective amendment to such registration statement or a supplement to the related prospectus or file any other required document

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so that, as thereafter delivered to the Holders and any underwriters, the prospectus will not contain an untrue statement of a material fact or omit to state any material fact necessary to make the statements therein, in light of the circumstances under which they were made, not misleading. If the Company notifies the Holders in accordance with Section 4.5(c)(vi)(E) to suspend the use of the prospectus until the requisite changes to the prospectus have been made, then the Holders and any underwriters shall suspend use of such prospectus and use their reasonable best efforts to return to the Company all copies of such prospectus (at the Company’s expense) other than permanent file copies then in such Holders’ or underwriters’ possession. The total number of days that any such suspension may be in effect in any 12-month period shall not exceed 90 days.  The Company shall notify the Holders of the date of any anticipated termination of any such suspension period prior to such date.

(ix)Use reasonable best efforts to procure the cooperation of the Company’s transfer agent in settling any offering or sale of Registrable Securities, including with respect to the transfer of physical stock certificates into book-entry form in accordance with any procedures reasonably requested by the Holders or any managing underwriter(s).

(x)If an underwritten offering is requested pursuant to Section 4.5(a)(ii), enter into an underwriting agreement in customary form, scope and substance and take all such other actions reasonably requested by the Holders of a majority of the Registrable Securities being sold in connection therewith or by the managing underwriter(s), if any, to expedite or facilitate the underwritten disposition of such Registrable Securities, and in connection therewith in any underwritten offering (including making members of management and executives of the Company available to participate in “road shows”, similar sales events and other marketing activities), (A) make such representations and warranties to the Holders that are selling stockholders and the managing underwriter(s), if any, with respect to the business of the Company and its subsidiaries, and the Shelf Registration Statement, prospectus and documents, if any, incorporated or deemed to be incorporated by reference therein, in each case, in customary form, substance and scope, and, if true, confirm the same if and when requested, (B) use its reasonable best efforts to furnish the underwriters with opinions and “10b-5” letters of counsel to the Company, addressed to the managing underwriter(s), if any, covering the matters customarily covered in such opinions and letters requested in underwritten offerings, (C) use its reasonable best efforts to obtain “cold comfort” letters from the independent certified public accountants of the Company (and, if necessary, any other independent certified public accountants of any business acquired by the Company for which financial statements and financial data are included in the Shelf Registration Statement) who have certified the financial statements included in such Shelf Registration Statement, addressed to each of the managing underwriter(s), if any, such letters to be in customary form and covering matters of the type customarily covered in “cold comfort” letters, (D) if an underwriting agreement is entered into, the same shall contain indemnification provisions and procedures customary in underwritten offerings (provided that Treasury shall not be obligated to provide any indemnity), and (E) deliver such documents and certificates as may be reasonably requested by the Holders of a majority of the Registrable Securities being sold in connection therewith, their counsel and the managing

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underwriter(s), if any, to evidence the continued validity of the representations and warranties made pursuant to clause (i) above and to evidence compliance with any customary conditions contained in the underwriting agreement or other agreement entered into by the Company.

(xi)Make available for inspection by a representative of Holders that are selling stockholders, the managing underwriter(s), if any, and any attorneys or accountants retained by such Holders or managing underwriter(s), at the offices where normally kept, during reasonable business hours, financial and other records, pertinent corporate documents and properties of the Company, and cause the officers, directors and employees of the Company to supply all information in each case reasonably requested (and of the type customarily provided in connection with due diligence conducted in connection with a registered public offering of securities) by any such representative, managing underwriter(s), attorney or accountant in connection with such Shelf Registration Statement.

(xii)Use reasonable best efforts to cause all such Registrable Securities to be listed on each national securities exchange on which similar securities issued by the Company are then listed or, if no similar securities issued by the Company are then listed on any national securities exchange, use its reasonable best efforts to cause all such Registrable Securities to be listed on such securities exchange as Treasury may designate.

(xiii)If requested by Holders of a majority of the Registrable Securities being registered and/or sold in connection therewith, or the managing underwriter(s), if any, promptly include in a prospectus supplement or amendment such information as the Holders of a majority of the Registrable Securities being registered and/or sold in connection therewith or managing underwriter(s), if any, may reasonably request in order to permit the intended method of distribution of such securities and make all required filings of such prospectus supplement or such amendment as soon as practicable after the Company has received such request.

(xiv)Timely provide to its security holders earning statements satisfying the provisions of Section 11(a) of the Securities Act and Rule 158 thereunder.

Suspension of Sales

. Upon receipt of written notice from the Company that a registration statement, prospectus or prospectus supplement contains or may contain an untrue statement of a material fact or omits or may omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading or that circumstances exist that make inadvisable use of such registration statement, prospectus or prospectus supplement, Treasury and each Holder of Registrable Securities shall forthwith discontinue disposition of Registrable Securities until Treasury and/or Holder has received copies of a supplemented or amended prospectus or prospectus supplement, or until Treasury and/or such Holder is advised in writing by the Company that the use of the prospectus and, if applicable, prospectus supplement may be resumed, and, if so directed by the Company, Treasury and/or such Holder shall deliver to the Company (at the Company’s expense) all copies, other than permanent file copies then in Treasury and/or such Holder’s possession, of the prospectus and, if applicable, prospectus supplement covering such Registrable Securities current at the time of receipt of such notice. The

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total number of days that any such suspension may be in effect in any 12-month period shall not exceed 90 days.  The Company shall notify Treasury prior to the anticipated termination of any such suspension period of the date of such anticipated termination

Termination of Registration Rights

. A Holder’s registration rights as to any securities held by such Holder shall not be available unless such securities are Registrable Securities.

Furnishing Information

.

(i)Neither Treasury nor any Holder shall use any free writing prospectus (as defined in Rule 405) in connection with the sale of Registrable Securities without the prior written consent of the Company.

(ii)It shall be a condition precedent to the obligations of the Company to take any action pursuant to Section 4.5(c) that Treasury and/or the selling Holders and the underwriters, if any, shall furnish to the Company such information regarding themselves, the Registrable Securities held by them and the intended method of disposition of such securities as shall be required to effect the registered offering of their Registrable Securities.

Indemnification

.

(i)The Company agrees to indemnify each Holder and, if a Holder is a person other than an individual, such Holder’s officers, directors, employees, agents, representatives and Affiliates, and each Person, if any, that controls a Holder within the meaning of the Securities Act (each, an “Indemnitee”), against any and all losses, claims, damages, actions, liabilities, costs and expenses (including reasonable fees, expenses and disbursements of attorneys and other professionals incurred in connection with investigating, defending, settling, compromising or paying any such losses, claims, damages, actions, liabilities, costs and expenses), joint or several, arising out of or based upon any untrue statement or alleged untrue statement of material fact contained in any registration statement, including any preliminary prospectus or final prospectus contained therein or any amendments or supplements thereto or any documents incorporated therein by reference or contained in any free writing prospectus (as such term is defined in Rule 405) prepared by the Company or authorized by it in writing for use by such Holder (or any amendment or supplement thereto); or any omission to state therein a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading; provided, that the Company shall not be liable to such Indemnitee in any such case to the extent that any such loss, claim, damage, liability (or action or proceeding in respect thereof) or expense arises out of or is based upon (A) an untrue statement or omission made in such registration statement, including any such preliminary prospectus or final prospectus contained therein or any such amendments or supplements thereto or contained in any free writing prospectus (as such term is defined in Rule 405) prepared by the Company or authorized by it in writing for use by such Holder (or any amendment or supplement thereto), in reliance upon and in conformity with information regarding such Indemnitee or its plan

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of distribution or ownership interests which was furnished in writing to the Company by such Indemnitee for use in connection with such registration statement, including any such preliminary prospectus or final prospectus contained therein or any such amendments or supplements thereto, or (B) offers or sales effected by or on behalf of such Indemnitee “by means of” (as defined in Rule 159A) a “free writing prospectus” (as defined in Rule 405) that was not authorized in writing by the Company.

(ii)If the indemnification provided for in Section 4.5(g)(i) is unavailable to an Indemnitee with respect to any losses, claims, damages, actions, liabilities, costs or expenses referred to therein or is insufficient to hold the Indemnitee harmless as contemplated therein, then the Company, in lieu of indemnifying such Indemnitee, shall contribute to the amount paid or payable by such Indemnitee as a result of such losses, claims, damages, actions, liabilities, costs or expenses in such proportion as is appropriate to reflect the relative fault of the Indemnitee, on the one hand, and the Company, on the other hand, in connection with the statements or omissions which resulted in such losses, claims, damages, actions, liabilities, costs or expenses as well as any other relevant equitable considerations. The relative fault of the Company, on the one hand, and of the Indemnitee, on the other hand, shall be determined by reference to, among other factors, whether the untrue statement of a material fact or omission to state a material fact relates to information supplied by the Company or by the Indemnitee and the parties’ relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission; the Company and each Holder agree that it would not be just and equitable if contribution pursuant to this Section 4.5(g)(ii) were determined by pro rata allocation or by any other method of allocation that does not take account of the equitable considerations referred to in Section 4.5(g)(i). No Indemnitee guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from the Company if the Company was not guilty of such fraudulent misrepresentation.

Assignment of Registration Rights

. The rights of Treasury to registration of Registrable Securities pursuant to Section 4.5(a) may be assigned by Treasury to a transferee or assignee of Registrable Securities in connection with a transfer of a total number of Warrant Shares and/or Warrants exercisable for at least 20% of the total number of Warrant Shares for which Warrants issued and to be issued under this Agreement could be exercised (giving effect to the anti-dilution adjustments in Warrants); provided, however, the transferor shall, within ten days after such transfer, furnish to the Company written notice of the name and address of such transferee or assignee and the number and type of Registrable Securities that are being assigned.

Clear Market

. With respect to any underwritten offering of Registrable Securities by Treasury or other Holders pursuant to this Section 4.5, the Company agrees not to effect (other than pursuant to such registration or pursuant to a Special Registration) any public sale or distribution, or to file any Shelf Registration Statement (other than such registration or a Special Registration) covering, in the case of an underwritten offering of Common Stock or Warrants, any of its equity securities, or, in each case, any securities convertible into or exchangeable or exercisable for such securities, during the period not to exceed 30 days following the effective date of such offering. The Company also agrees to cause such of its directors and senior executive officers to execute and deliver customary lock-up agreements in such form and for

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such time period up to 30 days as may be requested by the managing underwriter. “Special Registration” means the registration of (A) equity securities and/or options or other rights in respect thereof solely registered on Form S-4 or Form S-8 (or successor form) or (B) shares of equity securities and/or options or other rights in respect thereof to be offered to directors, members of management, employees, consultants, customers, lenders or vendors of the Company or Company Subsidiaries or in connection with dividend reinvestment plans.

Rule 144; Rule 144A

. With a view to making available to Treasury and Holders the benefits of certain rules and regulations of the SEC which may permit the sale of the Registrable Securities to the public without registration, the Company agrees to use its reasonable best efforts to:

(i)make and keep adequate public information available, as those terms are understood and defined in Rule 144(c)(1) or any similar or analogous rule promulgated under the Securities Act, at all times after the date hereof;

(ii)(A) file with the SEC, in a timely manner, all reports and other documents required of the Company under the Exchange Act, and (B) if at any time the Company is not required to file such reports, make available, upon the request of any Holder, such information necessary to permit sales pursuant to Rule 144A (including the information required by Rule 144A(d)(4) under the Securities Act);

(iii)so long as Treasury or a Holder owns any Registrable Securities, furnish to Treasury or such Holder forthwith upon request: a written statement by the Company as to its compliance with the reporting requirements of Rule 144 under the Securities Act, and of the Exchange Act; a copy of the most recent annual or quarterly report of the Company; and such other reports and documents as Treasury or Holder may reasonably request in availing itself of any rule or regulation of the SEC allowing it to sell any such securities to the public without registration; provided, however, that the availability of the foregoing reports on the EDGAR filing system of the SEC will be deemed to satisfy the foregoing delivery requirements; and

(iv)take such further action as any Holder may reasonably request, all to the extent required from time to time to enable such Holder to sell Registrable Securities without registration under the Securities Act.

(k)As used in this Section 4.5, the following terms shall have the following respective meanings:

(i)“Holder” means Treasury and any other holder of Registrable Securities to whom the registration rights conferred by this Agreement have been transferred in compliance with Section 4.5(h) hereof.

(ii)“Register,” “registered,” and “registration” shall refer to a registration effected by preparing and (A) filing a registration statement in compliance with the Securities Act and applicable rules and regulations thereunder, and the declaration or ordering of effectiveness of such registration statement or (B) filing a prospectus and/or

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prospectus supplement in respect of an appropriate effective registration statement on Form S-3.

(iii)“Registrable Securities” means (A) the Warrants (subject to Section 4.5(p)) and (B) any equity securities issued or issuable directly or indirectly with respect to the securities referred to in the foregoing clause (A) by way of conversion, exercise or exchange thereof, including the Warrant Shares, or share dividend or share split or in connection with a combination of shares, recapitalization, reclassification, merger, amalgamation, arrangement, consolidation or other reorganization, provided that, once issued, such securities will not be Registrable Securities when (1) they are sold pursuant to an effective registration statement under the Securities Act, (2) except as provided below in Section 4.5(o), they may be sold pursuant to Rule 144 without limitation thereunder on volume or manner of sale, (3) they shall have ceased to be outstanding or (4) they have been sold in a private transaction in which the transferor’s rights under this Agreement are not assigned to the transferee of the securities. No Registrable Securities may be registered under more than one registration statement at any one time.

(iv)“Registration Expenses” mean all expenses incurred by the Company in effecting any registration pursuant to this Agreement (whether or not any registration or prospectus becomes effective or final) or otherwise complying with its obligations under this Section 4.5, including all registration, filing and listing fees, printing expenses, fees and disbursements of counsel for the Company, blue sky fees and expenses, expenses incurred in connection with any “road show”, the reasonable fees and disbursements of Treasury’s counsel (if Treasury is participating in the registered offering), and expenses of the Company’s independent accountants in connection with any regular or special reviews or audits incident to or required by any such registration, but shall not include Selling Expenses.

(v)“Rule 144”, “Rule 144A”, “Rule 159A”, “Rule 405” and “Rule 415” mean, in each case, such rule promulgated under the Securities Act (or any successor provision), as the same shall be amended from time to time.

(vi)“Selling Expenses” mean all discounts, selling commissions and stock transfer taxes applicable to the sale of Registrable Securities and fees and disbursements of counsel for any Holder (other than the fees and disbursements of Treasury’s counsel included in Registration Expenses).

(l)At any time, any holder of Securities (including any Holder) may elect to forfeit its rights set forth in this Section 4.5 from that date forward; provided, that a Holder forfeiting such rights shall nonetheless be entitled to participate under Section 4.5(a)(iv) – (vi) in any Pending Underwritten Offering to the same extent that such Holder would have been entitled to if the holder had not withdrawn; and provided, further, that no such forfeiture shall terminate a Holder’s rights or obligations under Section 4.5(f) with respect to any prior registration or Pending Underwritten Offering. “Pending Underwritten Offering” means, with respect to any Holder forfeiting its rights pursuant to this Section 4.5(l), any underwritten offering of Registrable Securities in which such Holder has advised the Company of its intent to register its

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Registrable Securities either pursuant to Section 4.5(a)(ii) or 4.5(a)(iv) prior to the date of such Holder’s forfeiture.

Specific Performance

. The parties hereto acknowledge that there would be no adequate remedy at law if the Company fails to perform any of its obligations under this Section 4.5 and that Treasury and the Holders from time to time may be irreparably harmed by any such failure, and accordingly agree that Treasury and such Holders, in addition to any other remedy to which they may be entitled at law or in equity, to the fullest extent permitted and enforceable under applicable law shall be entitled to compel specific performance of the obligations of the Company under this Section 4.5 in accordance with the terms and conditions of this Section 4.5.

No Inconsistent Agreements

. The Company shall not, on or after the date hereof, enter into any agreement with respect to its securities that may impair the rights granted to Treasury and the Holders under this Section 4.5 or that otherwise conflicts with the provisions hereof in any manner that may impair the rights granted to Treasury and the Holders under this Section 4.5. In the event the Company has, prior to the date hereof, entered into any agreement with respect to its securities that is inconsistent with the rights granted to Treasury and the Holders under this Section 4.5 (including agreements that are inconsistent with the order of priority contemplated by Section 4.5(a)(vi)) or that may otherwise conflict with the provisions hereof, the Company shall use its reasonable best efforts to amend such agreements to ensure they are consistent with the provisions of this Section 4.5. Any transaction entered into by the Company that would reasonably be expected to require the inclusion in a Shelf Registration Statement or any Company Report filed with the SEC of any separate financial statements pursuant to Rule 3-05 of Regulation S-X or pro forma financial statements pursuant to Article 11 of Regulation S-X shall include provisions requiring the Company’s counterparty to provide any information necessary to allow the Company to comply with its obligation hereunder.

Certain Offerings by Treasury

. In the case of any securities held by Treasury that cease to be Registrable Securities solely by reason of clause (2) in the definition of “Registrable Securities,” the provisions of Sections 4.5(a)(ii), clauses (iv), (ix) and (x)-(xii) of Section 4.5(c), Section 4.5(g) and Section 4.5(i) shall continue to apply until such securities otherwise cease to be Registrable Securities. In any such case, an “underwritten” offering or other disposition shall include any distribution of such securities on behalf of Treasury by one or more broker-dealers, an “underwriting agreement” shall include any purchase agreement entered into by such broker-dealers, and any “registration statement” or “prospectus” shall include any offering document approved by the Company and used in connection with such distribution.

Registered Sales of the Warrant

s. The Holders agree to sell the Warrants or any portion thereof under the Shelf Registration Statement only beginning 30 days after notifying the Company of any such sale, during which 30-day period Treasury and all Holders of the Warrants shall take reasonable steps to agree to revisions to the Warrants, at the expense of the Company, to permit a public distribution of the Warrants, including entering into a revised warrant agreement, appointing a warrant agent, and making the securities eligible for book entry clearing and settlement at the Depositary Trust Company.

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Voting of Warrant Shares

. Notwithstanding anything in this Agreement to the contrary, Treasury shall not exercise any voting rights with respect to the Warrant Shares.

Article V
Miscellaneous

Survival of Representations and Warranties

. The representations and warranties of the Company made herein or in any certificates delivered in connection with the Initial Closing or any subsequent Closing shall survive such Closing without limitation.

Amendment

. No amendment of any provision of this Agreement will be effective unless made in writing and signed by an officer or a duly authorized representative of each party; provided that Treasury may unilaterally amend any provision of this Agreement to the extent required to comply with any changes after the date hereof in applicable federal statutes. No failure or delay by any party in exercising any right, power or privilege hereunder shall operate as a waiver thereof nor shall any single or partial exercise thereof preclude any other or further exercise of any other right, power or privilege. The rights and remedies herein provided shall be cumulative of any rights or remedies provided by law.

Waiver of Conditions

. No waiver will be effective unless it is in a writing signed by a duly authorized officer of the waiving party that makes express reference to the provision or provisions subject to such waiver.

Governing Law: Submission to Jurisdiction, Etc.

This Agreement will be governed by and construed in accordance with the federal law of the United States if and to the extent such law is applicable, and otherwise in accordance with the laws of the State of New York applicable to contracts made and to be performed entirely within such State. Each of the parties hereto agrees (a) to submit to the exclusive jurisdiction and venue of the United States District Court for the District of Columbia and the United States Court of Federal Claims for any and all civil actions, suits or proceedings arising out of or relating to this Agreement or the Warrants or the transactions contemplated hereby or thereby, and (b) that notice may be served upon (i) the Company at the address and in the manner set forth for notices to the Company in Section 5.5 and (ii) Treasury in accordance with federal law. To the extent permitted by applicable law, each of the parties hereto hereby unconditionally waives trial by jury in any civil legal action or proceeding relating to this Agreement or the Warrants or the transactions contemplated hereby or thereby.

Notices

. Any notice, request, instruction or other document to be given hereunder by any party to the other will be in writing and will be deemed to have been duly given (a) on the date of delivery if delivered personally, or by facsimile, upon confirmation of receipt, or (b) on the second Business Day following the date of dispatch if delivered by a recognized next day courier service. All notices to the Company shall be delivered as set forth below, or pursuant to such other instruction as may be designated in writing by the Company to Treasury. All notices to Treasury shall be delivered as set forth below, or pursuant to such other instructions as may be designated in writing by Treasury to the Company.

If to the Company:

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Atlas Air Worldwide Holdings, Inc.

2000 Westchester Avenue

Purchase, NY 10577
Facsimile: (914) 701-8333

Email: Adam.Kokas@atlasair.com

Attention: Adam R. Kokas

with a copy to (which copy alone shall not constitute notice):

Cravath, Swaine & Moore LLP

Worldwide Plaza

825 Eighth Avenue

New York, NY 10019

Facsimile: (212) 474-3700

Email: dzoubek@cravath.com, jhochenberg@cravath.com

Attention: Damien R. Zoubek, Esq., Jenny Hochenberg, Esq.

If to Treasury:

United States Department of the Treasury
1500 Pennsylvania Avenue, NW, Room 2312
Washington, D.C. 20220
Attention: Assistant General Counsel (Banking and Finance)

Definitions

.

(a)The term “Governmental Authority” means the government of the United States of America or any other nation, or of any political subdivision thereof, whether state or local, and any agency, authority, instrumentality, regulatory body, court, central bank or other entity exercising executive, legislative, judicial, taxing, regulatory or administrative powers or functions of or pertaining to government (including any supra-national bodies such as the European Union or the European Central Bank).

(b)The term “Laws” has the meaning ascribed thereto in the Promissory Note.

(c)The term “Lien” has the meaning ascribed thereto in the Promissory Note.

(d)The term “Material Adverse Effect” means (a) a material adverse change in, or a material adverse effect on, the operations, business, properties, liabilities (actual or contingent), condition (financial or otherwise) or prospects of the Company and its Subsidiaries taken as a whole; or (b) a material adverse effect on (i) the ability of the Company to perform its obligations under this Agreement or any Warrant or (ii) the legality, validity, binding effect or enforceability against the Company of this Agreement or any Warrant to which it is a party.

(e)The term “Organizational Documents” has the meaning ascribed thereto in the Promissory Note.

(f)The term “Subsidiary” has the meaning ascribed thereto in the Promissory Note.

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Assignment

. Neither this Agreement nor any right, remedy, obligation nor liability arising hereunder or by reason hereof shall be assignable by any party hereto without the prior written consent of the other party, and any attempt to assign any right, remedy, obligation or liability hereunder without such consent shall be void, except (a) an assignment, in the case of a Business Combination where such party is not the surviving entity, or a sale of substantially all of its assets, to the entity which is the survivor of such Business Combination or the purchaser in such sale and (b) as provided in Section 4.5.

Severability

. If any provision of this Agreement or the Warrants, or the application thereof to any person or circumstance, is determined by a court of competent jurisdiction to be invalid, void or unenforceable, the remaining provisions hereof, or the application of such provision to persons or circumstances other than those as to which it has been held invalid or unenforceable, will remain in full force and effect and shall in no way be affected, impaired or invalidated thereby, so long as the economic or legal substance of the transactions contemplated hereby is not affected in any manner materially adverse to any party. Upon such determination, the parties shall negotiate in good faith in an effort to agree upon a suitable and equitable substitute provision to effect the original intent of the parties.

No Third Party Beneficiaries

. Nothing contained in this Agreement, expressed or implied, is intended to confer upon any person or entity other than the Company and Treasury any benefit, right or remedies, except that the provisions of Section 4.5 shall inure to the benefit of the persons referred to in that Section.

* * *

[Signature page follows]

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-

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their respective officers thereunto duly authorized, as of the date first above written.

THE UNITED STATES DEPARTMENT OF THE

TREASURY

By:  /s/ Steven T. Mnuchin

Name: Steven T. Mnuchin

Title:  Secretary

ATLAS AIR WORLDWIDE HOLDINGS, INC.

By:  /s/ Spencer Schwartz

Name: Spencer Schwartz

Title:  Executive Vice President & Chief Financial Officer

Annex A

FORM OF OPINION

(a)The Company has been duly incorporated and is validly existing as a corporation in good standing under the laws of the state of its incorporation.

(b)Each of the Warrants has been duly authorized and, when executed and delivered as contemplated by the Agreement, will constitute a valid and legally binding obligation of the Company enforceable against the Company in accordance with its terms, except as the same may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the enforcement of creditors’ rights generally and general equitable principles, regardless of whether such enforceability is considered in a proceeding at law or in equity.

(c)The shares of Common Stock issuable upon exercise of the Warrants have been duly authorized and reserved for issuance upon exercise of the Warrants and when so issued in accordance with the terms of the Warrants will be validly issued, fully paid and non-assessable [insert, if applicable: , subject to the approvals of the Company’s stockholders set forth on Schedule 3].

(d)The Company has the corporate power and authority to execute and deliver the Agreement and the Warrants and [insert, if applicable: , subject to the approvals of the Company’s stockholders set forth on Schedule 3] to carry out its obligations thereunder (which includes the issuance of the Warrants and Warrant Shares).

(e)The execution, delivery and performance by the Company of the Agreement and the Warrants and the consummation of the transactions contemplated thereby have been duly authorized by all necessary corporate action on the part of the Company and its stockholders, and no further approval or authorization is required on the part of the Company [insert, if applicable: , subject, in each case, to the approvals of the Company’s stockholders set forth on Schedule 3].

(f)The Agreement is a valid and binding obligation of the Company enforceable against the Company in accordance with its terms, except as the same may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the enforcement of creditors’ rights generally and general equitable principles, regardless of whether such enforceability is considered in a proceeding at law or in equity; provided, however, such counsel need express no opinion with respect to Section 4.5(g) or the severability provisions of the Agreement insofar as Section 4.5(g) is concerned.

(g)No registration of the Warrant and the Common Stock issuable upon exercise of the Warrant under the U.S. Securities Act of 1933, as amended, is required for the offer and sale of the Warrant or the Common Stock issuable upon exercise of the Warrant by the Company to the Holder pursuant to and in the manner contemplated by this Agreement.

(h)The Company is not required to be registered as an investment company under the Investment Company Act of 1940, as amended.

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Annex B

FORM OF WARRANT

[SEE ATTACHED]

2

FORM OF WARRANT TO PURCHASE COMMON STOCK

THE SECURITIES REPRESENTED BY THIS INSTRUMENT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF ANY STATE AND MAY NOT BE TRANSFERRED, SOLD OR OTHERWISE DISPOSED OF EXCEPT WHILE A REGISTRATION STATEMENT RELATING THERETO IS IN EFFECT UNDER SUCH ACT AND APPLICABLE STATE SECURITIES LAWS OR PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER SUCH ACT AND SUCH LAWS.  

WARRANT
to purchase

Shares of Common Stock

of ATLAS AIR WORLDWIDE HOLDINGS, INC.

Issue Date: May 29, 2020

1.Definitions.  Unless the context otherwise requires, when used herein the following terms shall have the meanings indicated.

“Affiliate” means, with respect to any person, any person directly or indirectly controlling, controlled by or under common control with, such other person. For purposes of this definition, “control” (including, with correlative meanings, the terms “controlled by” and “under common control with”) when used with respect to any person, means the possession, directly or indirectly, of the power to cause the direction of management and/or policies of such person, whether through the ownership of voting securities by contract or otherwise.

“Aggregate Net Cash Settlement Amount” has the meaning ascribed thereto in Section 2(i).

“Aggregate Net Share Settlement Amount” has the meaning ascribed thereto in Section 2(ii).

“Appraisal Procedure” means a procedure whereby two independent appraisers, one chosen by the Company and one by the Original Warrantholder, shall mutually agree upon the determinations then the subject of appraisal.  Each party shall deliver a notice to the other appointing its appraiser within 10 days after the Appraisal Procedure is invoked.  If within 30 days after appointment of the two appraisers they are unable to agree upon the amount in question, a third independent appraiser shall be chosen within 10 days thereafter by the mutual consent of such first two appraisers.  The decision of the third appraiser so appointed and chosen shall be given within 30 days after the selection of such third appraiser.  If three appraisers shall be appointed and the determination of one appraiser is disparate from the middle determination by more than twice the amount by which the other determination is disparate from the middle determination, then the determination of such appraiser shall be excluded, the remaining two determinations shall be averaged and such average shall be binding and conclusive upon the Company and the Original Warrantholder; otherwise, the average of all three determinations

1

shall be binding upon the Company and the Original Warrantholder.  The costs of conducting any Appraisal Procedure shall be borne by the Company.

“Average Market Price” means, with respect to any security, the arithmetic average of the Market Price of such security for the 15 consecutive trading day period ending on and including the trading day immediately preceding the determination date.

“Board of Directors” means the board of directors of the Company, including any duly authorized committee thereof.

“Business Combination” means a merger, consolidation, statutory share exchange or similar transaction that requires the approval of the Company’s stockholders.

“Business Day” means any day except Saturday, Sunday and any day on which banking institutions in the State of New York generally are authorized or required by law or other governmental actions to close; provided that banks shall be deemed to be generally open for business in the event of a “shelter in place” or similar closure of physical branch locations at the direction of any governmental entity if such banks’ electronic funds transfer system (including wire transfers) are open for use by customers on such day.

“Capital Stock” means (A) with respect to any Person that is a corporation or company, any and all shares, interests, participations or other equivalents (however designated) of capital or capital stock of such Person and (B) with respect to any Person that is not a corporation or company, any and all partnership or other equity interests of such Person.

“Charter” means, with respect to any Person, its certificate or articles of incorporation, articles of association, or similar organizational document.

“Common Stock” means common stock of the Company, par value $0.01 subject to adjustment as provided in Section 13(E).  

“Company” means the Person whose name, corporate or other organizational form and jurisdiction of organization is set forth in Item 1 of Schedule A hereto.  

“conversion” has the meaning set forth in Section 13(B).  

“convertible securities” has the meaning set forth in Section 13(B).  

“Depositary” means The Depositary Trust Company, its nominees and their respective successors.

“Exchange Act” means the Securities Exchange Act of 1934, as amended, or any successor statute, and the rules and regulations promulgated thereunder.

“Exercise Date” means each date a Notice of Exercise substantially in the form annexed hereto is delivered to the Company in accordance with Section 2 hereof.

2

“Exercise Price” means the amount set forth in Item 2 of Schedule A hereto, subject to adjustment as contemplated herein.  

“Expiration Time” has the meaning set forth in Section 3.

“Fair Market Value” means, with respect to any security or other property, the fair market value of such security or other property as determined by the Board of Directors, acting in good faith in reliance on an opinion of a nationally recognized independent investment banking firm retained by the Company for this purpose.  For so long as the Original Warrantholder holds this Warrant or any portion thereof, it may object in writing to the Board of Director’s calculation of fair market value within 10 days of receipt of written notice thereof.  If the Original Warrantholder and the Company are unable to agree on fair market value during the 10-day period following the delivery of the Original Warrantholder’s objection, the Appraisal Procedure may be invoked by either party to determine Fair Market Value by delivering written notification thereof not later than the 30^th day after delivery of the Original Warrantholder’s objection.

“Initial Number” has the meaning set forth in Section 13(B).

“Issue Date” means the date set forth in Item 3 of Schedule A hereto.

“Market Price” means, with respect to a particular security, on any given day, the last reported sale price regular way or, in case no such reported sale takes place on such day, the average of the last closing bid and ask prices regular way, in either case on the principal national securities exchange on which the applicable securities are listed or admitted to trading, or if not listed or admitted to trading on any national securities exchange, the average of the closing bid and ask prices as furnished by two members of the Financial Industry Regulatory Authority, Inc. selected from time to time by the Company for that purpose.  “Market Price” shall be determined without reference to after hours or extended hours trading.  If such security is not listed and traded in a manner that the quotations referred to above are available for the period required hereunder, the Market Price of such security shall be deemed to be (i) in the event that any portion of the Warrant is held by the Original Warrantholder, the fair market value per share of such security as determined in good faith by the Original Warrantholder or (ii) in all other circumstances, the fair market value per share of such security as determined in good faith by the Board of Directors in reliance on an opinion of a nationally recognized independent investment banking corporation retained by the Company for this purpose and certified in a resolution to the Warrantholder.  

“Original Warrantholder” means the United States Department of the Treasury.  Any actions specified to be taken by the Original Warrantholder hereunder may only be taken by such Person and not by any other Warrantholder.

“Permitted Transactions” has the meaning set forth in Section 13(B).

“Per Share Net Cash Settlement Amount” means the Average Market Price of a share of Common Stock determined as of the relevant Exercise Date less the then applicable Exercise Price.

3

“Per Share Net Share Settlement Amount” means the quotient of (i) the Average Market Price of a share of Common Stock determined as of the relevant Exercise Date less the then applicable Exercise Price divided by (ii) the Average Market Price of a share of Common Stock determined as of the relevant Exercise Date.

“Person” has the meaning given to it in Section 3(a)(9) of the Exchange Act and as used in Sections 13(d)(3) and 14(d)(2) of the Exchange Act.

“Per Share Fair Market Value” has the meaning set forth in Section 13(C).

“Pro Rata Repurchases” means any purchase of shares of Common Stock by the Company or any Affiliate thereof pursuant to (A) any tender offer or exchange offer subject to Section 13(e) or 14(e) of the Exchange Act or Regulation 14E promulgated thereunder or (B) any other offer available to substantially all holders of Common Stock, in the case of both (A) or (B), whether for cash, shares of Capital Stock of the Company, other securities of the Company, evidences of indebtedness of the Company or any other Person or any other property (including, without limitation, shares of Capital Stock, other securities or evidences of indebtedness of a subsidiary), or any combination thereof, effected while this Warrant is outstanding.  The “Effective Date” of a Pro Rata Repurchase shall mean the date of acceptance of shares for purchase or exchange by the Company under any tender or exchange offer which is a Pro Rata Repurchase or the date of purchase with respect to any Pro Rata Repurchase that is not a tender or exchange offer.

“Regulatory Approvals” with respect to the Warrantholder, means, to the extent applicable and required to permit the Warrantholder to exercise this Warrant for shares of Common Stock and to own such Common Stock without the Warrantholder being in violation of applicable law, rule or regulation, the receipt of any necessary approvals and authorizations of, filings and registrations with, notifications to, or expiration or termination of any applicable waiting period under, the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and the rules and regulations thereunder.

“SEC” means the U.S. Securities and Exchange Commission.

“Securities Act” means the Securities Act of 1933, as amended, or any successor statute, and the rules and regulations promulgated thereunder.

“trading day” means (A) if the shares of Common Stock are not traded on any national or regional securities exchange or association or over-the-counter market, a Business Day or (B) if the shares of Common Stock are traded on any national or regional securities exchange or association or over-the-counter market, a Business Day on which such relevant exchange or quotation system is scheduled to be open for business and on which the shares of Common Stock (i) are not suspended from trading on any national or regional securities exchange or association or over-the-counter market for any period or periods aggregating one half hour or longer; and (ii) have traded at least once on the national or regional securities exchange or association or over-the-counter market that is the primary market for the trading of the shares of Common Stock.

“U.S. GAAP” means United States generally accepted accounting principles.

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“Warrant” means this Warrant, issued pursuant to the Warrant Agreement.

“Warrant Agreement” means the Warrant Agreement, dated as of the date set forth in Item 4 of Schedule A hereto, as amended from time to time, between the Company and the United States Department of the Treasury.

“Warrantholder” has the meaning set forth in Section 2.

“Warrant Shares” has the meaning set forth in Section 2.

2.Number of Warrant Shares; Net Exercise.  This certifies that, for value received, the United States Department of the Treasury or its permitted assigns (the “Warrantholder”) is entitled, upon the terms and subject to the conditions hereinafter set forth, to acquire from the Company, in whole or in part, after the receipt of all applicable Regulatory Approvals, if any, up to an aggregate of the number of fully paid and nonassessable shares of Common Stock set forth in Item 5 of Schedule A hereto.  The number of shares of Common Stock (the “Warrant Shares”) issuable upon exercise of this Warrant and the Exercise Price are subject to adjustment as provided herein, and all references to “Common Stock,” “Warrant Shares” and “Exercise Price” herein shall be deemed to include any such adjustment or series of adjustments.  

Upon exercise of the Warrant in accordance with Section 3 hereof, the Company shall elect to pay or deliver, as the case may be, to the exercising Warrantholder (a) cash (“Net Cash Settlement”) or (b) Warrant Shares together with cash, if applicable, in lieu of delivering any fractional shares in accordance with Section 5 of this Warrant (“Net Share Settlement”). The Company will notify the exercising Warrantholder of its election of a settlement method within one Business Day after the relevant Exercise Date and if it fails to deliver a timely notice shall be deemed to have elected Net Share Settlement.  

(i) Net Cash Settlement. If the Company elects Net Cash Settlement, it shall pay to the Warrantholder cash equal to the Per Share Net Cash Settlement Amount multiplied by the number of Warrant Shares as to which the Warrant has been exercised as indicated in the Notice of Exercise (the “Aggregate Net Cash Settlement Amount”).

(ii) Net Share Settlement. If the Company elects Net Share Settlement, it shall deliver to the Warrantholder a number of shares of Common Stock equal to the Per Share Net Share Settlement Amount multiplied by the number of Warrant Shares as to which the Warrant has been exercised as indicated in the Notice of Exercise (the “Aggregate Net Share Settlement Amount”).  

3.Term; Method of Exercise.  Subject to Section 2, to the extent permitted by applicable laws and regulations, this Warrant is exercisable, in whole or in part by the Warrantholder, at any time or from time to time after the execution and delivery of this Warrant by the Company on the date hereof, but in no event later than 5:00 p.m., New York City time on the fifth anniversary of the Issue Date (the “Expiration Time”), by the surrender of this Warrant and delivery of the Notice of Exercise annexed hereto, duly completed and executed on behalf of the Warrantholder, at the principal executive office of the Company located at the address set forth in Item 6 of Schedule A hereto (or such other office or agency of the Company in the

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United States as it may designate by notice in writing to the Warrantholder at the address of the Warrantholder appearing on the books of the Company).

If the Warrantholder does not exercise this Warrant in its entirety, the Warrantholder will be entitled to receive from the Company within a reasonable time after the date on which this Warrant has been duly exercised in accordance with the terms of this Warrant, and in any event not exceeding three Business Days after the date thereof, a new warrant in substantially identical form for the purchase of that number of Warrant Shares equal to the difference between the number of Warrant Shares subject to this Warrant and the number of Warrant Shares as to which this Warrant is so exercised.  Notwithstanding anything in this Warrant to the contrary, the Warrantholder hereby acknowledges and agrees that its exercise of this Warrant for Warrant Shares is subject to the condition that the Warrantholder will have first received any applicable Regulatory Approvals.

4.Method of Settlement.

(i) Net Cash Settlement.  If the Company elects Net Cash Settlement, the Company shall, within a reasonable time, not to exceed five Business Days after the date on which this Warrant has been duly exercised in accordance with the terms of this Warrant, pay to the exercising Warrantholder the Aggregate Net Cash Settlement Amount.  

(ii) Net Share Settlement. If the Company elects Net Share Settlement, shares of Common Stock equal to the Aggregate Net Share Settlement Amount shall be (x) issued in such name or names as the exercising Warrantholder may designate and (y) delivered by the Company or the Company's transfer agent to such Warrantholder or its nominee or nominees (i) if the shares are then able to be so delivered, via book-entry transfer crediting the account of such Warrantholder (or the relevant agent member for the benefit of such Warrantholder) through the Depositary’s DWAC system (if the Company's transfer agent participates in such system), or (ii) otherwise in certificated form by physical delivery to the address specified by the Warrantholder in the Notice of Exercise, within a reasonable time, not to exceed three Business Days after the date on which this Warrant has been duly exercised in accordance with the terms of this Warrant.  The Company hereby represents and warrants that any Warrant Shares issued upon the exercise of this Warrant in accordance with the provisions of Section 3 will be duly and validly authorized and issued, fully paid and nonassessable and free from all taxes, liens and charges (other than liens or charges created by the Warrantholder, income and franchise taxes incurred in connection with the exercise of the Warrant or taxes in respect of any transfer occurring contemporaneously therewith).  The Company agrees that the Warrant Shares so issued will be deemed to have been issued to the Warrantholder as of the close of business on the date on which this Warrant and payment of the Exercise Price are delivered to the Company in accordance with the terms of this Warrant, notwithstanding that the stock transfer books of the Company may then be closed or certificates representing such Warrant Shares may not be actually delivered on such date.  The Company will at all times reserve and keep available, out of its authorized but unissued Common Stock, solely for the purpose of providing for the exercise of this Warrant, the aggregate number of shares of Common Stock then issuable upon exercise of this Warrant at any time.  The Company will (A) procure, at its sole expense, the listing of the Warrant Shares issuable upon exercise of this Warrant at any time, subject to issuance or notice of issuance, on all principal stock exchanges on which the Common Stock is then listed or traded and (B)

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maintain such listings of such Warrant Shares at all times after issuance.  The Company will use reasonable best efforts to ensure that the Warrant Shares may be issued without violation of any applicable law or regulation or of any requirement of any securities exchange on which the Warrant Shares are listed or traded.

5.No Fractional Warrant Shares or Scrip.  No fractional Warrant Shares or scrip representing fractional Warrant Shares shall be issued upon any exercise of this Warrant.  In lieu of any fractional Share to which the Warrantholder would otherwise be entitled, the Warrantholder shall be entitled to receive a cash payment equal to the Average Market Price of the Common Stock determined as of the Exercise Date multiplied by such fraction of a share, less the pro-rated Exercise Price for such fractional share.

6.No Rights as Stockholders; Transfer Books.  This Warrant does not entitle the Warrantholder to any voting rights or other rights as a stockholder of the Company prior to the date of exercise hereof.  The Company will at no time close its transfer books against transfer of this Warrant in any manner which interferes with the timely exercise of this Warrant.

7.Charges, Taxes and Expenses.  Issuance of certificates for Warrant Shares to the Warrantholder upon the exercise of this Warrant shall be made without charge to the Warrantholder for any issue or transfer tax or other incidental expense in respect of the issuance of such certificates, all of which taxes and expenses shall be paid by the Company; provided, however, that the Company shall not be required to pay any tax that may be payable in respect of any transfer involved in the issuance and delivery of any such certificate, or any certificates or other securities in a name other than that of the registered holder of the Warrant surrendered upon exercise of the Warrant.

8.Transfer/Assignment.

(A)Subject to compliance with clause (B) of this Section 8, this Warrant and all rights hereunder are transferable, in whole or in part, upon the books of the Company by the registered holder hereof in person or by duly authorized attorney, and a new warrant shall be made and delivered by the Company, of the same tenor and date as this Warrant but registered in the name of one or more transferees, upon surrender of this Warrant, duly endorsed, to the office or agency of the Company described in Section 3.  All expenses (other than stock transfer taxes) and other charges payable in connection with the preparation, execution and delivery of the new warrants pursuant to this Section 8 shall be paid by the Company.

(B)If and for so long as required by the Warrant Agreement, this Warrant shall contain the legend as set forth in Sections 4.2(a) of the Warrant Agreement.

9.Exchange and Registry of Warrant.  This Warrant is exchangeable, upon the surrender hereof by the Warrantholder to the Company, for a new warrant or warrants of like tenor and representing the right to purchase the same aggregate number of Warrant Shares.  The Company shall maintain a registry showing the name and address of the Warrantholder as the registered holder of this Warrant.  This Warrant may be surrendered for exchange or exercise in accordance with its terms, at the office of the Company, and the Company shall be entitled to rely in all respects, prior to written notice to the contrary, upon such registry.

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10.Loss, Theft, Destruction or Mutilation of Warrant.  Upon receipt by the Company of evidence reasonably satisfactory to it of the loss, theft, destruction or mutilation of this Warrant, and in the case of any such loss, theft or destruction, upon receipt of a bond, indemnity or security reasonably satisfactory to the Company, or, in the case of any such mutilation, upon surrender and cancellation of this Warrant, the Company shall make and deliver, in lieu of such lost, stolen, destroyed or mutilated Warrant, a new Warrant of like tenor and representing the right to purchase the same aggregate number of Warrant Shares as provided for in such lost, stolen, destroyed or mutilated Warrant.

11.Saturdays, Sundays, Holidays, etc.  If the last or appointed day for the taking of any action or the expiration of any right required or granted herein shall not be a Business Day, then such action may be taken or such right may be exercised on the next succeeding day that is a Business Day.

12.Information.  With a view to making available to Warrantholders the benefits of certain rules and regulations of the SEC which may permit the sale of the Warrants and Warrant Shares to the public without registration, the Company agrees to use its reasonable best efforts to:

(A)make and keep adequate public information available, as those terms are understood and defined in Rule 144(c) or any similar or analogous rule promulgated under the Securities Act, at all times after the date hereof;

(B)(x) file with the SEC, in a timely manner, all reports and other documents required of the Company under the Securities Act and the Exchange Act, and (y) if at any time the Company is not required to file such reports, make available, upon the request of any Warrantholder, such information necessary to permit sales pursuant to Rule 144A (including the information required by Rule 144A(d)(4) under the Securities Act);

(C)furnish to any holder of Warrants or Warrant Shares forthwith upon request: a written statement by the Company as to its compliance with the reporting requirements of the Exchange Act and Rule 144(c)(1); a copy of the most recent annual or quarterly report of the Company; and such other reports and documents as the Warrantholder may reasonably request in availing itself of any rule or regulation of the SEC allowing it to sell any such securities to the public without registration; and

(D)take such further action as any Warrantholder may reasonably request, all to the extent required from time to time to enable such Warantholder to sell Warrants or Warrant Shares without registration under the Securities Act.

13.Adjustments and Other Rights.  The Exercise Price and the number of Warrant Shares issuable upon exercise of the Warrant shall be subject to adjustment from time to time as follows; provided, that if more than one subsection of this Section 13 is applicable to a single event, the subsection shall be applied that produces the largest adjustment and no single event shall cause an adjustment under more than one subsection of this Section 13 so as to result in duplication:

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(A)Stock Splits, Subdivisions, Reclassifications or Combinations.  If the Company shall (i) declare and pay a dividend or make a distribution on its Common Stock in shares of Common Stock, (ii) subdivide or reclassify the outstanding shares of Common Stock into a greater number of shares, or (iii) combine or reclassify the outstanding shares of Common Stock into a smaller number of shares, the number of Warrant Shares issuable upon exercise of this Warrant at the time of the record date for such dividend or distribution or the effective date of such subdivision, combination or reclassification shall be proportionately adjusted so that the Warrantholder after such date shall be entitled to acquire the number of shares of Common Stock which such holder would have owned or been entitled to receive in respect of the shares of Common Stock subject to this Warrant after such date had this Warrant been exercised immediately prior to such date.  In such event, the Exercise Price in effect at the time of the record date for such dividend or distribution or the effective date of such subdivision, combination or reclassification shall be adjusted to the number obtained by dividing (x) the product of (1) the number of Warrant Shares issuable upon the exercise of this Warrant before such adjustment and (2) the Exercise Price in effect immediately prior to the record or effective date, as the case may be, for the dividend, distribution, subdivision, combination or reclassification giving rise to this adjustment by (y) the new number of Warrant Shares issuable upon exercise of the Warrant determined pursuant to the immediately preceding sentence.

(B)Certain Issuances of Common Stock or Convertible Securities.  If the Company shall issue shares of Common Stock (or rights or warrants or other securities exercisable or convertible into or exchangeable (collectively, a “conversion”) for shares of Common Stock) (collectively, “convertible securities”) (other than in Permitted Transactions (as defined below) or a transaction to which subsection (A) of this Section 13 is applicable) without consideration or at a consideration per share (or having a conversion price per share) that is less than 90% of the Average Market Price determined as of the date of the agreement on pricing such shares (or such convertible securities) then, in such event:

(A) the number of Warrant Shares issuable upon the exercise of this Warrant immediately prior to the date of the agreement on pricing of such shares (or of such convertible securities) (the “Initial Number”) shall be increased to the number obtained by multiplying the Initial Number by a fraction (A) the numerator of which shall be the sum of (x) the number of shares of Common Stock of the Company outstanding on such date and (y) the number of additional shares of Common Stock issued (or into which convertible securities may be exercised or convert) and (B) the denominator of which shall be the sum of (I) the number of shares of Common Stock outstanding on such date and (II) the number of shares of Common Stock which the aggregate consideration receivable by the Company for the total number of shares of Common Stock so issued (or into which convertible securities may be exercised or convert) would purchase at the Average Market Price determined as of the date of the agreement on pricing such shares (or such convertible securities); and

(B) the Exercise Price payable upon exercise of the Warrant shall be adjusted by multiplying such Exercise Price in effect immediately prior to the date of the agreement on pricing of such shares (or of such convertible securities) by a fraction, the numerator of which shall be the number of shares of Common Stock

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issuable upon exercise of this Warrant prior to such date and the denominator of which shall be the number of shares of Common Stock issuable upon exercise of this Warrant immediately after the adjustment described in clause (A) above.

For purposes of the foregoing, the aggregate consideration receivable by the Company in connection with the issuance of such shares of Common Stock or convertible securities shall be deemed to be equal to the sum of the net offering price (including the Fair Market Value of any non-cash consideration and after deduction of any related expenses payable to third parties) of all such securities plus the minimum aggregate amount, if any, payable upon exercise or conversion of any such convertible securities into shares of Common Stock; and “Permitted Transactions” shall mean issuances (i) as consideration for or to fund the acquisition of businesses and/or related assets, (ii) in connection with employee benefit plans and compensation related arrangements in the ordinary course and consistent with past practice approved by the Board of Directors, (iii) in connection with a public or broadly marketed offering and sale of Common Stock or convertible securities for cash conducted by the Company or its affiliates pursuant to registration under the Securities Act or Rule 144A thereunder on a basis consistent with capital raising transactions by comparable institutions and (iv) in connection with the exercise of preemptive rights on terms existing as of the Issue Date.  Any adjustment made pursuant to this Section 13(B) shall become effective immediately upon the date of such issuance.

(C)Other Distributions.  In case the Company shall fix a record date for the making of a distribution to all holders of shares of its Common Stock of securities, evidences of indebtedness, assets, cash, rights or warrants (excluding dividends of its Common Stock and other dividends or distributions referred to in Section 13(A)), in each such case, the Exercise Price in effect prior to such record date shall be reduced immediately thereafter to the price determined by multiplying the Exercise Price in effect immediately prior to the reduction by the quotient of (x) the Average Market Price of the Common Stock determined as of the first date on which the Common Stock trades regular way on the principal national securities exchange on which the Common Stock is listed or admitted to trading without the right to receive such distribution, minus the amount of cash and/or the Fair Market Value of the securities, evidences of indebtedness, assets, rights or warrants to be so distributed in respect of one share of Common Stock (such amount and/or Fair Market Value, the “Per Share Fair Market Value”) divided by (y) the Average Market Price specified in clause (x); such adjustment shall be made successively whenever such a record date is fixed.  In such event, the number of Warrant Shares issuable upon the exercise of this Warrant shall be increased to the number obtained by dividing (x) the product of (1) the number of Warrant Shares issuable upon the exercise of this Warrant before such adjustment, and (2) the Exercise Price in effect immediately prior to the distribution giving rise to this adjustment by (y) the new Exercise Price determined in accordance with the immediately preceding sentence.  In the event that such distribution is not so made, the Exercise Price and the number of Warrant Shares issuable upon exercise of this Warrant then in effect shall be readjusted, effective as of the date when the Board of Directors determines not to distribute such shares, evidences of indebtedness, assets, rights, cash or warrants, as the case may be, to the Exercise Price that would then be in effect and the number of Warrant Shares that would then be issuable upon exercise of this Warrant if such record date had not been fixed.

(D)Certain Repurchases of Common Stock.  In case the Company effects a Pro Rata Repurchase of Common Stock, then the Exercise Price shall be reduced to the price determined

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by multiplying the Exercise Price in effect immediately prior to the Effective Date of such Pro Rata Repurchase by a fraction of which the numerator shall be (i) the product of (x) the number of shares of Common Stock outstanding immediately before such Pro Rata Repurchase and (y) the Average Market Price of a share of Common Stock determined as of the date of the first public announcement by the Company or any of its Affiliates of the intent to effect such Pro Rata Repurchase, minus (ii) the aggregate purchase price of the Pro Rata Repurchase, and of which the denominator shall be the product of (i) the number of shares of Common Stock outstanding immediately prior to such Pro Rata Repurchase minus the number of shares of Common Stock so repurchased and (ii) the Average Market Price per share of Common Stock determined as of the date of the first public announcement by the Company or any of its Affiliates of the intent to effect such Pro Rata Repurchase.  In such event, the number of shares of Common Stock issuable upon the exercise of this Warrant shall be increased to the number obtained by dividing (x) the product of (1) the number of Warrant Shares issuable upon the exercise of this Warrant before such adjustment, and (2) the Exercise Price in effect immediately prior to the Pro Rata Repurchase giving rise to this adjustment by (y) the new Exercise Price determined in accordance with the immediately preceding sentence.  For the avoidance of doubt, no increase to the Exercise Price or decrease in the number of Warrant Shares issuable upon exercise of this Warrant shall be made pursuant to this Section 13(D).

(E)Business Combinations.  In case of any Business Combination or reclassification of Common Stock (other than a reclassification of Common Stock referred to in Section 13(A)), the Warrantholder’s right to receive Warrant Shares upon exercise of this Warrant shall be converted into the right to exercise this Warrant to acquire the number of shares of stock or other securities or property (including cash) which the Common Stock issuable (at the time of such Business Combination or reclassification) upon exercise of this Warrant immediately prior to such Business Combination or reclassification would have been entitled to receive upon consummation of such Business Combination or reclassification; and in any such case, if necessary, the provisions set forth herein with respect to the rights and interests thereafter of the Warrantholder shall be appropriately adjusted so as to be applicable, as nearly as may reasonably be, to the Warrantholder’s right to exercise this Warrant in exchange for any shares of stock or other securities or property pursuant to this paragraph.  In determining the kind and amount of stock, securities or the property receivable upon exercise of this Warrant following the consummation of such Business Combination, if the holders of Common Stock have the right to elect the kind or amount of consideration receivable upon consummation of such Business Combination, then the consideration that the Warrantholder shall be entitled to receive upon exercise shall be deemed to be the types and amounts of consideration received by the majority of all holders of the shares of common stock that affirmatively make an election (or of all such holders if none make an election).

(F)Rounding of Calculations; Minimum Adjustments.  All calculations under this Section 13 shall be made to the nearest one-tenth (1/10th) of a cent or to the nearest one- hundredth (1/100th) of a share, as the case may be.  Any provision of this Section 13 to the contrary notwithstanding, no adjustment in the Exercise Price or the number of Warrant Shares shall be made if the amount of such adjustment would be less than $0.01 or one-tenth (1/10th) of a share of Common Stock, but any such amount shall be carried forward and an adjustment with respect thereto shall be made at the time of and together with any subsequent adjustment which,

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together with such amount and any other amount or amounts so carried forward, shall aggregate $0.01 or 1/10th of a share of Common Stock, or more.

(G)Timing of Issuance of Additional Common Stock Upon Certain Adjustments.  In any case in which the provisions of this Section 13 shall require that an adjustment shall become effective immediately after a record date for an event, the Company may defer until the occurrence of such event (i) issuing to the Warrantholder of this Warrant exercised after such record date and before the occurrence of such event the additional shares of Common Stock issuable upon such exercise by reason of the adjustment required by such event over and above the shares of Common Stock issuable upon such exercise before giving effect to such adjustment and (ii) paying to such Warrantholder any amount of cash in lieu of a fractional share of Common Stock; provided, however, that the Company upon request shall deliver to such Warrantholder a due bill or other appropriate instrument evidencing such Warrantholder’s right to receive such additional shares, and such cash, upon the occurrence of the event requiring such adjustment.

(H)Other Events.  For so long as the Original Warrantholder holds this Warrant or any portion thereof, if any event occurs as to which the provisions of this Section 13 are not strictly applicable or, if strictly applicable, would not, in the good faith judgment of the Board of Directors of the Company, fairly and adequately protect the purchase rights of the Warrants in accordance with the essential intent and principles of such provisions, then the Board of Directors shall make such adjustments in the application of such provisions, in accordance with such essential intent and principles, as shall be reasonably necessary, in the good faith opinion of the Board of Directors, to protect such purchase rights as aforesaid.  The Exercise Price or the number of Warrant Shares shall not be adjusted in the event of a change in the par value of the Common Stock or a change in the jurisdiction of incorporation of the Company.

(I)Statement Regarding Adjustments.  Whenever the Exercise Price or the number of Warrant Shares shall be adjusted as provided in Section 13, the Company shall forthwith file at the principal office of the Company a statement showing in reasonable detail the facts requiring such adjustment and the Exercise Price that shall be in effect and the number of Warrant Shares after such adjustment, and the Company shall also cause a copy of such statement to be sent by mail, first class postage prepaid, to each Warrantholder at the address appearing in the Company’s records.

(J)Notice of Adjustment Event.  In the event that the Company shall propose to take any action of the type described in this Section 13 (but only if the action of the type described in this Section 13 would result in an adjustment in the Exercise Price or the number of Warrant Shares or a change in the type of securities or property to be delivered upon exercise of this Warrant), the Company shall give notice to the Warrantholder, in the manner set forth in Section 13(J), which notice shall specify the record date, if any, with respect to any such action and the approximate date on which such action is to take place.  Such notice shall also set forth the facts with respect thereto as shall be reasonably necessary to indicate the effect on the Exercise Price and the number, kind or class of shares or other securities or property which shall be deliverable upon exercise of this Warrant.  In the case of any action which would require the fixing of a record date, such notice shall be given at least 10 days prior to the date so fixed, and in case of all other action, such notice shall be given at least 15 days prior to the taking of such proposed

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action.  Failure to give such notice, or any defect therein, shall not affect the legality or validity of any such action.

(K)Proceedings Prior to Any Action Requiring Adjustment.  As a condition precedent to the taking of any action which would require an adjustment pursuant to this Section 13, the Company shall take any action which may be necessary, including obtaining regulatory, New York Stock Exchange, NASDAQ Stock Market or other applicable national securities exchange or stockholder approvals or exemptions, as applicable, in order that the Company may thereafter validly and legally issue as fully paid and nonassessable all shares of Common Stock that the Warrantholder is entitled to receive upon exercise of this Warrant pursuant to this Section 13.

(L)Adjustment Rules.  Any adjustments pursuant to this Section 13 shall be made successively whenever an event referred to herein shall occur.  If an adjustment in Exercise Price made hereunder would reduce the Exercise Price to an amount below par value of the Common Stock, then such adjustment in Exercise Price made hereunder shall reduce the Exercise Price to the par value of the Common Stock.

14.No Impairment.  The Company will not, by amendment of its Charter or through any reorganization, transfer of assets, consolidation, merger, dissolution, issue or sale of securities or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms to be observed or performed hereunder by the Company, but will at all times in good faith assist in the carrying out of all the provisions of this Warrant and in taking of all such action as may be necessary or appropriate in order to protect the rights of the Warrantholder.

15.Governing Law.  This Warrant will be governed by and construed in accordance with the federal law of the United States if and to the extent such law is applicable, and otherwise in accordance with the laws of the State of New York applicable to contracts made and to be performed entirely within such State.  Each of the Company and the Warrantholder agrees (a) to submit to the exclusive jurisdiction and venue of the United States District Court for the District of Columbia for any civil action, suit or proceeding arising out of or relating to this Warrant or the transactions contemplated hereby, and (b) that notice may be served upon the Company at the address in Section 19 below and upon the Warrantholder at the address for the Warrantholder set forth in the registry maintained by the Company pursuant to Section 9 hereof.  To the extent permitted by applicable law, each of the Company and the Warrantholder hereby unconditionally waives trial by jury in any civil legal action or proceeding relating to the Warrant or the transactions contemplated hereby or thereby.

16.Binding Effect.  This Warrant shall be binding upon any successors or assigns of the Company.

17.Amendments.  This Warrant may be amended and the observance of any term of this Warrant may be waived only with the written consent of the Company and the Warrantholder.

18.Prohibited Actions.  The Company agrees that it will not take any action which would entitle the Warrantholder to an adjustment of the Exercise Price if the total number of

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shares of Common Stock issuable after such action upon exercise of this Warrant, together with all shares of Common Stock then outstanding and all shares of Common Stock then issuable upon the exercise of all outstanding options, warrants, conversion and other rights, would exceed the total number of shares of Common Stock then authorized by its Charter.

19.Notices.  Any notice, request, instruction or other document to be given hereunder by any party to the other will be in writing and will be deemed to have been duly given (a) on the date of delivery if delivered personally, or by facsimile, upon confirmation of receipt, or (b) on the second Business Day following the date of dispatch if delivered by a recognized next day courier service.  All notices hereunder shall be delivered as set forth in Item 7 of Schedule A hereto, or pursuant to such other instructions as may be designated in writing by the party to receive such notice.

20.Entire Agreement.  This Warrant, the forms attached hereto and Schedule A hereto (the terms of which are incorporated by reference herein), and the Warrant Agreement (including all documents incorporated therein), contain the entire agreement between the parties with respect to the subject matter hereof and supersede all prior and contemporaneous arrangements or undertakings with respect thereto.

[Remainder of page intentionally left blank]

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[Form of Notice of Exercise]
Date:

TO:Atlas Air Worldwide Holdings. Inc.

RE:Exercise of Warrant

The undersigned, pursuant to the provisions set forth in the attached Warrant, hereby notifies the Company of its intention to exercise its option with respect to the number of shares of the Common Stock set forth below covered by such Warrant.  Pursuant to Section 4 of the Warrant, the undersigned acknowledges that the Company may settle this exercise in net cash or shares. Cash to be paid pursuant to a Net Cash Settlement or payment of fractional shares in connection with a Net Share Settlement should be deposited to the account of the Warrantholder set forth below. Common Stock to be delivered pursuant to a Net Share Settlement shall be delivered to the Warrantholder as indicated below. A new warrant evidencing the remaining shares of Common Stock covered by such Warrant, but not yet subscribed for and purchased, if any, should be issued in the name set forth below.

Number of Warrant Shares:

Aggregate Exercise Price:

Address for Delivery of Warrant Shares:

Wire Instructions:

Proceeds to be delivered:$

Name of Bank:

City/ State of Bank:

ABA Number of Bank

SWIFT #

Name of Account:

            Account Number at Bank:

Securities to be issued to:

If in book-entry form through the Depositary:

Depositary Account Number:

Name of Agent Member:

If in certificated form:

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Social Security Number or Other Identifying Number:

Name:

Street Address:

City, State and Zip Code:

Any unexercised Warrants evidenced by the exercising Warrantholder’s interest in the Warrant:

Social Security Number or Other Identifying Number:

Name:

Street Address:

City, State and Zip Code:

Holder:
By:
Name:
Title:

16

IN WITNESS WHEREOF, the Company has caused this Warrant to be duly executed by a duly authorized officer.

Dated:

ATLAS AIR WORLDWIDE HOLDINGS, INC.

By:
Name:  
Title:  

Attest:

By:
Name:
Title:

[Signature Page to Warrant]

17

Item 1 Name: Atlas Air Worldwide Holdings, Inc.
Corporate or other organizational form: Corporation
Jurisdiction of organization: Delaware

Item 2
Exercise Price: $31.95

Item 3
Issue Date: May 29, 2020

Item 4
Date of Warrant Agreement between the Company and the United States Department of the Treasury: May 29, 2020

Item 5
Number of shares of Common Stock: 268,908

Item 6
Company’s address: 2000 Westchester Avenue, Purchase, NY 10577

Item 7
Notice information:

Atlas Air Worldwide Holdings, Inc.

2000 Westchester Avenue

Purchase, NY 10577
Facsimile: (914) 701-8333

Email: Adam.Kokas@atlasair.com

Attention: Adam R. Kokas

with a copy to (which copy alone shall not constitute notice):

Cravath, Swaine & Moore LLP

Worldwide Plaza

825 Eighth Avenue

New York, NY 10019

Facsimile: (212) 474-3700

Email: dzoubek@cravath.com, jhochenberg@cravath.com

Attention: Damien R. Zoubek, Esq., Jenny Hochenberg, Esq.

SCHEDULE 1

WARRANT SHARES FORMULA

The number of Warrant Shares for which Warrants issued on each Warrant Closing Date shall be exercisable shall equal:

(i) On the Closing Date, the quotient of (x) the product of the principal amount of the Promissory Note multiplied by 0.1 divided by (y) the Exercise Price (as defined in Annex B); and

(ii) On each subsequent Warrant Closing Date, the quotient of (x) the product of the amount by which the principal amount of the Promissory Note is increased on such Warrant Closing Date multiplied by 0.1 divided by (y) the Exercise Price.

SCHEDULE 2

CAPITALIZATION

The authorized capital stock of the Company consists of 100,000,000 shares of common stock (of which, as of April 30, 2020, 26,126,559 shares were issued and outstanding) and 10,000,000 shares of preferred stock (of which, as of April 30, 2020, no shares were issued or outstanding).

As of April 30, 2020, 5,357,346 shares of Common Stock were held by the Company in its treasury.

As of April 30, 2020:

(i) 4,115,210 shares of Common Stock were reserved for issuance upon conversion of the Company’s 2.25% Convertible Senior Notes due 2022 issued on June 3, 2015, with an aggregate principal amount of $224.5 million and an initial conversion ratio of 13.5036 shares of Common Stock per $1,000 principal amount thereof (the “2015 Convertible Notes”);

(ii) 6,211,656  shares of Common Stock were reserved for issuance upon exercise of the 3,031,558 warrants issued in connection with the 2015 Convertible Notes;

(iii) 6,485,849 shares of Common Stock were reserved for issuance upon conversion of the Company’s 1.875% Convertible Senior Notes due 2024 issued on May 23, 2017, with an aggregate principal amount of $289.0 million and an initial conversion ratio of 16.3713 shares of Common Stock per $1,000 principal amount thereof (the “2017 Convertible Notes);

(iv) 9,790,038 shares of Common Stock were reserved for issuance upon exercise of the 4,731,306 warrants issued in connection with the 2017 Convertible Notes;

(v) 17,882,576 shares of Common Stock were reserved for issuance upon exercise of the warrants issued to Amazon.com, Inc., consisting of (1) a warrant to purchase 7,500,000 shares of Common Stock issued on May 4, 2016, (2) a warrant to purchase 3,750,000 shares of Common Stock issued on May 4, 2016, and (3) a warrant to purchase 6,632,576 shares of Common Stock issued on March 27, 2019; and

(vi) 1,385,651 shares of Common Stock were reserved for issuance under compensatory equity plans of the Company and its subsidiaries (including 1,200,147 shares of Common Stock reserved for issuance upon the settlement of restricted stock units and performance awards outstanding as of such date and granted under such plans (assuming, in the case of performance awards, that applicable goals are attained at maximum levels)).

The number of shares of Common Stock issuable upon conversion or exercise, as applicable, of the notes and warrants set forth in clauses (i) through (v) above are subject to anti-dilution adjustments as set forth in the applicable definitive documents governing such instruments.

21

SCHEDULE 3

REQUIRED STOCKHOLDER APPROVALS

None.

EX-10.1

Exhibit 10.1

PAyroll support Program Agreement

Recipient: Atlas Air, Inc. 2000 Westchester Avenue Purchase, NY 10577	PSP Participant Number: PSA-2004031679 Employer Identification Number:84-1207329 DUNS Number: 79-777-0773
Amount of Initial Payroll Support Payment: $203,421,410
The Department of the Treasury (Treasury) hereby provides Payroll Support (as defined herein) under Division A, Title IV, Subtitle B of the Coronavirus Aid, Relief, and Economic Security Act.  The Signatory Entity named above, on behalf of itself and its Affiliates (as defined herein), agrees to comply with this Agreement and applicable Federal law as a condition of receiving Payroll Support.  The Signatory Entity and its undersigned authorized representatives acknowledge that a materially false, fictitious, or fraudulent statement (or concealment or omission of a material fact) in connection with this Agreement may result in administrative remedies as well as civil and/or criminal penalties.
The undersigned hereby agree to the attached Payroll Support Program Agreement.
/s/ Steven T. Mnuchin	/s/ John Dietrich
Department of the Treasury Name: Steven Mnuchin Title: Secretary Date: May 29, 2020	Atlas Air, Inc. First Authorized Representative: John Dietrich Title: Chief Executive Officer & President Date: May 29, 2019 /s/ Spencer Schwartz
	Atlas Air, Inc. Second Authorized Representative: Spencer Schwartz Title: Executive Vice President & Chief Financial Officer Date: May 29, 2020

OMB Approved No. 1505-0263        

Expiration Date: 09/30/2020

PAYROLL SUPPORT PROGRAM AGREEMENT

INTRODUCTION

The Coronavirus Aid, Relief, and Economic Security Act (CARES Act or Act) directs the Department of the Treasury (Treasury) to provide Payroll Support (as defined herein) to passenger air carriers, cargo air carriers, and certain contractors that must be exclusively used for the continuation of payment of Employee Salaries, Wages, and Benefits (as defined herein).  The Act permits Treasury to provide Payroll Support in such form, and on such terms and conditions, as the Secretary of the Treasury determines appropriate, and requires certain assurances from the Recipient (as defined herein).  

This Payroll Support Program Agreement, including the application and all supporting documents submitted by the Recipient and the Payroll Support Certification attached hereto (collectively, Agreement), memorializes the binding terms and conditions applicable to the Recipient.  

DEFINITIONS

As used in this Agreement, the following terms shall have the following respective meanings, unless the context clearly requires otherwise.  In addition, this Agreement shall be construed in a manner consistent with any public guidance Treasury may from time to time issue regarding the implementation of Division A, Title IV, Subtitle B of the CARES Act.

Act or CARES Act means the Coronavirus Aid, Relief, and Economic Security Act (Pub. L. No. 116-136).

Additional Payroll Support Payment means any disbursement of Payroll Support occurring after the first disbursement of Payroll Support under this Agreement.

Affiliate means any Person that directly or indirectly controls, is controlled by, or is under common control with, the Recipient.  For purposes of this definition, “control” of a Person shall mean having the power, directly or indirectly, to direct or cause the direction of the management and policies of such Person, whether by ownership of voting equity, by contract, or otherwise.

Benefits means, without duplication of any amounts counted as Salary or Wages, pension expenses in respect of Employees, all expenses for accident, sickness, hospital, and death benefits to Employees, and the cost of insurance to provide such benefits; any Severance Pay or Other Benefits payable to Employees pursuant to a bona fide voluntary early retirement program or voluntary furlough; and any other similar expenses paid by the Recipient for the benefit of Employees, including any other fringe benefit expense described in lines 10 and 11 of Financial Reporting Schedule P-6, Form 41, as published by the Department of Transportation, but excluding any Federal, state, or local payroll taxes paid by the Recipient.

Corporate Officer means, with respect to the Recipient, its president; any vice president in charge of a principal business unit, division, or function (such as sales, administration or finance); any other officer who performs a policy-making function; or any other person who

performs similar policy making functions for the Recipient.  Executive officers of subsidiaries or parents of the Recipient may be deemed Corporate Officers of the Recipient if they perform such policy-making functions for the Recipient.

Employee means an individual who is employed by the Recipient and whose principal place of employment is in the United States (including its territories and possessions), including salaried, hourly, full-time, part-time, temporary, and leased employees, but excluding any individual who is a Corporate Officer or independent contractor.

Involuntary Termination or Furlough means the Recipient terminating the employment of one or more Employees or requiring one or more Employees to take a temporary suspension or unpaid leave for any reason, including a shut-down or slow-down of business; provided, however, that an Involuntary Termination or Furlough does not include a Permitted Termination or Furlough.

Maximum Awardable Amount means the amount determined by the Secretary with respect to the Recipient pursuant to section 4113(a)(1), (2), or (3) (as applicable) of the CARES Act.

Payroll Support means funds disbursed by the Secretary to the Recipient under this Agreement, including the first disbursement of Payroll Support and any Additional Payroll Support Payment.

Permitted Termination or Furlough means, with respect to an Employee, (1) a voluntary furlough, voluntary leave of absence, voluntary resignation, or voluntary retirement, (2) termination of employment resulting from such Employee’s death or disability, or (3) the Recipient terminating the employment of such Employee for cause or placing such Employee on a temporary suspension or unpaid leave of absence for disciplinary reasons, in either case, as reasonably determined by the Recipient acting in good faith.

Person means any natural person, corporation, limited liability company, partnership, joint venture, trust, business association, governmental entity, or other entity.

Recipient means, collectively, the Signatory Entity; its Affiliates that are air carriers as defined in 49 U.S.C. § 40102; and their respective heirs, executors, administrators, successors, and assigns.

Salary means, without duplication of any amounts counted as Benefits, a predetermined regular payment, typically paid on a weekly or less frequent basis but which may be expressed as an hourly, weekly, annual or other rate, as well as cost-of-living differentials, vacation time, paid time off, sick leave, and overtime pay, paid by the Recipient to its Employees, but excluding any Federal, state, or local payroll taxes paid by the Recipient.

Secretary means the Secretary of the Treasury.

Severance Pay or Other Benefits means any severance payment or other similar benefits, including cash payments, health care benefits, perquisites, the enhancement or acceleration of the payment or vesting of any payment or benefit or any other in-kind benefit payable (whether in lump sum or over time, including after March 24, 2022) by the Recipient to a Corporate Officer or Employee in connection with any termination of such Corporate Officer’s or Employee’s employment (including, without limitation, resignation, severance, retirement, or constructive termination), which shall be determined and calculated in respect of any Employee or Corporate

Officer of the Recipient in the manner prescribed in 17 CFR 229.402(j) (without regard to its limitation to the five most highly compensated executives and using the actual date of termination of employment rather than the last business day of the Recipient’s last completed fiscal year as the trigger event).

Signatory Entity means the passenger air carrier, cargo air carrier, or contractor that has entered into this Agreement.

Taxpayer Protection Instruments means warrants, options, preferred stock, debt securities, notes, or other financial instruments issued by the Recipient or an Affiliate to Treasury as compensation for the Payroll Support under this Agreement, if applicable.

Total Compensation means compensation including salary, wages, bonuses, awards of stock, and any other financial benefits provided by the Recipient or an Affiliate, as applicable, which shall be determined and calculated for the 2019 calendar year or any applicable 12-month period in respect of any Employee or Corporate Officer of the Recipient in the manner prescribed under paragraph e.5 of the award term in 2 CFR part 170, App. A, but excluding any Severance Pay or Other Benefits in connection with a termination of employment.

Wage means, without duplication of any amounts counted as Benefits, a payment, typically paid on an hourly, daily, or piecework basis, including cost-of-living differentials, vacation, paid time off, sick leave, and overtime pay, paid by the Recipient to its Employees, but excluding any Federal, state, or local payroll taxes paid by the Recipient.

PAYROLL SUPPORT PAYMENTS

1. Upon the execution of this Agreement by Treasury and the Recipient, the Secretary shall approve the Recipient’s application for Payroll Support.

2. The Recipient may receive Payroll Support in multiple payments up to the Maximum Awardable Amount, and the amounts (individually and in the aggregate) and timing of such payments will be determined by the Secretary in his sole discretion.  The Secretary may, in his sole discretion, increase or reduce the Maximum Awardable Amount (a) consistent with section 4113(a) of the CARES Act and (b) on a pro rata basis in order to address any shortfall in available funds, pursuant to section 4113(c) of the CARES Act.

3. The Secretary may determine in his sole discretion that any Payroll Support shall be conditioned on, and subject to, such additional terms and conditions (including the receipt of, and any terms regarding, Taxpayer Protection Instruments) to which the parties may agree in writing.  

TERMS AND CONDITIONS

Retaining and Paying Employees

4. The Recipient shall use the Payroll Support exclusively for the continuation of payment of Wages, Salaries, and Benefits to the Employees of the Recipient.

a. Furloughs and Layoffs.  The Recipient shall not conduct an Involuntary Termination or Furlough of any Employee between the date of this Agreement and September 30, 2020.  

b. Employee Salary, Wages, and Benefits

i. Salary and Wages.  Except in the case of a Permitted Termination or Furlough, the Recipient shall not, between the date of this Agreement and September 30, 2020, reduce, without the Employee’s consent, (A) the pay rate of any Employee earning a Salary, or (B) the pay rate of any Employee earning Wages.

ii. Benefits.  Except in the case of a Permitted Termination or Furlough, the Recipient shall not, between the date of this Agreement and September 30, 2020, reduce, without the Employee’s consent, the Benefits of any Employee; provided, however, that for purposes of this paragraph, personnel expenses associated with the performance of work duties, including those described in line 10 of Financial Reporting Schedule P-6, Form 41, as published by the Department of Transportation, may be reduced to the extent the associated work duties are not performed.

Dividends and Buybacks

5. Through September 30, 2021, neither the Recipient nor any Affiliate shall, in any transaction, purchase an equity security of the Recipient or of any direct or indirect parent company of the Recipient that, in either case, is listed on a national securities exchange.

6. Through September 30, 2021, the Recipient shall not pay dividends, or make any other capital distributions, with respect to the common stock (or equivalent equity interest) of the Recipient.

Limitations on Certain Compensation

7. Beginning March 24, 2020, and ending March 24, 2022, the Recipient and its Affiliates shall not pay any of the Recipient’s Corporate Officers or Employees whose Total Compensation exceeded $425,000 in calendar year 2019 (other than an Employee whose compensation is determined through an existing collective bargaining agreement entered into before March 27, 2020):

a. Total Compensation which exceeds, during any 12 consecutive months of such two-year period, the Total Compensation the Corporate Officer or Employee received in calendar year 2019; or

b. Severance Pay or Other Benefits in connection with a termination of employment with the Recipient which exceed twice the maximum Total Compensation received by such Corporate Officer or Employee in calendar year 2019.

8. Beginning March 24, 2020, and ending March 24, 2022, the Recipient and its Affiliates shall not pay any of the Recipient’s Corporate Officers or Employees whose Total Compensation exceeded $3,000,000 in calendar year 2019 Total Compensation in excess of the sum of:

a. $3,000,000; and

b. 50 percent of the excess over $3,000,000 of the Total Compensation received by such Corporate Officer or Employee in calendar year 2019.

9. For purposes of determining applicable amounts under paragraphs 7 and 8 with respect to any Corporate Officer or Employee who was employed by the Recipient or an Affiliate for less than all of calendar year 2019, the amount of Total Compensation in calendar year 2019 shall mean such Corporate Officer’s or Employee’s Total Compensation on an annualized basis.

Continuation of Service

10. If the Recipient is an air carrier, until March 1, 2022, the Recipient shall comply with any applicable requirement issued by the Secretary of Transportation under section 4114(b) of the CARES Act to maintain scheduled air transportation service to any point served by the Recipient before March 1, 2020.

Effective Date

11. This Agreement shall be effective as of the date of its execution by both parties.

Reporting and Auditing

12. Until the calendar quarter that begins after the later of March 24, 2022, and the date on which no Taxpayer Protection Instrument is outstanding, not later than 45 days after the end of each of the first three calendar quarters of each calendar year and 90 days after the end of each calendar year, the Signatory Entity, on behalf of itself and each other Recipient, shall certify to Treasury that it is in compliance with the terms and conditions of this Agreement and provide a report containing the following:

a. the amount of Payroll Support funds expended during such quarter;

b. the Recipient’s financial statements (audited by an independent certified public accountant, in the case of annual financial statements); and

c. a copy of the Recipient’s IRS Form 941 filed with respect to such quarter; and

d. a detailed summary describing, with respect to the Recipient, (a) any changes in Employee headcount during such quarter and the reasons therefor, including any Involuntary Termination or Furlough, (b) any changes in the amounts spent by the Recipient on Employee Wages, Salary, and Benefits during such quarter, and (c) any changes in Total Compensation for, and any Severance Pay or Other Benefits in connection with the termination of, Corporate Officers and Employees subject to

limitation under this Agreement during such quarter; and the reasons for any such changes.

13. If the Recipient or any Affiliate, or any Corporate Officer of the Recipient or any Affiliate, becomes aware of facts, events, or circumstances that may materially affect the Recipient’s compliance with the terms and conditions of this Agreement, the Recipient or Affiliate shall promptly provide Treasury with a written description of the events or circumstances and any action taken, or contemplated, to address the issue.

14. In the event the Recipient contemplates any action to commence a bankruptcy or insolvency proceeding in any jurisdiction, the Recipient shall promptly notify Treasury.

15. The Recipient shall:

a. Promptly provide to Treasury and the Treasury Inspector General a copy of any Department of Transportation Inspector General report, audit report, or report of any other oversight body, that is received by the Recipient relating to this Agreement.

b. Immediately notify Treasury and the Treasury Inspector General of any indication of fraud, waste, abuse, or potentially criminal activity pertaining to the Payroll Support.

c. Promptly provide Treasury with any information Treasury may request relating to compliance by the Recipient and its Affiliates with this Agreement.

16. The Recipient and Affiliates will provide Treasury, the Treasury Inspector General, and such other entities as authorized by Treasury timely and unrestricted access to all documents, papers, or other records, including electronic records, of the Recipient related to the Payroll Support, to enable Treasury and the Treasury Inspector General to make audits, examinations, and otherwise evaluate the Recipient’s compliance with the terms of this Agreement.  This right also includes timely and reasonable access to the Recipient’s and its Affiliates’ personnel for the purpose of interview and discussion related to such documents.  This right of access shall continue as long as records are required to be retained.

Recordkeeping and Internal Controls

17. If Treasury notifies the Recipient that the first disbursement of Payroll Support to the Recipient under this Agreement is the Maximum Awardable Amount (subject to any pro rata reductions and as determined by the Secretary as of the date of such disbursement), the Recipient shall maintain the Payroll Support funds in a separate account over which Treasury shall have a perfected security interest to continue the payment of Wages, Salary, and Benefits to the Employees.  For the avoidance of doubt, regardless whether the first disbursement of Payroll Support to the Recipient under this Agreement is the Maximum Awardable Amount, if the Recipient is a debtor as defined under 11 U.S.C. § 101(13), the Payroll Support funds, any claim or account receivable arising under this Agreement, and any segregated account holding funds received under this Agreement shall not constitute or become property of the estate under 11 U.S.C. § 541.

18. The Recipient shall expend and account for Payroll Support funds in a manner sufficient to:

a. Permit the preparation of accurate, current, and complete quarterly reports as required under this Agreement.

b. Permit the tracing of funds to a level of expenditures adequate to establish that such funds have been used as required under this Agreement.

19. The Recipient shall establish and maintain effective internal controls over the Payroll Support; comply with all requirements related to the Payroll Support established under applicable Federal statutes and regulations; monitor compliance with Federal statutes, regulations, and the terms and conditions of this Agreement; and take prompt corrective actions in accordance with audit recommendations.  The Recipient shall promptly remedy any identified instances of noncompliance with this Agreement.  

20. The Recipient and Affiliates shall retain all records pertinent to the receipt of Payroll Support and compliance with the terms and conditions of this Agreement (including by suspending any automatic deletion functions for electronic records, including e-mails) for a period of three years following the period of performance.  Such records shall include all information necessary to substantiate factual representations made in the Recipient’s application for Payroll Support, including ledgers and sub-ledgers, and the Recipient’s and Affiliates’ compliance with this Agreement.  While electronic storage of records (backed up as appropriate) is preferable, the Recipient and Affiliates may store records in hardcopy (paper) format. The term “records” includes all relevant financial and accounting records and all supporting documentation for the information reported on the Recipient’s quarterly reports.

21. If any litigation, claim, investigation, or audit relating to the Payroll Support is started before the expiration of the three-year period, the Recipient and Affiliates shall retain all records described in paragraph 20 until all such litigation, claims, investigations, or audit findings have been completely resolved and final judgment entered or final action taken.

Remedies

22. If Treasury believes that an instance of noncompliance by the Recipient or an Affiliate with (a) this Agreement, (b) sections 4114 or 4116 of the CARES Act, or (c) the Internal Revenue Code of 1986 as it applies to the receipt of Payroll Support has occurred, Treasury may notify the Recipient in writing of its proposed determination of noncompliance, provide an explanation of the nature of the noncompliance, and specify a proposed remedy.  Upon receipt of such notice, the Recipient shall, within seven days, accept Treasury’s proposed remedy, propose an alternative remedy, or provide information and documentation contesting Treasury’s proposed determination.  Treasury shall consider any such submission by the Recipient and make a final written determination, which will state Treasury’s findings regarding noncompliance and the remedy to be imposed.

23. If Treasury makes a final determination under paragraph 22 that an instance of noncompliance has occurred, Treasury may, in its sole discretion, withhold any Additional Payroll Support Payments; require the repayment of the amount of any previously disbursed

Payroll Support, with appropriate interest; require additional reporting or monitoring; initiate suspension or debarment proceedings as authorized under 2 CFR Part 180; terminate this Agreement; or take any such other action as Treasury, in its sole discretion, deems appropriate.    

24. Treasury may make a final determination regarding noncompliance without regard to paragraph 22 if Treasury determines, in its sole discretion, that such determination is necessary to protect a material interest of the Federal Government.  In such event, Treasury shall notify the Recipient of the remedy that Treasury, in its sole discretion, shall impose, after which the Recipient may contest Treasury’s final determination or propose an alternative remedy in writing to Treasury.  Following the receipt of such a submission by the Recipient, Treasury may, in its sole discretion, maintain or alter its final determination.

25. Any final determination of noncompliance and any final determination to take any remedial action described herein shall not be subject to further review.  To the extent permitted by law, the Recipient waives any right to judicial review of any such determinations and further agrees not to assert in any court any claim arising from or relating to any such determination or remedial action.

26. Instead of, or in addition to, the remedies listed above, Treasury may refer any noncompliance or any allegations of fraud, waste, or abuse to the Treasury Inspector General.

27. Treasury, in its sole discretion, may grant any request by the Recipient for termination of this Agreement, which such request shall be in writing and shall include the reasons for such termination, the proposed effective date of the termination, and the amount of any unused Payroll Support funds the Recipient requests to return to Treasury.  Treasury may, in its sole discretion, determine the extent to which the requirements under this Agreement may cease to apply following any such termination.

28. If Treasury determines that any remaining portion of the Payroll Support will not accomplish the purpose of this Agreement, Treasury may terminate this Agreement in its entirety to the extent permitted by law.

Debts

29. Any Payroll Support in excess of the amount which Treasury determines, at any time, the Recipient is authorized to receive or retain under the terms of this Agreement constitutes a debt to the Federal Government.

30. Any debts determined to be owed by the Recipient to the Federal Government shall be paid promptly by the Recipient.  A debt is delinquent if it has not been paid by the date specified in Treasury’s initial written demand for payment, unless other satisfactory arrangements have been made.  Interest, penalties, and administrative charges shall be charged on delinquent debts in accordance with 31 U.S.C. § 3717, 31 CFR 901.9, and paragraphs 31 and 32.  Treasury will refer any debt that is more than 180 days delinquent to Treasury’s Bureau of the Fiscal Service for debt collection services.

31. Penalties on any debts shall accrue at a rate of not more than 6 percent per year or such other higher rate as authorized by law.

32. Administrative charges relating to the costs of processing and handling a delinquent debt shall be determined by Treasury.

33. The Recipient shall not use funds from other federally sponsored programs to pay a debt to the government arising under this Agreement.

Protections for Whistleblowers

34. In addition to other applicable whistleblower protections, in accordance with 41 U.S.C. §4712, the Recipient shall not discharge, demote, or otherwise discriminate against an Employee as a reprisal for disclosing information to a Person listed below that the Employee reasonably believes is evidence of gross mismanagement of a Federal contract or grant, a gross waste of Federal funds, an abuse of authority relating to a Federal contract or grant, a substantial and specific danger to public health or safety, or a violation of law, rule, or regulation related to a Federal contract (including the competition for or negotiation of a contract) or grant:

a. A Member of Congress or a representative of a committee of Congress;

b. An Inspector General;

c. The Government Accountability Office;

d. A Treasury employee responsible for contract or grant oversight or management;

e. An authorized official of the Department of Justice or other law enforcement agency;

f. A court or grand jury; or

g. A management official or other Employee of the Recipient who has the responsibility to investigate, discover, or address misconduct.

Lobbying

35. The Recipient shall comply with the provisions of 31 U.S.C. § 1352, as amended, and with the regulations at 31 CFR Part 21.  

Non-Discrimination

36. The Recipient shall comply with, and hereby assures that it will comply with, all applicable Federal statutes and regulations relating to nondiscrimination including:

a. Title VI of the Civil Rights Act of 1964 (42 U.S.C. § 2000d et seq.), including Treasury’s implementing regulations at 31 CFR Part 22;

b. Section 504 of the Rehabilitation Act of 1973, as amended (29 U.S.C. § 794);

c. The Age Discrimination Act of 1975, as amended (42 U.S.C. §§ 6101–6107), including Treasury’s implementing regulations at 31 CFR Part 23  and the general age discrimination regulations at 45 CFR Part 90; and

d. The Air Carrier Access Act of 1986 (49 U.S.C. § 41705).

Additional Reporting

37. Within seven days after the date of this Agreement, the Recipient shall register in SAM.gov, and thereafter maintain the currency of the information in SAM.gov until at least March 24, 2022.  The Recipient shall review and update such information at least annually after the initial registration, and more frequently if required by changes in the Recipient’s information.  The Recipient agrees that this Agreement and information related thereto, including the Maximum Awardable Amount and any executive total compensation reported pursuant to paragraph 38, may be made available to the public through a U.S. Government website, including SAM.gov.

38. For purposes of paragraph 37, the Recipient shall report total compensation as defined in paragraph e.5 of the award term in 2 CFR part 170, App. A for each of the Recipient’s five most highly compensated executives for the preceding completed fiscal year, if:

a. the total Payroll Support is $25,000 or more;

b. in the preceding fiscal year, the Recipient received:

i. 80 percent or more of its annual gross revenues from Federal procurement contracts (and subcontracts) and Federal financial assistance, as defined at 2 CFR 170.320 (and subawards); and

ii. $25,000,000 or more in annual gross revenues from Federal procurement contracts (and subcontracts) and Federal financial assistance, as defined at 2 CFR 170.320 (and subawards); and

c. the public does not have access to information about the compensation of the executives through periodic reports filed under section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m(a), 78o(d)) or section 6104 of the Internal Revenue Code of 1986.  To determine if the public has access to the compensation information, the Recipient shall refer to U.S. Securities and Exchange Commission total compensation filings at http://www.sec.gov/answers/execomp.htm.

39. The Recipient shall report executive total compensation described in paragraph 38:

a. as part of its registration profile at https://www.sam.gov; and

b. within five business days after the end of each month following the month in which this Agreement becomes effective, and annually thereafter.

40. The Recipient agrees that, from time to time, it will, at its own expense, promptly upon reasonable request by Treasury, execute and deliver, or cause to be executed and delivered, or use its commercially reasonable efforts to procure, all instruments, documents and information, all in form and substance reasonably satisfactory to Treasury, to enable Treasury to ensure compliance with, or effect the purposes of, this Agreement, which may include, among other documents or information, (a) certain audited financial statements of the Recipient, (b) documentation regarding the Recipient’s revenues derived from its business as a passenger or cargo air carrier or regarding the passenger air carriers for which the Recipient provides services as a contractor (as the case may be), and (c) the Recipient’s most recent quarterly Federal tax returns.  The Recipient agrees to provide Treasury with such documents or information promptly.

41. If the total value of the Recipient’s currently active grants, cooperative agreements, and procurement contracts from all Federal awarding agencies exceeds $10,000,000 for any period before termination of this Agreement, then the Recipient shall make such reports as required by 2 CFR part 200, Appendix XII.

Other

42. The Recipient acknowledges that neither Treasury, nor any other actor, department, or agency of the Federal Government, shall condition the provision of Payroll Support on the Recipient’s implementation of measures to enter into negotiations with the certified bargaining representative of a craft or class of employees of the Recipient under the Railway Labor Act (45 U.S.C. 151 et seq.) or the National Labor Relations Act (29 U.S.C. 151 et seq.), regarding pay or other terms and conditions of employment.

43. Notwithstanding any other provision of this Agreement, the Recipient has no right to, and shall not, transfer, pledge, mortgage, encumber, or otherwise assign this Agreement or any Payroll Support provided under this Agreement, or any interest therein, or any claim, account receivable, or funds arising thereunder or accounts holding Payroll Support, to any party, bank, trust company, or other Person without the express written approval of Treasury.

44. The Signatory Entity will cause its Affiliates to comply with all of their obligations under or relating to this Agreement.

45. Unless otherwise provided in guidance issued by Treasury or the Internal Revenue Service, the form of any Taxpayer Protection Instrument held by Treasury and any subsequent holder will be treated as such form for purposes of the Internal Revenue Code of 1986 (for example, a Taxpayer Protection Instrument in the form of a note will be treated as indebtedness for purposes of the Internal Revenue Code of 1986).

46. This Agreement may not be amended or modified except pursuant to an agreement in writing entered into by the Recipient and Treasury, except that Treasury may unilaterally amend this Agreement if required in order to comply with applicable Federal law or regulation.

47. Subject to applicable law, Treasury may, in its sole discretion, waive any term or condition under this Agreement imposing a requirement on the Recipient or any Affiliate.

48. This Agreement shall bind and inure to the benefit of the parties and their respective heirs, executors, administrators, successors, and assigns.  

49. The Recipient represents and warrants to Treasury that this Agreement, and the issuance and delivery to Treasury of the Taxpayer Protection Instruments, if applicable, have been duly authorized by all requisite corporate and, if required, stockholder action, and will not result in the violation by the Recipient of any provision of law, statute, or regulation, or of the articles of incorporation or other constitutive documents or bylaws of the Recipient, or breach or constitute an event of default under any material contract to which the Recipient is a party.

50. The Recipient represents and warrants to Treasury that this Agreement has been duly executed and delivered by the Recipient and constitutes a legal, valid, and binding obligation of the Recipient enforceable against the Recipient in accordance with its terms.

51. This Agreement may be executed in counterparts, each of which shall constitute an original, but all of which together shall constitute a single contract.  

52. The words “execution,” “signed,” “signature,” and words of like import in any assignment shall be deemed to include electronic signatures or the keeping of records in electronic form, each of which shall be of the same legal effect, validity or enforceability as a manually executed signature or the use of a paper-based recordkeeping system, as the case may be, to the extent and as provided for in any applicable law, including the Federal Electronic Signatures in Global and National Commerce Act, the New York State Electronic Signatures and Records Act, or any other similar state laws based on the Uniform Electronic Transactions Act.  Notwithstanding anything herein to the contrary, delivery of an executed counterpart of a signature page of this Agreement by electronic means, or confirmation of the execution of this Agreement on behalf of a party by an email from an authorized signatory of such party, shall be effective as delivery of a manually executed counterpart of this Agreement.

53. The captions and paragraph headings appearing herein are included solely for convenience of reference and are not intended to affect the interpretation of any provision of this Agreement.

54. This Agreement is governed by and shall be construed in accordance with Federal law. Insofar as there may be no applicable Federal law, this Agreement shall be construed in accordance with the laws of the State of New York, without regard to any rule of conflicts of law (other than section 5-1401 of the New York General Obligations Law) that would result in the application of the substantive law of any jurisdiction other than the State of New York.

55. Nothing in this Agreement shall require any unlawful action or inaction by either party.

56. The requirement pertaining to trafficking in persons at 2 CFR 175.15(b) is incorporated herein and made applicable to the Recipient.

57. This Agreement, together with the attachments hereto, including the Payroll Support Certification and any attached terms regarding Taxpayer Protection Instruments, constitute the entire agreement of the parties relating to the subject matter hereof and supersede any previous agreements and understandings, oral or written, relating to the subject matter hereof.  There may exist other agreements between the parties as to other matters, which are not affected by this Agreement and are not included within this integration clause.

58. No failure by either party to insist upon the strict performance of any provision of this Agreement or to exercise any right or remedy hereunder, and no acceptance of full or partial Payroll Support (if applicable) or other performance by either party during the continuance of any such breach, shall constitute a waiver of any such breach of such provision.

ATTACHMENT

Payroll Support Program Certification of Corporate Officer of Recipient

PAYROLL SUPPORT PROGRAM

CERTIFICATION OF CORPORATE OFFICER OF RECIPIENT

In connection with the Payroll Support Program Agreement (Agreement) between Atlas Air, Inc., Southern Air Inc., and the Department of the Treasury (Treasury) relating to Payroll Support being provided by Treasury to the Recipient under Division A, Title IV, Subtitle B of the Coronavirus Aid, Relief and Economic Security Act, I hereby certify under penalty of perjury to the Treasury that all of the following are true and correct.  Capitalized terms used but not defined herein have the meanings set forth in the Agreement.

(1)I have the authority to make the following representations on behalf of myself and the Recipient.  I understand that these representations will be relied upon as material in the decision by Treasury to provide Payroll Support to the Recipient.

(2) The information and certifications provided by the Recipient in an application for Payroll Support, and in any attachments or other information provided by the Recipient to Treasury related to the application, are true and correct and do not contain any materially false, fictitious, or fraudulent statement, nor any concealment or omission of any material fact.

(3) The Recipient has the legal authority to apply for the Payroll Support, and it has the institutional, managerial, and financial capability to comply with all obligations, terms, and conditions set forth in the Agreement and any attachment thereto.

(4) The Recipient and any Affiliate will give Treasury, Treasury’s designee or the Treasury Office of Inspector General (as applicable) access to, and opportunity to examine, all documents, papers, or other records of the Recipient or Affiliate pertinent to the provision of Payroll Support made by Treasury based on the application, in order to make audits, examinations, excerpts, and transcripts.

(5)  No Federal appropriated funds, including Payroll Support, have been paid or will be paid, by or on behalf of the Recipient, to any person for influencing or attempting to influence an officer or employee of an agency, a Member of Congress, an officer or employee of Congress, or an employee of a Member of Congress in connection with the awarding of any Federal contract, the making of any Federal grant, the making of any Federal loan, the entering into of any cooperative agreement, and the extension, continuation, renewal, amendment, or modification of any Federal contract, grant, loan, or cooperative agreement.

(6) If the Payroll Support exceeds $100,000, the Recipient shall comply with the disclosure requirements in 31 CFR Part 21 regarding any amounts paid for influencing or attempting to influence an officer or employee of any agency, a Member of Congress, an officer or employee of Congress, or an employee of a Member of Congress in connection with the Payroll Support.

I acknowledge that a materially false, fictitious, or fraudulent statement (or concealment or omission of a material fact) in this certification, or in the application that it supports, may be the subject of criminal prosecution and also may subject me and the Recipient to civil penalties and/or administrative remedies for false claims or otherwise.

/s/ John Dietrich _____________________________________	/s/ Spencer Schwartz _____________________________________
Corporate Officer of Signatory Entity Name: John Dietrich	Second Authorized Representative Name: Spencer Schwartz
Title: Chief Executive Officer & President	Title: Executive Vice President & Chief Financial Officer
Date: May 29, 2020	Date: May 29, 2020

PAYROLL SUPPORT PROGRAM

CERTIFICATION OF CORPORATE OFFICER OF RECIPIENT

In connection with the Payroll Support Program Agreement (Agreement) between Atlas Air, Inc., Southern Air Inc., and the Department of the Treasury (Treasury) relating to Payroll Support being provided by Treasury to the Recipient under Division A, Title IV, Subtitle B of the Coronavirus Aid, Relief and Economic Security Act, I hereby certify under penalty of perjury to the Treasury that all of the following are true and correct.  Capitalized terms used but not defined herein have the meanings set forth in the Agreement.

(1)I have the authority to make the following representations on behalf of myself and the Recipient.  I understand that these representations will be relied upon as material in the decision by Treasury to provide Payroll Support to the Recipient.

(2) The information and certifications provided by the Recipient in an application for Payroll Support, and in any attachments or other information provided by the Recipient to Treasury related to the application, are true and correct and do not contain any materially false, fictitious, or fraudulent statement, nor any concealment or omission of any material fact.

(3) The Recipient has the legal authority to apply for the Payroll Support, and it has the institutional, managerial, and financial capability to comply with all obligations, terms, and conditions set forth in the Agreement and any attachment thereto.

(4) The Recipient and any Affiliate will give Treasury, Treasury’s designee or the Treasury Office of Inspector General (as applicable) access to, and opportunity to examine, all documents, papers, or other records of the Recipient or Affiliate pertinent to the provision of Payroll Support made by Treasury based on the application, in order to make audits, examinations, excerpts, and transcripts.

(5)  No Federal appropriated funds, including Payroll Support, have been paid or will be paid, by or on behalf of the Recipient, to any person for influencing or attempting to influence an officer or employee of an agency, a Member of Congress, an officer or employee of Congress, or an employee of a Member of Congress in connection with the awarding of any Federal contract, the making of any Federal grant, the making of any Federal loan, the entering into of any cooperative agreement, and the extension, continuation, renewal, amendment, or modification of any Federal contract, grant, loan, or cooperative agreement.

(6) If the Payroll Support exceeds $100,000, the Recipient shall comply with the disclosure requirements in 31 CFR Part 21 regarding any amounts paid for influencing or attempting to influence an officer or employee of any agency, a Member of Congress, an officer or employee of Congress, or an employee of a Member of Congress in connection with the Payroll Support.

I acknowledge that a materially false, fictitious, or fraudulent statement (or concealment or omission of a material fact) in this certification, or in the application that it supports, may be the subject of criminal prosecution and also may subject me and the Recipient to civil penalties and/or administrative remedies for false claims or otherwise.

/s/ John Dietrich _____________________________________	/s/ Spencer Schwartz _____________________________________
Corporate Officer of Signatory Entity Name: John Dietrich	Second Authorized Representative Name: Spencer Schwartz
Title: Chief Executive Officer & President	Title: Executive Vice President & Chief Financial Officer
Date: May 29, 2020	Date: May 29, 2020

EX-10.2

Exhibit 10.2

PROMISSORY NOTE

THE SECURITIES REPRESENTED BY THIS INSTRUMENT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF ANY STATE AND MAY NOT BE TRANSFERRED, SOLD OR OTHERWISE DISPOSED OF EXCEPT WHILE A REGISTRATION STATEMENT RELATING THERETO IS IN EFFECT UNDER SUCH ACT AND APPLICABLE STATE SECURITIES LAWS OR PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER SUCH ACT OR SUCH LAWS.

Reference is made to that certain Payroll Support Program Agreement (“PSP Agreement”) dated as of the date hereof by and among ATLAS AIR, INC., a Delaware corporation (“Atlas”), having an office at 2000 Westchester Avenue, Purchase, NY, 10577, and SOUTHERN AIR INC., a Delaware corporation (“Southern”), having an office at 2000 Westchester Avenue, Purchase, NY, 10577, and the United States Department of the Treasury (“Treasury”), having an office at 1500 Pennsylvania Avenue, NW, Washington, D.C. 20220, entered into by Issuer and Treasury pursuant to the Coronavirus Aid, Relief, and Economic Security Act, Pub. L. 116-136 (Mar. 27, 2020) (“CARES Act”).

WHEREAS, Issuer has requested that Treasury provide financial assistance to the Issuer and certain of its Affiliates (as defined below) that are Recipients (as defined in the PSP Agreement) that shall be used for the continuation of payment of employee wages, salaries, and benefits as is permissible under Section 4112(a) of the CARES Act.

WHEREAS, as appropriate compensation to the Federal Government of the United States of America for the provision of financial assistance under the PSP Agreement, ATLAS AIR WORLDWIDE HOLDINGS, INC., a Delaware corporation and parent of Atlas and Southern (“Issuer”), has agreed to issue this Promissory Note (“Note”) to Treasury on the terms and conditions set forth herein.

FOR VALUE RECEIVED, Issuer unconditionally promises to pay to the Holder (as defined below) the principal sum of EIGHTY-FIVE MILLION NINE HUNDRED FIFTEEN THOUSAND NINE HUNDRED AND NINETY DOLLARS ($85,915,990), subject to increases and/or decreases made pursuant to Section 2.1, as permissible under the PSP Agreement, or Section 2.3, in each case as noted by the Holder in Schedule I (the “Principal Amount”), outstanding hereunder, together with all accrued interest thereon on the Maturity Date (as defined below) as provided in this Note.  Notations made by the Holder in Schedule I shall be final and conclusive absent manifest error; provided, however, that any failure by the Holder to make such notations or any error by omission by the Holder in this regard shall not affect the obligation of the Issuer to pay the full amount of the principal of and interest on the Note or any other amount owing hereunder.

1DEFINITIONS

1.1 Defined Terms

.  As used in this Note, capitalized terms have the meanings specified in Annex A.

1.2 Terms Generally

.  The definitions of terms herein shall apply equally to the singular and plural forms of the terms defined.  Whenever the context may require, any pronoun shall include the corresponding masculine, feminine and neuter forms.  The words “include,” “includes” and “including” shall be deemed to be followed by the phrase “without limitation.”  The word “will” shall be construed to have the same meaning and effect as the word “shall.”  The word “or” is not exclusive.  The word “year” shall refer (i) in the case of a leap year, to a year of three hundred sixty-six (366) days, and (ii) otherwise, to a year of three hundred sixty-five (365) days.  Unless the context requires otherwise (a) any definition of or reference to any agreement, instrument or other document herein shall be construed as referring to such agreement, instrument or other document as from time to time amended, supplemented or otherwise modified (subject to any restrictions on such amendments, supplements or modifications set forth herein), (b) any reference herein to any Person shall be construed to include such Person’s successors and assigns, (c) the words “herein,” “hereof” and “hereunder,” and words of similar import, shall be construed to refer to this Note in its entirety and not to any particular provision hereof, (d) all references herein to Sections, Annexes and Schedules shall be construed to refer to Sections of, and Annexes and Schedules to, this Note, (e) any reference to any law or regulation herein shall, unless otherwise specified, refer to such law or regulation as amended, modified or supplemented from time to time, and (f) the words “asset” and “property” shall be construed to have the same meaning and effect and to refer to any and all tangible and intangible assets and properties, including cash, securities, accounts and contract rights.

1.3 Accounting Terms

.  All accounting terms not otherwise defined herein shall be construed in conformity with GAAP, as in effect from time to time.

1

Exhibit 10.2

2NOTE

2.1 Principal Amount

.  Upon any disbursement to the Issuer under the PSP Agreement after the Closing Date, the Principal Amount of this Note shall be increased in an amount equal to 56% of any such disbursement; provided, however, that no increases in the Principal Amount of this Note shall occur pursuant to this Section until the aggregate principal amount of any disbursements to the Issuer under the PSP Agreement is greater than $50,000,000.

2.2 Maturity Date

.  The aggregate unpaid principal amount of the Note, all accrued and unpaid interest, and all other amounts payable under this Note shall be due and payable on the Maturity Date, unless otherwise provided in Section 5.1.  

2.3 Prepayments.

(a)Optional Prepayments.  The Issuer may, upon written notice to the Holder, at any time and from time to time prepay the Note in whole or in part without premium or penalty in a minimum aggregate principal amount equal to the lesser of $5,000,000 and the Principal Amount outstanding.

(b)Mandatory Prepayments.  If a Change of Control occurs, within thirty (30) days following the occurrence of such Change of Control, the Issuer shall prepay the aggregate principal amount outstanding under the Note and any accrued interest or other amounts owing under the Note.  The Issuer will not, and will not permit any Subsidiary to, enter into any Contractual Obligation (other than this Note) that, directly or indirectly, restricts the ability of the Issuer or any Subsidiary to make such prepayment hereunder.

2.4 Interest

.

(a)Interest Rate.  Subject to paragraph (b) of this Section, the Note shall bear interest on the Principal Amount outstanding from time to time at a rate per annum equal to 1.00% until the fifth anniversary of the Closing Date, and the Applicable SOFR Rate plus 2.00% thereafter until the Maturity Date.  All interest hereunder shall be computed on the basis of the actual number of days in each interest period and a year of 365 or 366 days, as applicable, until the fifth anniversary of the Closing Date and computed in a manner determined by the Holder thereafter, based on prevailing customary market conventions for the use of the Applicable SOFR Rate in floating-rate debt instruments at the time of the announcement of the Applicable SOFR Rate.  Each interest period will be from, and including, the Closing Date, or from and including the most recent interest payment date to which interest has been paid or provided for, to, but excluding the next interest payment date.

(b)Default Interest.  If any amount payable by the Issuer or any Guarantor under this Note (including principal of the Note, interest, fees or other amount) is not paid when due, whether at stated maturity, upon acceleration or otherwise, such amount shall thereafter bear interest at a rate per annum equal to the applicable Default Rate.  While any Event of Default exists, the Issuer or any Guarantor shall pay interest on the principal amount of the Note outstanding hereunder at a rate per annum equal to the applicable Default Rate.

(c)Payment Dates.  Accrued interest on the Note shall be payable in arrears on the last Business Day of March and September of each year, beginning with September 30, 2020, and on the Maturity Date and at such other times as may be specified herein; provided that (i) interest accrued pursuant to paragraph (b) of this Section shall be payable on demand and (ii) in the event of any repayment or prepayment of the Note, accrued interest on the principal amount repaid or prepaid shall be payable on the date of such repayment or prepayment.

(d)SOFR Fallback.  If, at any time, the Holder or its designee determines that a Benchmark Transition Event has occurred with respect to the Applicable SOFR Rate or SOFR, or any successor rate, the Holder or its designee will designate a Benchmark Replacement and, as applicable, make Benchmark Conforming Changes in a manner consistent with the methodology set forth in the ARRC Fallback Provisions.  Any determination, decision or election that may be made by the Holder or its designee pursuant to this Section (d), and any decision to take or refrain from taking any action or making any determination, decision or election arising out of or relating to this Section (d), shall be conclusive and binding absent manifest error, may be made by the Holder or its designee in its sole discretion, and, notwithstanding anything to the contrary in this Note, shall become effective without the consent of the Issuer, any Guarantor or any other party.  Any terms used in this Section (d) but not defined in this Note shall be construed in a manner consistent with the ARRC Fallback Provisions.

2.5 Payments Generally

.

(a)Payments by Issuer.  All payments to be made by the Issuer hereunder shall be made without condition or deduction for any counterclaim, defense, recoupment or setoff.  Except as otherwise expressly provided herein, (i) for

2

Exhibit 10.2

so long as Treasury is the Holder of this Note, each payment under this Note shall be paid in immediately available funds by electronic funds transfer to the account of the United States Treasury maintained at the Federal Reserve Bank of New York specified by Treasury in a written notice to the Issuer, or to such other account as may be specified from time to time by Treasury in a written notice to the Issuer, or (ii) in the event that Treasury is not the Holder of this Note, then each payment under this Note shall be made in immediately available funds by electronic funds transfer to such account as shall be specified by the Holder in a written notice to the Issuer, in each case not later than 12:00 noon (Washington, D.C. time) on the date specified herein.  All amounts received by the Holder after such time on any date shall be deemed to have been received on the next succeeding Business Day and any applicable interest or fees shall continue to accrue.  If any payment to be made by the Issuer shall fall due on a day that is not a Business Day, payment shall be made on the next succeeding Business Day and such extension of time shall be reflected in computing interest or fees, as the case may be; provided that, if such next succeeding Business Day would fall after the Maturity Date, payment shall be made on the immediately preceding Business Day.  Except as otherwise expressly provided herein, all payments hereunder shall be made in Dollars.

(b)Application of Insufficient Payments.  If at any time insufficient funds are received by and available to the Holder to pay fully all amounts of principal, interest, fees and other amounts then due hereunder, such funds shall be applied (i) first, to pay interest, fees and other amounts then due hereunder, and (ii) second, to pay principal then due hereunder.

3REPRESENTATIONS AND WARRANTIES

The Issuer and each Guarantor represents and warrants to the Holder on the Closing Date and is deemed to represent and warrant to the Holder on any date on which the amount of the Note is increased pursuant to the terms hereof and in accordance with the PSP Agreement that:

3.1 Existence, Qualification and Power

.  The Issuer, each Guarantorand each Subsidiary (a) is duly organized or formed, validly existing and, as applicable, in good standing under the Laws of the jurisdiction of its incorporation or organization, (b) has all requisite power and authority and all requisite governmental licenses, authorizations, consents and approvals to (i) own or lease its assets and carry on its business and (ii) execute, deliver and perform its obligations under the Note, and (c) is duly qualified and is licensed and, as applicable, in good standing under the Laws of each jurisdiction where its ownership, lease or operation of properties or the conduct of its business requires such qualification or license, except, in each case referred to in clause (a) (other than with respect to the Issuer and each Guarantor), (b)(i) or (c), to the extent that failure to do so could not reasonably be expected to have a Material Adverse Effect.

3.2 Authorization; No Contravention

.  The execution, delivery and performance by the Issuer and each Guarantor of the Note have been duly authorized by all necessary corporate or other organizational action, and do not and will not (a) contravene the terms of its Organizational Documents, (b) conflict with or result in any breach or contravention of, or the creation of any Lien under, or require any payment to be made under (i) any material Contractual Obligation to which the Issuer or any Guarantor is a party or affecting the Issuer or any Guarantor or the material properties of the Issuer, any Guarantor or any Subsidiary or (ii) any material order, injunction, writ or decree of any Governmental Authority or any arbitral award to which the Issuer, the Guarantor or any Subsidiary or its property is subject or (c) violate any Law, except to the extent that such violation could not reasonably be expected to have a Material Adverse Effect.

3.3 Governmental Authorization; Other Consents

.  No approval, consent, exemption, authorization, or other action by, or notice to, or filing with, any Governmental Authority or any other Person is necessary or required in connection with the execution, delivery or performance by, or enforcement against, the Issuer or any Guarantor of this Note, except for such approvals, consents, exemptions, authorizations, actions or notices that have been duly obtained, taken or made and in full force and effect.

3.4 Execution and Delivery; Binding Effect

.  This Note has been duly executed and delivered by the Issuer and each Guarantor.  This Note constitutes a legal, valid and binding obligation of the Issuer and each Guarantor, enforceable against the Issuer and each Guarantor in accordance with its terms, except as such enforceability may be limited by bankruptcy, insolvency, reorganization, receivership, moratorium or other Laws affecting creditors’ rights generally and by general principles of equity.

4COVENANTS

Until all Obligations shall have been paid in full or until any later date as provided for in this Note, the Issuer covenants and agrees with the Holder that:

3

Exhibit 10.2

4.1 Notices

. The Issuer will promptly notify the Holder of the occurrence of any Default.

4.2 Guarantors

.  The Guarantors listed on the signature page to this Note hereby Guarantee the Guaranteed Obligations as set forth in Annex B.  If any Subsidiary (other than an Excluded Subsidiary) is formed or acquired after the Closing Date or if any Subsidiary ceases to be an Excluded Subsidiary, then the Issuer will cause such Subsidiary to become a Guarantor of this Note within 30 days of such Subsidiary being formed or acquired or of such Subsidiary ceasing to be an Excluded Subsidiary pursuant to customary documentation reasonably acceptable to the Holder and on the terms and conditions set forth in Annex B.

4.3 Pari Passu Ranking

.  The Obligations of the Issuer and any Guaranteed Obligations of any Guarantor under this Note shall be unsecured obligations of the Issuer and any Guarantor ranking pari passu with all existing and future senior unsecured Indebtedness of the Issuer or any Guarantor that is not subordinated in right of payment to the holder or lender of such Indebtedness.

5EVENTS OF DEFAULT

5.1 Events of Default

.  If any of the following events (each, an “Event of Default”) shall occur:

(a)the Issuer shall fail to pay any principal of the Note when and as the same shall become due and payable, whether at the due date thereof or at a date fixed for prepayment thereof or otherwise;

(b)the Issuer shall fail to pay any interest on the Note, or any fee or any other amount (other than an amount referred to in clause (a) of this Section) payable under this Note, when and as the same shall become due and payable, and such failure shall continue unremedied for a period of two (2) or more Business Days;

(c)any representation or warranty made or deemed made by or on behalf of the Issuer or any Guarantor, including those made prior to the Closing Date, in or in connection with this Note or any amendment or modification hereof, or any waiver hereunder, or in the PSP Agreement, or in any report, certificate, financial statement or other document furnished pursuant to or in connection with this Note, the PSP Agreement or the PSP Application or any amendment or modification hereof or thereof, or any waiver hereunder or thereunder, shall prove to have been incorrect in any material respect (or, in the case of any such representation or warranty under this Note already qualified by materiality, such representation or warranty shall prove to have been incorrect) when made or deemed made;

(d)the Issuer shall fail to observe or perform any covenant, condition or agreement contained in Section 4.1;

(e)the Issuer or any Guarantor shall fail to observe or perform any covenant, condition or agreement contained in this Note (other than those specified in clause (a), (b) or (d) of this Section) and such failure shall continue unremedied for a period of 30 or more days after notice thereof by the Holder to the Issuer;

(f)(i) the Issuer or any Guarantor shall default in the performance of any obligation relating to any Indebtedness (other than Indebtedness under the Note) having an aggregate principal amount equal to or greater than $30,000,000 (“Material Indebtedness”) and any applicable grace periods shall have expired and any applicable notice requirements shall have been complied with, and as a result of such default the holder or holders of such Material Indebtedness or any trustee or agent on behalf of such holder or holders shall have caused such Material Indebtedness to become due prior to its scheduled final maturity date or (ii) the Issuer or any Guarantor shall default in the payment of the outstanding principal amount due on the scheduled final maturity date of any Indebtedness outstanding under one or more agreements of the Issuer or any Guarantor, any applicable grace periods shall have expired and any applicable notice requirements shall have been complied with and such failure to make payment when due shall be continuing for a period of more than five (5) consecutive Business Days following the applicable scheduled final maturity date or the applicable grace period thereunder, in an aggregate principal amount at any single time unpaid exceeding $30,000,000;

(g)an involuntary proceeding shall be commenced or an involuntary petition shall be filed seeking (i) liquidation, reorganization or other relief in respect of the Issuer, any Guarantor or any Subsidiary or its debts, or of a substantial part of its assets, under any Debtor Relief Law now or hereafter in effect or (ii) the appointment of a receiver, trustee, custodian, sequestrator, conservator or similar official for the Issuer or any of its Subsidiaries or for a substantial part of its assets, and, in any such case, such proceeding or petition shall continue undismissed for a period of 60 or more days or an order or decree approving or ordering any of the foregoing shall be entered;

(h)the Issuer, any Guarantor or any Subsidiary shall (i) voluntarily commence any proceeding or file any petition seeking liquidation, reorganization or other relief under any Debtor Relief Law now or hereafter in effect, (ii) consent to the institution of, or fail to contest in a timely and appropriate manner, any proceeding or petition described in

4

Exhibit 10.2

clause (g) of this Section, (iii) apply for or consent to the appointment of a receiver, trustee, custodian, sequestrator, conservator or similar official for the Issuer, any Guarantor or any Subsidiary or for a substantial part of its assets, (iv) file an answer admitting the material allegations of a petition filed against it in any such proceeding or (v) make a general assignment for the benefit of creditors;

(i)the Issuer, any Guarantor or any Subsidiary shall become unable, admit in writing its inability or fail generally to pay its debts as they become due;

(j)there is entered against the Issuer, any Guarantor or any Subsidiary (i) a final judgment or order for the payment of money in an aggregate amount (as to all such judgments and orders) exceeding an amount equal to or greater than $$30,000,000 (to the extent not covered by independent third-party insurance as to which the insurer has been notified of such judgment or order and has not denied or failed to acknowledge coverage), or (ii) a non-monetary final judgment or order that, either individually or in the aggregate, has or could reasonably be expected to have a Material Adverse Effect and, in either case, (A) enforcement proceedings are commenced by any creditor upon such judgment or order, or (B) there is a period of 30 consecutive days during which a stay of enforcement of such judgment, by reason of a pending appeal or otherwise, is not in effect; or

(k)any material provision of the Note, at any time after its execution and delivery and for any reason other than as expressly permitted hereunder or satisfaction in full of all Obligations, ceases to be in full force and effect; or the Issuer, any Guarantor or any other Person contests in writing the validity or enforceability of any provision of the Note; or the Issuer or any Guarantor denies in writing that it has any or further liability or obligation under the Note, or purports in writing to revoke, terminate or rescind the Note;

then, and in every such event (other than an event with respect to the Issuer or any Guarantor described in clause (g) or (h) of this Section), and at any time thereafter during the continuance of such event, the Holder may, by notice to the Issuer, take any or all of the following actions, at the same or different times:

(i) declare any amounts then outstanding under the Note to be due and payable in whole (or in part, in which case any principal not so declared to be due and payable may thereafter be declared to be due and payable), and thereupon the principal of the Note so declared to be due and payable, together with accrued interest thereon and all fees and other Obligations of the Issuer accrued hereunder, shall become due and payable immediately, without presentment, demand, protest or other notice of any kind, all of which are hereby waived by the Issuer and any Guarantor; and

(ii) exercise on all rights and remedies available to it under the Note and Applicable Law;

provided that, in case of any event with respect to the Issuer or any Guarantor described in clause (g) or (h) of this Section, the principal of the Note then outstanding, together with accrued interest thereon and all fees and other Obligations accrued hereunder, shall automatically become due and payable, in each case without presentment, demand, protest or other notice of any kind, all of which are hereby waived by the Issuer and any Guarantor.

6MISCELLANEOUS

6.1 Notices

.

(a)Notices Generally.  Except in the case of notices and other communications expressly permitted to be given by telephone (and except as provided in paragraph (b) below), all notices and other communications provided for herein shall be in writing and shall be delivered by hand or overnight courier service, mailed by certified or registered mail or sent by email as follows:

if to the Issuer or any Guarantor, to Atlas Air Worldwide Holdings, Inc., Attention of Adam R. Kokas (Telephone No. (914)701-8333; Email: Adam.Kokas@AtlasAir.com),

with a copy to (which copy alone shall not constitute notice): Cravath, Swaine & Moore LLP, Attention of Damien R. Zoubek, Esq. and Jenny Hochenberg, Esq. (Email: dzoubek@cravath.com, jhochenberg@cravath.com);

(i) if to the Holder, to the Department of the Treasury at 1500 Pennsylvania Avenue, NW, Washington, D.C. 20220, Attention of Assistant General Counsel (Banking and Finance) (Telephone No. 202-622-0283; Email: eric.froman@treasury.gov); and

Notices sent by hand or overnight courier service, or mailed by certified or registered mail, shall be deemed to have been given when received.  Notices delivered through electronic communications, to the extent provided in paragraph (b) below, shall be effective as provided in said paragraph (b).

5

Exhibit 10.2

(b)Electronic Communications.  Notices and other communications to the Holder hereunder may be delivered or furnished by electronic communication (including e‑mail, FpML, and Internet or intranet websites) pursuant to procedures approved by the Holder.  The Holder, the Issuer or any Guarantor may, in its discretion, agree to accept notices and other communications to it hereunder by electronic communications pursuant to procedures approved by it; provided that approval of such procedures may be limited to particular notices or communications.

Unless the Holder otherwise prescribes, (i) notices and other communications sent to an e-mail address shall be deemed received upon the sender’s receipt of an acknowledgement from the intended recipient (such as by return e-mail or other written acknowledgement), and (ii) notices or communications posted to an Internet or intranet website shall be deemed received upon the deemed receipt by the intended recipient, at its e-mail address as described in the foregoing clause (i), of notification that such notice or communication is available and identifying the website address therefor; provided that, for both clauses (i) and (ii) above, if such notice, email or other communication is not sent during the normal business hours of the recipient, such notice or communication shall be deemed to have been sent at the opening of business on the next Business Day.

6.2 Waivers; Amendments

.

(a)No Waiver; Remedies Cumulative; Enforcement.  No failure or delay by the Holder in exercising any right, remedy, power or privilege hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any such right, remedy, power or privilege, or any abandonment or discontinuance of steps to enforce such a right remedy, power or privilege, preclude any other or further exercise thereof or the exercise of any other right remedy, power or privilege.  The rights, remedies, powers and privileges of the Holder hereunder and under the Note are cumulative and are not exclusive of any rights, remedies, powers or privileges that any such Person would otherwise have.  

(b)Amendments, Etc.  Except as otherwise expressly set forth in this Note, no amendment or waiver of any provision of this Note, and no consent to any departure by the Issuer therefrom, shall be effective unless in writing executed by the Issuer and the Holder, and each such waiver or consent shall be effective only in the specific instance and for the specific purpose for which given.

6.3 Expenses; Indemnity; Damage Waiver

.

(a)Costs and Expenses.  The Issuer shall pay (i) all reasonable out‑of‑pocket expenses incurred by the Holder (including the reasonable fees, charges and disbursements of any counsel for the Holder) in connection with the preparation, negotiation, execution, delivery and administration of this Note and the PSP Agreement, any other agreements or documents executed in connection herewith or therewith, or any amendments, modifications or waivers of the provisions hereof or thereof (whether or not the transactions contemplated hereby or thereby shall be consummated), and (ii) all out‑of‑pocket expenses incurred by the Holder (including the fees, charges and disbursements of any counsel for the Holder), in connection with the enforcement or protection of its rights in connection with this Note and the PSP Agreement, any other agreements or documents executed in connection herewith or therewith, or any amendments, modifications or waivers of the provisions hereof or thereof (whether or not the transactions contemplated hereby or thereby shall be consummated), including all such out‑of‑pocket expenses incurred during any workout, restructuring, negotiations or enforcement in respect of such Note, PSP Agreement and other agreements or documents executed in connection herewith or therewith.

(b)Indemnification by the Issuer.  The Issuer shall indemnify the Holder and each of its Related Parties (each such Person being called an “Indemnitee”) against, and hold each Indemnitee harmless from, any and all losses, claims, damages, liabilities, obligations, penalties, fines, settlements, judgments, disbursements and related costs and expenses (including the fees, charges and disbursements of any counsel for any Indemnitee), and shall indemnify and hold harmless each Indemnitee from all fees and time charges and disbursements for attorneys who may be employees of any Indemnitee, incurred by any Indemnitee or asserted against any Indemnitee by any Person (including the Issuer) arising out of, in connection with, or as a result of (i) the execution or delivery of this Note or any agreement or instrument contemplated hereby, the performance by the Issuer or any Guarantor of its obligations hereunder or the consummation of the transactions contemplated hereby, (ii) the Note or the use or proposed use of the proceeds therefrom, or (iii) any actual or prospective claim, litigation, investigation or proceeding relating to any of the foregoing, whether based on contract, tort or any other theory, whether brought by a third party or by the Issuer or any Guarantor, and regardless of whether any Indemnitee is a party thereto.

(c)Waiver of Consequential Damages, Etc.  To the fullest extent permitted by Applicable Law, the Issuer and any Guarantor shall not assert, and hereby waives, any claim against any Indemnitee, on any theory of liability, for special, indirect, consequential or punitive damages (as opposed to direct or actual damages) arising out of, in connection with, or as a result of, this Note or any agreement or instrument contemplated hereby, the transactions contemplated

6

Exhibit 10.2

hereby, or the use of the proceeds thereof.  No Indemnitee referred to in paragraph (b) above shall be liable for any damages arising from the use by unintended recipients of any information or other materials distributed by it through telecommunications, electronic or other information transmission systems in connection with this Note or the transactions contemplated hereby.

(d)Payments.  All amounts due under this Section shall be payable not later than five  (5) days after demand therefor.

(e)Survival.  Each party’s obligations under this Section shall survive the termination of the Note and payment of the obligations hereunder.

6.4 Successors and Assigns

.  Neither the Issuer nor any Guarantor may assign or transfer this Note or any of its rights or obligations hereunder and any purported assignment or transfer in violation of this Note shall be void.  Holder may assign or participate a portion or all of its rights under this Note at any time in compliance with all Applicable Laws.  This Note shall inure to the benefit of and be binding upon Issuer, any Guarantor and Holder and their permitted successors and assigns.  Any Holder that assigns, or sells participations in, any portion of the Note will take such actions as are necessary for the Note and such portion to be in “registered form” (within the meaning of Treasury Regulations Section 5f.103-1).

6.5 Counterparts; Integration; Effectiveness

.  This Note and any amendments, waivers, consents or supplements hereto may be executed in counterparts, each of which shall constitute an original, but all taken together shall constitute a single contract. This Note constitutes the entire contract between Issuer, any Guarantor and the Holder with respect to the subject matter hereof and supersede all previous agreements and understandings, oral or written, with respect thereto.  Notwithstanding anything herein to the contrary, delivery of an executed counterpart of a signature page of this Note by electronic means shall be effective as delivery of a manually executed counterpart of this Note.

6.6 Severability

.  If any term or provision of this Note is invalid, illegal or unenforceable in any jurisdiction, such invalidity, illegality or unenforceability shall not affect any other term or provision of this Note or invalidate or render unenforceable such term or provision in any other jurisdiction.  

6.7 Right of Setoff

.  If an Event of Default shall have occurred and be continuing, the Holder is hereby authorized at any time and from time to time, to the fullest extent permitted by Applicable Law, to set off and apply any and all deposits (general or special, time or demand, provisional or final, in whatever currency) at any time held, and other obligations (in whatever currency) at any time owing, by the Holder, to or for the credit or the account of the Issuer against any and all of the due and unpaid Obligations of the Issuer now or hereafter existing under this Note to the Holder, irrespective of whether or not the Holder shall have made any demand under this Note.  The rights of the Holder under this Section are in addition to other rights and remedies (including other rights of setoff) that the Holder may have.  The Holder agrees to notify the Issuer promptly after any such setoff and application; provided that the failure to give such notice shall not affect the validity of such setoff and application.

6.8 Governing Law; Jurisdiction; Etc

.  This Note will be governed by and construed in accordance with the federal law of the United States if and to the extent such law is applicable, and otherwise in accordance with the laws of the State of New York applicable to contracts made and to be performed entirely within such State.  Each of the Issuer, any Guarantor and the Holder agrees (a) to submit to the exclusive jurisdiction and venue of the United States District Court for the District of Columbia for any civil action, suit or proceeding arising out of or relating to this Note or the transactions contemplated hereby, and (b) that notice may be served upon the Issuer, any Guarantor or the Holder at the applicable address in Section 6.1 hereof (or upon any Holder that is not Treasury at an address provided by such Holder to Issuer in writing).  To the extent permitted by Applicable Law, each of the Issuer, any Guarantor and the Holder hereby unconditionally waives trial by jury in any civil legal action or proceeding relating to the Note or the transactions contemplated hereby.

6.9 Headings

.  Section headings used herein are for convenience of reference only, are not part of this Note and shall not affect the construction of, or be taken into consideration in interpreting, this Note.

7

Exhibit 10.2

IN WITNESS WHEREOF, the Issuer and each Guarantor have executed this Note as of the day and year written below.

ATLAS AIR WORLDWIDE HOLDINGS, INC.
as Issuer

By /s/ Spencer Schwartz
Name:  Spencer Schwartz
Title:  Executive Vice President & Chief Financial Officer
Date: May 29, 2020

ATLAS AIR, INC.
as Guarantor

By /s/ Spencer Schwartz
Name:  Spencer Schwartz
Title:  Executive Vice President & Chief Financial Officer
Date: May 29, 2020

SOUTHERN AIR INC.
as Guarantor

By /s/ Spencer Schwartz
Name:  Spencer Schwartz
Title:  Executive Vice President & Chief Financial Officer
Date: May 29, 2020

Exhibit 10.2

ANNEX A

DEFINITIONS

“Affiliate” means any Person that directly or indirectly Controls, is Controlled by, or is under common Control with, the Issuer.

“Applicable Law” means, as to any Person, all applicable Laws binding upon such Person or to which such a Person is subject.

“Applicable SOFR Rate” means a rate of interest based on SOFR that shall be determined by the Holder and publicly announced by the Holder on or prior to the fifth anniversary of the Closing Date and shall, to the extent reasonably practicable, be based on customary market conventions as in effect at the time of such announcement.  In no event will the Applicable SOFR Rate be less than 0.00% per annum.

“ARRC Fallback Provisions” means the Fallback Language for New Issuances of LIBOR Floating Rate Notes set forth in the ARRC Recommendations Regarding More Robust Fallback Language for New Issuances of LIBOR Floating Rate Notes, dated April 25, 2019.

“ASU” means the Accounting Standards Update 2016-02, Leases (Topic 842) by the Financial Accounting Standards Board issued on February 25, 2016.

“Beneficial Owner” has the meaning assigned to such term in Rule 13d-3 and Rule 13d-5 under the Exchange Act, except that in calculating the beneficial ownership of any particular “person” (as that term is used in Section 13(d)(3) of the Exchange Act), such “person” will be deemed to have beneficial ownership of all securities that such “person” has the right to acquire by conversion or exercise of other securities, whether such right is currently exercisable or is exercisable only after the passage of time. The terms “Beneficially Owns” and “Beneficially Owned” have a corresponding meaning.

“Business Day” means any on which Treasury and the Federal Reserve Bank of New York are both open for business.

“Capitalized Lease Obligations” means, at the time any determination thereof is to be made, the amount of the liability in respect of a Capitalized Lease that would at such time be required to be capitalized and reflected as a liability on a balance sheet (excluding the footnotes thereto) prepared in accordance with GAAP; provided that all leases of such Person that are or would have been treated as operating leases for purposes of GAAP prior to the issuance of the ASU shall continue to be accounted for as operating leases for purposes of all financial definitions and calculations for purposes of this Note (whether or not such operating lease obligations were in effect on such date) notwithstanding the fact that such obligations are required in accordance with the ASU (on a prospective or retroactive basis or otherwise) to be treated as capitalized lease obligations for other purposes.

“Capitalized Leases” means all leases that have been or should be, in accordance with GAAP as in effect on the Closing Date, recorded as capitalized leases; provided that for all purposes hereunder the amount of obligations under any Capitalized Lease shall be the amount thereof accounted for as a liability in accordance with GAAP; provided, further, that all leases of such Person that are or would have been treated as operating leases for purposes of GAAP prior to the issuance of the ASU shall continue to be accounted for as operating leases for purposes of all financial definitions and calculations for purposes of this Note (whether or not such operating lease obligations were in effect on such date) notwithstanding the fact that such obligations are required in accordance with the ASU (on a prospective or retroactive basis or otherwise) to be treated as capitalized lease obligations for other purposes.

“CARES Act” has the meaning specified in the preamble to this Note.

“Change of Control” means the occurrence of any of the following: (a) the sale, lease, transfer, conveyance or other disposition (other than by way of merger or consolidation), in one or a series of related transactions, of all or substantially all of the properties or assets of the Issuer and its Subsidiaries, or if the Issuer is a Subsidiary of any Guarantor, such Guarantor (the “Parent Guarantor”) and its Subsidiaries, taken as a whole to any Person (including any “person” (as that term is used in Section 13(d)(3) of the Exchange Act)); or (b) the consummation of any transaction (including, without limitation, any merger or consolidation), the result of which is that any Person (including any “person” (as defined above)) becomes the Beneficial Owner, directly or indirectly, of more than 50% of the Voting Stock of the Issuer or Parent Guarantor, as applicable, (measured by voting power rather than number of shares), other than (i) any such transaction where the Voting Stock of the Issuer or Parent Guarantor, as applicable,

Annex A-1

Exhibit 10.2

(measured by voting power rather than number of shares) outstanding immediately prior to such transaction constitutes or is converted into or exchanged for at least a majority of the outstanding shares of the Voting Stock of such Beneficial Owner (measured by voting power rather than number of shares), or (ii) any merger or consolidation of the Issuer or Parent Guarantor, as applicable, with or into any Person (including any “person” (as defined above)) which owns or operates (directly or indirectly through a contractual arrangement) a Permitted Business (a “Permitted Person”) or a Subsidiary of a Permitted Person, in each case, if immediately after such transaction no Person (including any “person” (as defined above)) is the Beneficial Owner, directly or indirectly, of more than 50% of the total Voting Stock of such Permitted Person (measured by voting power rather than number of shares).

“Closing Date” means the date set forth on the Issuer’s and each Guarantor’s signature page to this Note.

“Contractual Obligation” means, as to any Person, any provision of any security issued by such Person or of any agreement, instrument or other undertaking to which such Person is a party or by which it or any of its property is bound.

“Control” means the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of a Person, whether through the ability to exercise voting power, by contract or otherwise.  “Controlling” and “Controlled” have meanings analogous thereto.

“Debtor Relief Laws” means the Bankruptcy Code of the United States of America, and all other liquidation, conservatorship, bankruptcy, assignment for the benefit of creditors, moratorium, rearrangement, receivership, insolvency, reorganization, or similar debtor relief Laws of the United States or other applicable jurisdictions from time to time in effect.

“Default” means any event or condition that constitutes an Event of Default or that, with the giving of any notice, the passage of time, or both, would be an Event of Default.

“Default Rate” means an interest rate (before as well as after judgment) equal to the interest rate on the Note plus 2.00% per annum.

“Disqualified Equity Interest” means any equity interest that, by its terms (or the terms of any security or other equity interests into which it is convertible or for which it is exchangeable), or upon the happening of any event or condition (a) matures or is mandatorily redeemable (other than solely for equity interests that are not Disqualified Equity Interests), pursuant to a sinking fund obligation or otherwise (except as a result of a change of Control or asset sale so long as any rights of the holders thereof upon the occurrence of a change of Control or asset sale event shall be subject to the prior repayment in full of the Note and all other Obligations that are accrued and payable), (b) is redeemable at the option of the holder thereof, in whole or in part, (c) provides for scheduled payments of dividends in cash, or (d) is or becomes convertible into or exchangeable for Indebtedness or any other equity interests that would constitute Disqualified Equity Interests, in each case, prior to the date that is ninety-one days after the Maturity Date; provided that if such equity interests are issued pursuant to a plan for the benefit of employees of the Issuer or any Subsidiary or by any such plan to such employees, such equity interests shall not constitute Disqualified Equity Interests solely because they may be required to be repurchased by the Issuer or its Subsidiaries in order to satisfy applicable statutory or regulatory obligations or as a result of such employee’s termination, death or disability.

“Dollar” and “$” mean lawful money of the United States.

“Event of Default” has the meaning specified in Section 5.

“Exchange Act” shall mean the Securities Exchange Act of 1934, as amended.

“Excluded Subsidiary” means any Subsidiary of the Issuer that is not an obligor in respect of any Material Indebtedness that is unsecured of the Issuer or any of its Subsidiaries, unless such Subsidiary is required to be an obligor under any agreement, instrument or other document relating to any Material Indebtedness that is unsecured of the Issuer or any of its Subsidiaries.

“GAAP” means United States generally accepted accounting principles as in effect as of the date of determination thereof.  Notwithstanding any other provision contained herein, (a) all terms of an accounting or financial nature used herein shall be construed, and all computations of amounts and ratios referred to herein shall be made, without giving effect to any election under FASB Accounting Standards Codification 825-Financial Instruments, or any successor thereto (including pursuant to the FASB Accounting Standards Codification), to value any Indebtedness of any

Annex A-2

Exhibit 10.2

subsidiary at “fair value,” as defined therein and (b) the amount of any Indebtedness under GAAP with respect to Capitalized Lease Obligations shall be determined in accordance with the definition of Capitalized Lease Obligations.

“Governmental Authority” means the government of the United States of America or any other nation, or of any political subdivision thereof, whether state or local, and any agency, authority, instrumentality, regulatory body, court, central bank or other entity exercising executive, legislative, judicial, taxing, regulatory or administrative powers or functions of or pertaining to government (including any supra-national bodies such as the European Union or the European Central Bank).

“Guarantee” means, as to any Person, (a) any obligation, contingent or otherwise, of such Person guaranteeing or having the economic effect of guaranteeing any Indebtedness or other obligation payable or performable by another Person (the “primary obligor”) in any manner, whether directly or indirectly, and including any obligation of such Person, direct or indirect, (i) to purchase or pay (or advance or supply funds for the purchase or payment of) such Indebtedness or other obligation, (ii) to purchase or lease property, securities or services for the purpose of assuring the obligee in respect of such Indebtedness or other obligation of the payment or performance of such Indebtedness or other obligation, (iii) to maintain working capital, equity capital or any other financial statement condition or liquidity or level of income or cash flow of the primary obligor so as to enable the primary obligor to pay such Indebtedness or other obligation or (iv) entered into for the purpose of assuring in any other manner the obligee in respect of such Indebtedness or other obligation of the payment or performance thereof or to protect such obligee against loss in respect thereof (in whole or in part) or (b) any Lien on any assets of such Person securing any Indebtedness or other obligation of any other Person, whether or not such Indebtedness or other obligation is assumed by such Person (or any right, contingent or otherwise, of any holder of such Indebtedness to obtain any such Lien); provided that the term “Guarantee” shall not include endorsements for collection or deposit in the ordinary course of business.  The amount of any Guarantee shall be deemed to be an amount equal to the stated or determinable amount of the related primary obligation, or portion thereof, in respect of which such Guarantee is made or, if not stated or determinable, the maximum reasonably anticipated liability in respect thereof as determined by the guaranteeing Person in good faith.  The term “Guarantee” as a verb has a corresponding meaning.

“Guaranteed Obligations” has the meaning specified in Annex B.

“Guarantor” means each Guarantor listed on the signature page to this Note and any other Person that Guarantees this Note.

“Holder” means the United States Department of the Treasury or its designees or any other Person that shall have rights pursuant to an assignment hereunder.

“Indebtedness” means, as to any Person at a particular time, without duplication, all of the following, whether or not included as indebtedness or liabilities in accordance with GAAP: (a) all obligations of such Person for borrowed money and all obligations of such Person evidenced by bonds, debentures, notes, loan agreements or other similar instruments; (b) all direct or contingent obligations of such Person arising under (i) letters of credit (including standby and commercial), bankers’ acceptances and bank guaranties and (ii) surety bonds, performance bonds and similar instruments issued or created by or for the account of such Person; (c) net obligations of such Person under any swap contract; (d) all obligations of such Person to pay the deferred purchase price of property or services (other than trade accounts payable in the ordinary course of business); (e) indebtedness (excluding prepaid interest thereon) secured by a Lien on property owned or being purchased by such Person (including indebtedness arising under conditional sales or other title retention agreements), whether or not such indebtedness shall have been assumed by such Person or is limited in recourse; (f) attributable indebtedness in respect of any Capitalized Lease Obligation and any synthetic lease obligation of any Person; (g) all obligations of such Person in respect of Disqualified Equity Interests; and (h) all Guarantees of such Person in respect of any of the foregoing.  For all purposes hereof, the Indebtedness of any Person shall include the Indebtedness of any partnership or joint venture (other than a joint venture that is itself a corporation or limited liability company) in which such Person is a general partner or a joint venturer, unless such Indebtedness is expressly made non-recourse to such Person.  The amount of any net obligation under any swap contract on any date shall be deemed to be the swap termination value thereof as of such date.  The amount of any Indebtedness of any Person for purposes of clause (e) that is expressly made non-recourse or limited-recourse (limited solely to the assets securing such Indebtedness) to such Person shall be deemed to be equal to the lesser of (i) the aggregate principal amount of such Indebtedness and (ii) the fair market value of the property encumbered thereby as determined by such Person in good faith.

“Indemnitee” has the meaning specified in Section 6.3(b).

Annex A-3

Exhibit 10.2

“Issuer” has the meaning specified in the preamble to this Note.

“Laws” means, collectively, all international, foreign, federal, state and local statutes, treaties, rules, guidelines, regulations, ordinances, codes and administrative or judicial precedents or authorities, including the interpretation or administration thereof by any Governmental Authority charged with the enforcement, interpretation or administration thereof, and all applicable administrative orders, directed duties, requests, licenses, authorizations and permits of, and agreements with, any Governmental Authority, in each case whether or not having the force of law.

“Lien” means any mortgage, pledge, hypothecation, collateral assignment, deposit arrangement, encumbrance, lien (statutory or other), charge, or preference, priority or other security interest or preferential arrangement of any kind or nature whatsoever (including any conditional sale or other title retention agreement, any easement, right of way or other encumbrance on title to real property, and any financing lease having substantially the same economic effect as any of the foregoing).

“Material Adverse Effect” means (a) a material adverse change in, or a material adverse effect on, the operations, business, properties, liabilities (actual or contingent), condition (financial or otherwise) or prospects of the Issuer and its Subsidiaries taken as a whole; or (b) a material adverse effect on (i) the ability of the Issuer or any Guarantor to perform its Obligations, (ii) the legality, validity, binding effect or enforceability against the Issuer or any Guarantors of the Note or (iii) the rights, remedies and benefits available to, or conferred upon, the Holder under the Note.

“Material Indebtedness” has the meaning specified in Section 5.1(f).

“Maturity Date” means the date that is ten years after the Closing Date (except that, if such date is not a Business Day, the Maturity Date shall be the next preceding Business Day).

“Note” has the meaning specified in the preamble to this Note.

“Obligations” means all advances to, and debts, liabilities, obligations, covenants and duties of, the Issuer arising under or otherwise with respect to the Note, whether direct or indirect (including those acquired by assumption), absolute or contingent, due or to become due, now existing or hereafter arising and including interest and fees that accrue after the commencement by or against the Issuer or any Affiliate thereof of any proceeding under any Debtor Relief Laws naming such Person as the debtor in such proceeding, regardless of whether such interest and fees are allowed claims in such proceeding.  Without limiting the foregoing, the Obligations include (a) the obligation to pay principal, interest, charges, expenses, fees, indemnities and other amounts payable by the Issuer under the Note and (b) the obligation of the Issuer to reimburse any amount in respect of any of the foregoing that the Holder, in each case in its sole discretion, may elect to pay or advance on behalf of the Issuer.

“Obligee Guarantor” has the meaning specified in Annex B.

“Organizational Documents” means (a) as to any corporation, the charter or certificate or articles of incorporation and the bylaws (or equivalent or comparable constitutive documents with respect to any non-U.S. jurisdiction), (b) as to any limited liability company, the certificate or articles of formation or organization and operating or limited liability agreement and (c) as to any partnership, joint venture, trust or other form of business entity, the partnership, joint venture or other applicable agreement of formation or organization and any agreement, instrument, filing or notice with respect thereto filed in connection with its formation or organization with the applicable Governmental Authority in the jurisdiction of its formation or organization and, if applicable, any certificate or articles of formation or organization of such entity.

“Permitted Business” means any business that is the same as, or reasonably related, ancillary, supportive or complementary to, the business in which the Issuer and its Subsidiaries are engaged on the date of this Note.

“Person” means any natural person, corporation, limited liability company, trust, joint venture, association, company, partnership, Governmental Authority or other entity.

“Principal Amount” has the meaning specified in the preamble to this Note.

“PSP Agreement” has the meaning specified in the preamble to this Note.

“PSP Application” means the application form and any related materials submitted by the Issuer to Treasury in connection with an application for financial assistance under Division A, Title IV, Subtitle B of the CARES Act.

Annex A-4

Exhibit 10.2

“Related Parties” means, with respect to any Person, such Person’s Affiliates and the agents, advisors and representatives of such Person and of such Person’s Affiliates.

“SOFR” means the secured overnight financing rate published by the Federal Reserve Bank of New York, as administrator of the benchmark (or a successor administrator) on the Federal Reserve Bank of New York’s (or such successor’s) website.

“Subsidiary” of a Person means a corporation, partnership, limited liability company, association or joint venture or other business entity of which a majority of the equity interests having ordinary voting power for the election of directors or other governing body (other than securities or interests having such power only by reason of the happening of a contingency) are at the time owned or the management of which is Controlled, directly, or indirectly through one or more intermediaries, by such Person.  Unless otherwise specified, all references herein to a “Subsidiary” or to “Subsidiaries” shall refer to a Subsidiary or Subsidiaries of the Issuer.

“Treasury” has the meaning specified in the preamble to this Note.

“United States” and “U.S.” mean the United States of America.

“Voting Stock” of any specified Person as of any date means the equity interests of such Person that is at the time entitled to vote in the election of the board of directors of such Person.

Annex A-5

Exhibit 10.2

ANNEX B

GUARANTEE

1. Guarantee of the Obligations

.  Each Guarantor jointly and severally hereby irrevocably and unconditionally guarantees to the Holder, the due and punctual payment in full of all Obligations (or such lesser amount as agreed by the Holder in its sole discretion) when the same shall become due, whether at stated maturity, by required prepayment, declaration, acceleration, demand or otherwise (including amounts that would become due but for the operation of the automatic stay under Section 362(a) of the Bankruptcy Code, 11 U.S.C. § 362(a)) (collectively, the “Guaranteed Obligations”).

2. Payment by a Guarantor

.  Each Guarantor hereby jointly and severally agrees, in furtherance of the foregoing and not in limitation of any other right which the Holder may have at law or in equity against any Guarantor by virtue hereof, that upon the failure of the Issuer to pay any of the Guaranteed Obligations when and as the same shall become due, whether at stated maturity, by required prepayment, declaration, acceleration, demand or otherwise (including amounts that would become due but for the operation of the automatic stay under Section 362(a) of the Bankruptcy Code, 11 U.S.C. § 362(a)), such Guarantor will upon demand pay, or cause to be paid, in cash, to the Holder an amount equal to the sum of the unpaid principal amount of all Guaranteed Obligations then due as aforesaid, accrued and unpaid interest on such Guaranteed Obligations (including interest which, but for the Issuer’s becoming the subject of a case under the Bankruptcy Code, would have accrued on such Guaranteed Obligations, whether or not a claim is allowed against the Issuer for such interest in the related bankruptcy case) and all other Guaranteed Obligations then owed to the Holder as aforesaid.

3. Liability of Guarantors Absolute

.  Each Guarantor agrees that its obligations hereunder are irrevocable, absolute, independent and unconditional and shall not be affected by any circumstance which constitutes a legal or equitable discharge of a guarantor or surety other than payment in full of the Guaranteed Obligations.  In furtherance of the foregoing and without limiting the generality thereof, each Guarantor agrees as follows:

(a)this Guarantee is a guarantee of payment when due and not of collectability;

(b)the Holder may enforce this Guarantee upon the occurrence of an Event of Default notwithstanding the existence of any dispute between the Issuer and the Holder with respect to the existence of such Event of Default;

(c)a separate action or actions may be brought and prosecuted against such Guarantor whether or not any action is brought against the Issuer or any other Guarantors and whether or not Issuer or such Guarantors are joined in any such action or actions;

(d)payment by any Guarantor of a portion, but not all, of the Guaranteed Obligations shall in no way limit, affect, modify or abridge any other Guarantor’s liability for any portion of the Guaranteed Obligations which has not been paid;  

(e)the Holder, upon such terms as it deems appropriate, without notice or demand and without affecting the validity or enforceability hereof or giving rise to any reduction, limitation, impairment, discharge or termination of any Guarantor’s liability hereunder, from time to time may (i) renew, extend, accelerate, increase the rate of interest on, or otherwise change the time, place, manner or terms of payment of the Guaranteed Obligations; (ii) settle, compromise, release or discharge, or accept or refuse any offer of performance with respect to, or substitutions for, the Guaranteed Obligations or subordinate the payment of the same to the payment of any other obligations; (iii) release, surrender, exchange, substitute, compromise, settle, rescind, waive, alter, subordinate or modify, with or without consideration, any security for payment of the Guaranteed Obligations, any other guarantees of the Guaranteed Obligations, or any other obligation of any Person (including any other Guarantor) with respect to the Guaranteed Obligations; and (iv) enforce its rights and remedies even though such action may operate to impair or extinguish any right of reimbursement or subrogation or other right or remedy of any Guarantor against the Issuer or any security for the Guaranteed Obligations; and

(f)this Guarantee and the obligations of each Guarantor hereunder shall be valid and enforceable and shall not be subject to any reduction, limitation, impairment, discharge or termination for any reason (other than payment in full of the Guaranteed Obligations), including the occurrence of any of the following:  (i) any failure, delay or omission to assert or enforce or agreement or election not to assert or enforce, or the stay or enjoining, by order of court, by operation of law or otherwise, of the exercise or enforcement of, any claim or demand or any right, power or remedy

Annex B-1

Exhibit 10.2

with respect to the Guaranteed Obligations, or with respect to any security for the payment of the Guaranteed Obligations; (ii) any rescission, waiver, amendment or modification of, or any consent to departure from, any of the terms or provisions hereof; (iii) the Guaranteed Obligations, or any agreement relating thereto, at any time being found to be illegal, invalid or unenforceable in any respect; (iv) the Holder’s consent to the change, reorganization or termination of the corporate structure or existence of the Issuer or any of its Subsidiaries and to any corresponding restructuring of the Guaranteed Obligations; (v) any defenses, set‑offs or counterclaims which the Issuer or any Guarantor may allege or assert against the Holder in respect of the Guaranteed Obligations, including failure of consideration, lack of authority, validity or enforceability, breach of warranty, payment, statute of frauds, statute of limitations, accord and satisfaction and usury; and (vi) any other event or circumstance that  might in any manner vary the risk of any Guarantor as an obligor in respect of the Guaranteed Obligations.

4. Waivers by Guarantors

.  Each Guarantor hereby waives, for the benefit of the Holder:  (a) any right to require the Holder, as a condition of payment or performance by such Guarantor, to (i) proceed against Issuer, any Guarantor or any other Person; (ii) proceed against or exhaust any security in favor of the Holder; or (iii)  pursue any other remedy in the power of the Holder whatsoever or (b) presentment to, demand for payment from and protest to the Issuer or any Guarantor or notice of acceptance; and (c) any defenses or benefits that may be derived from or afforded by law which limit the liability of or exonerate guarantors or sureties, or which may conflict with the terms hereof.

5. Guarantors’ Rights of Subrogation, Contribution, etc.

  Until the Guaranteed Obligations shall have been paid in full, each Guarantor hereby waives any claim, right or remedy, direct or indirect, that such Guarantor now has or may hereafter have against the Issuer or any other Guarantor or any of its assets in connection with this Guarantee or the performance by such Guarantor of its obligations hereunder, including without limitation (a) any right of subrogation, reimbursement or indemnification that such Guarantor now has or may hereafter have against the Issuer with respect to the Guaranteed Obligations, (b) any right to enforce, or to participate in, any claim, right or remedy that the Holder now has or may hereafter have against the Issuer, and (c) any benefit of, and any right to participate in, any collateral or security now or hereafter held by the Holder.  In addition, until the Guaranteed Obligations shall have been paid in full, each Guarantor shall withhold exercise of any right of contribution such Guarantor may have against any other guarantor (including any other Guarantor) of the Guaranteed Obligations.  If any amount shall be paid to any Guarantor on account of any such subrogation, reimbursement, indemnification or contribution rights at any time when all Guaranteed Obligations shall not have been finally and paid in full, such amount shall be held in trust for the Holder and shall forthwith be paid over to the Holder to be credited and applied against the Guaranteed Obligations, whether matured or unmatured, in accordance with the terms hereof.

6. Subordination

.  Any Indebtedness of the Issuer or any Guarantor now or hereafter held by any Guarantor (the “Obligee Guarantor”) is hereby subordinated in right of payment to the Guaranteed Obligations, and any such indebtedness collected or received by the Obligee Guarantor after an Event of Default has occurred and is continuing shall be held in trust for the Holder and shall forthwith be paid over to the Holder to be credited and applied against the Guaranteed Obligations but without affecting, impairing or limiting in any manner the liability of the Obligee Guarantor under any other provision hereof.

7. Continuing Guarantee

.  This Guarantee is a continuing guarantee and shall remain in effect until all of the Guaranteed Obligations shall have been paid in full.  Each Guarantor hereby irrevocably waives any right to revoke this Guarantee as to future transactions giving rise to any Guaranteed Obligations.

8. Financial Condition of the Issuer

.  The Note may be issued to the Issuer without notice to or authorization from any Guarantor regardless of the financial or other condition of the Issuer at the time of such grant.  Each Guarantor has adequate means to obtain information from the Issuer on a continuing basis concerning the financial condition of the Issuer and its ability to perform its obligations under the Note, and each Guarantor assumes the responsibility for being and keeping informed of the financial condition of the Issuer and of all circumstances bearing upon the risk of nonpayment of the Guaranteed Obligations.

9. Reinstatement

.  In the event that all or any portion of the Guaranteed Obligations are paid by the Issuer or any Guarantor, the obligations of any other Guarantor hereunder shall continue and remain in full force and effect or be reinstated, as the case may be, in the event that all or any part of such payment(s) are rescinded or recovered directly or indirectly from the Holder as a preference, fraudulent transfer or otherwise, and any such payments which are so rescinded or recovered shall constitute Guaranteed Obligations for all purposes hereunder.

Annex B-2

Exhibit 10.2

10. Discharge of Guarantee Upon Sale of the Guarantor

.  If, in compliance with the terms and provisions of the Note, all of the capital stock of any Guarantor that is a Subsidiary of the Issuer or any of its successors in interest hereunder shall be sold or otherwise disposed of (including by merger or consolidation) to any Person (other than to the Issuer or to any other Guarantor), the Guarantee of such Guarantor or such successor in interest, as the case may be, hereunder shall automatically be discharged and released without any further action by any beneficiary or any other Person effective as of the time of such asset sale.

Annex B-3

SCHEDULE I

Date Current Outstanding Principal Amount Increase or Decrease in Outstanding Principal Amount Resulting Outstanding Principal Amount Notation Made By

Schedule I

EX-31.1

Exhibit 31.1

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

I, John W. Dietrich,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;

4. 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: August 6, 2020	/s/ John W. Dietrich
	John W. Dietrich
	President and Chief Executive Officer

EX-31.2

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;

4. 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: August 6, 2020	/s/ Spencer Schwartz
	Spencer Schwartz
	Executive Vice President and Chief Financial Officer

EX-32.1

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 June 30, 2020 as filed with the Securities and Exchange Commission (the “Report”), we, John W. Dietrich 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: August 6, 2020

/s/ John W. Dietrich

John W. Dietrich

President and Chief Executive Officer

/s/ Spencer Schwartz

Spencer Schwartz

Executive Vice President and Chief Financial Officer

XML

Document and Entity Information - shares	6 Months Ended
	Jun. 30, 2020	Jul. 30, 2020
Cover [Abstract]
Document Type	10-Q
Document period end date	Jun. 30, 2020
Amendment flag	false
Document Fiscal Period Focus	Q2
Document Fiscal Year Focus	2020
Current fiscal year end date	--12-31
Entity central index key	0001135185
Entity filer category	Large Accelerated Filer
Entity Small Business	false
Entity Emerging Growth Company	false
Entity registrant name	Atlas Air Worldwide Holdings, Inc.
Entity common stock shares outstanding		26,136,036
Entity Current Reporting Status	Yes
Entity Shell Company	false
Entity File Number	001-16545
Entity Tax Identification Number	13-4146982
Entity Address, Address Line One	2000 Westchester Avenue
Entity Address, Address Line Two	Purchase
Entity Address, State or Province	NY
Entity Address, City or Town	New York
Entity Address, Postal Zip Code	10577
City Area Code	914
Local Phone Number	701-8000
Entity Incorporation, State or Country Code	DE
Title of 12(b) Security	Common Stock, $0.01 Par Value
Trading Symbol	AAWW
Security Exchange Name	NASDAQ
Entity Interactive Data Current	Yes
Document Quarterly Report	true
Document Transition Report	false

XML

Consolidated Balance Sheets (Unaudited) - USD ($) $ in Thousands	Jun. 30, 2020	Dec. 31, 2019
Current Assets
Cash and cash equivalents	$ 726,402	$ 103,029
Restricted cash	12,776	10,401
Short-term investments	0	879
Accounts receivable, net of allowance of $886 and $1,822, respectively	239,051	290,119
Prepaid expenses, assets held for sale and other current assets	177,978	228,103
Total current assets	1,156,207	632,531
Property and Equipment
Flight equipment	4,962,987	4,880,424
Ground equipment	86,341	83,584
Less: accumulated depreciation	(1,068,347)	(977,883)
Flight equipment modifications in progress	26,960	67,101
Property and equipment, net	4,007,941	4,053,226
Other Assets
Operating lease right-of-use assets	200,194	231,133
Deferred costs and other assets	378,567	391,895
Intangible assets, net and goodwill	73,841	76,856
Total Assets	5,816,750	5,385,641
Current Liabilities
Accounts payable	73,812	79,683
Accrued liabilities	653,253	481,725
Current portion of long-term debt and finance leases	275,017	395,781
Current portion of long-term operating leases	143,225	141,973
Total current liabilities	1,145,307	1,099,162
Other Liabilities
Long-term debt and finance leases	2,238,664	1,984,902
Long-term operating leases	322,450	392,832
Deferred taxes	111,802	74,040
Financial instruments and other liabilities	68,160	42,526
Total other liabilities	2,741,076	2,494,300
Commitments and contingencies	0	0
Stockholders’ Equity
Preferred stock, $1 par value; 10,000,000 shares authorized; no shares issued	0	0
Common stock, $0.01 par value; 100,000,000 shares authorized; 31,493,328 and 31,048,842 shares issued, 26,135,945 and 25,870,876 shares outstanding (net of treasury stock), as of June 30, 2020 and December 31, 2019, respectively	315	310
Additional paid-in-capital	801,002	761,715
Treasury stock, at cost; 5,357,383 and 5,177,966 shares, respectively	(217,711)	(213,871)
Accumulated other comprehensive loss	(2,347)	(2,818)
Retained earnings	1,349,108	1,246,843
Total stockholders’ equity	1,930,367	1,792,179
Total Liabilities and Equity	$ 5,816,750	$ 5,385,641

XML

Consolidated Balance Sheets (Parenthetical) (Unaudited) - USD ($) $ in Thousands	Jun. 30, 2020	Dec. 31, 2019
Statement Of Financial Position [Abstract]
Allowance for doubtful accounts receivable	$ 886	$ 1,822
Preferred stock par value	$ 1	$ 1
Preferred stock shares authorized	10,000,000	10,000,000
Preferred stock shares issued	0	0
Common stock par value	$ 0.01	$ 0.01
Common stock shares authorized	100,000,000	100,000,000
Common stock shares issued	31,493,328	31,048,842
Common stock shares outstanding	26,135,945	25,870,876
Treasury stock shares	5,357,383	5,177,966

XML

Consolidated Statements of Operations (Unaudited) - USD ($) shares in Thousands, $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2020	Jun. 30, 2019	Jun. 30, 2020	Jun. 30, 2019
Operating Revenue	$ 825,253	$ 663,918	$ 1,468,755	$ 1,343,601
Operating Expenses
Salaries, wages and benefits	192,591	141,450	340,335	286,924
Aircraft fuel	83,242	122,158	191,560	228,479
Travel	34,627	46,374	77,018	91,403
Navigation fees, landing fees and other rent	35,638	37,982	67,039	78,198
Passenger and ground handling services	30,130	30,525	62,089	62,685
Aircraft rent	24,316	40,335	48,283	82,223
Loss (gain) on disposal of aircraft	2	0	(6,715)	0
Special charge	15,934	3,269	15,934	3,269
Transaction-related expenses	1,275	734	1,796	3,261
Other	52,710	54,961	103,822	106,054
Total Operating Expenses	704,591	654,948	1,287,023	1,287,757
Operating Income	120,662	8,970	181,732	55,844
Non-operating Expenses (Income)
Interest income	(224)	(1,278)	(704)	(3,322)
Interest expense	28,950	30,045	58,225	60,398
Capitalized interest	(132)	(627)	(325)	(1,090)
Loss on early extinguishment of debt	74	0	74	245
Unrealized loss (gain) on financial instruments	30,671	(42,300)	29,747	4,275
Other (income) expense, net	(50,598)	945	(49,392)	(2,030)
Total Non-operating Expenses (Income)	8,741	(13,215)	37,625	58,476
Income (loss) before income taxes	111,921	22,185	144,107	(2,632)
Income tax expense (benefit)	33,009	(64,683)	41,842	(59,790)
Net Income	$ 78,912	$ 86,868	$ 102,265	$ 57,158
Earnings per share:
Basic	$ 3.02	$ 3.36	$ 3.93	$ 2.22
Diluted	$ 3.01	$ 1.61	$ 3.92	$ 2.21
Weighted average shares:
Basic	26,129	25,851	26,048	25,794
Diluted	26,182	26,953	26,074	25,921
Service [Member]
Operating Expenses
Maintenance, materials and repairs	$ 168,300	$ 113,471	$ 262,452	$ 217,091
Depreciation and amortization	$ 65,826	$ 63,689	$ 123,410	$ 128,170

XML

Consolidated Statements of Comprehensive Income (Unaudited) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2020	Jun. 30, 2019	Jun. 30, 2020	Jun. 30, 2019
Statement Of Income And Comprehensive Income [Abstract]
Net Income	$ 78,912	$ 86,868	$ 102,265	$ 57,158
Other comprehensive income:
Reclassification to interest expense	296	337	604	681
Income tax benefit	(70)	(80)	(133)	(161)
Other comprehensive income	226	257	471	520
Comprehensive Income	$ 79,138	$ 87,125	$ 102,736	$ 57,678

XML

Consolidated Statements of Cash Flows (Unaudited) - USD ($) $ in Thousands	6 Months Ended
	Jun. 30, 2020	Jun. 30, 2019
Operating Activities:
Net Income	$ 102,265	$ 57,158
Adjustments to reconcile Net Income to net cash provided by operating activities:
Depreciation and amortization	157,509	157,820
Amortization (accretion) of debt securities discount	(2)	208
Provision for (reversal of) expected credit losses	(6)	4
Loss on early extinguishment of debt	74	245
Special charge, net of cash payments	15,934	3,269
Unrealized loss (gain) on financial instruments	29,747	4,275
Loss (gain) on disposal of aircraft	(6,715)	0
Deferred taxes	39,518	(60,122)
Stock-based compensation	10,506	10,025
Changes in:
Accounts receivable	51,781	26
Prepaid expenses, current assets and other assets	(19,115)	(23,835)
Accounts payable, accrued liabilities and other liabilities	178,894	(40,076)
Net cash provided by operating activities	560,390	108,997
Investing Activities:
Capital expenditures	(25,095)	(76,754)
Payments for flight equipment and modifications	(59,919)	(99,161)
Proceeds from insurance		38,133
Proceeds from investments	881	9,313
Proceeds from disposal of aircraft	44,110	0
Net cash used for investing activities	(40,023)	(128,469)
Financing Activities:
Proceeds from debt issuance	321,518	19,723
Payment of debt issuance costs	(3,910)	(955)
Payments of debt and finance lease obligations	(274,960)	(160,091)
Proceeds from revolving credit facility	75,000	50,000
Customer maintenance reserves and deposits received	6,010	8,039
Customer maintenance reserves paid	(14,437)	0
Treasury shares withheld for payment of taxes	(3,840)	(9,227)
Net cash provided by (used for) financing activities	105,381	(92,511)
Net increase (decrease) in cash, cash equivalents and restricted cash	625,748	(111,983)
Cash, cash equivalents and restricted cash at the beginning of period	113,430	232,741
Cash, cash equivalents and restricted cash at the end of period	739,178	120,758
Noncash Investing and Financing Activities:
Acquisition of flight equipment included in Accounts payable and accrued liabilities	13,613	51,996
Acquisition of property and equipment acquired under operating leases	1,918	0
Customer maintenance reserves settled with sale of aircraft	$ 6,497	$ 0

XML

Consolidated Statements of Stockholders' Equity (Unaudited) - USD ($) $ in Thousands	Total	Common Stock [Member]	Treasury Stock [Member]	Additional Paid-In Capital [Member]	Accumulated Other Comprehensive Loss [Member]	Retained Earnings [Member]
Beginning Balance at Dec. 31, 2018	$ 2,067,964	$ 306	$ (204,501)	$ 736,035	$ (3,832)	$ 1,539,956
Net Income	57,158	0	0	0	0	57,158
Other comprehensive income	520	0	0	0	520	0
Stock-based compensation	10,025	0	0	10,025	0	0
Issuance of warrants	669	0	0	669	0	0
Treasury shares of 206 withheld for payment of taxes	(9,227)	0	(9,227)	0	0	0
Issuance of shares of restricted stock	0	4	0	(4)	0	0
Ending Balance at Jun. 30, 2019	2,127,109	310	(213,728)	746,725	(3,312)	1,597,114
Beginning Balance at Mar. 31, 2019	2,034,949	310	(213,690)	741,652	(3,569)	1,510,246
Net Income	86,868	0	0	0	0	86,868
Other comprehensive income	257	0	0	0	257	0
Stock-based compensation	4,404	0	0	4,404	0	0
Issuance of warrants	669	0	0	669	0	0
Treasury shares of 206 withheld for payment of taxes	(38)	0	(38)	0	0	0
Issuance of shares of restricted stock	0	0	0	0	0	0
Ending Balance at Jun. 30, 2019	2,127,109	310	(213,728)	746,725	(3,312)	1,597,114
Beginning Balance at Dec. 31, 2019	1,792,179	310	(213,871)	761,715	(2,818)	1,246,843
Net Income	102,265	0	0	0	0	102,265
Other comprehensive income	471	0	0	0	471	0
Stock-based compensation	10,506	0	0	10,506	0	0
Issuance of warrants	28,786	0	0	28,786	0	0
Treasury shares of 206 withheld for payment of taxes	(3,840)	0	(3,840)	0	0	0
Issuance of shares of restricted stock	0	5	0	(5)	0	0
Ending Balance at Jun. 30, 2020	1,930,367	315	(217,711)	801,002	(2,347)	1,349,108
Beginning Balance at Mar. 31, 2020	1,832,750	315	(217,705)	782,517	(2,573)	1,270,196
Net Income	78,912	0	0	0	0	78,912
Other comprehensive income	226	0	0	0	226	0
Stock-based compensation	6,646	0	0	6,646	0	0
Issuance of warrants	11,840	0	0	11,840	0	0
Treasury shares of 206 withheld for payment of taxes	(6)	0	(6)	0	0	0
Issuance of shares of restricted stock	(1)	0	0	(1)	0	0
Ending Balance at Jun. 30, 2020	$ 1,930,367	$ 315	$ (217,711)	$ 801,002	$ (2,347)	$ 1,349,108

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Consolidated Statements of Stockholders' Equity (Parentheticals) (Unaudited) - shares	3 Months Ended		6 Months Ended
	Jun. 30, 2020	Jun. 30, 2019	Jun. 30, 2020	Jun. 30, 2019
Statement Of Stockholders Equity [Abstract]
Treasury shares withheld for payment of taxes	206	743	179,417	180,082
Issuance of shares of restricted stock	9,919	4,385	444,486	443,929

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Basis of Presentation

6 Months Ended

Jun. 30, 2020

Basis Of Presentation [Abstract]

Basis of Presentation

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, 2019, which includes additional disclosures and a summary of our significant accounting policies.  The December 31, 2019 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 June 30, 2020, the results of operations for the three and six months ended June 30, 2020 and 2019, comprehensive income for the three and six months ended June 30, 2020 and 2019, cash flows for the six months ended June 30, 2020 and 2019, and stockholders’ equity as of and for the three and six months ended June 30, 2020 and 2019.

Our quarterly results are subject to seasonal and other fluctuations, including fluctuations resulting from the global COVID-19 pandemic (see Note 3 for further discussion), 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.

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Summary of Significant Accounting Policies

6 Months Ended

Jun. 30, 2020

Accounting Policies [Abstract]

Summary of Significant Accounting Policies

2. Summary of Significant Accounting Policies

Warrant Liability

Common stock warrants that are classified as a liability are marked-to-market at the end of each reporting period with changes in fair value recorded in Unrealized (gain) loss on financial instruments.  We utilize a Monte Carlo simulation approach to estimate the fair value of the warrant liability, 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.  Our earnings are affected by changes in our common stock price due to the impact those changes have on the fair value of our warrant liability (see Note 5 for further discussion).

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 $10.3 million and $5.3 million for the three months ended June 30, 2020 and 2019, respectively, and was $18.2 million and $9.7 million for the six months ended June 30, 2020 and 2019, respectively.

Deferred maintenance included within Deferred costs and other assets is as follows:  

Balance as of December 31, 2019	$	184,279
Deferred maintenance costs		24,307
Amortization of deferred maintenance		(18,237	)
Balance as of June 30, 2020	$	190,349

Recent Accounting Pronouncements Adopted in 2020

In November 2019, the Financial Accounting Standards Board (“FASB”) amended its accounting guidance for share-based payment awards issued to a customer. The amended guidance requires share-based payment awards issued to a customer to be recorded as a reduction of the transaction price in revenue based on the fair value at grant date and to be classified on the balance sheet using accounting guidance for stock-based compensation. The amended guidance was effective for fiscal years beginning after December 15, 2019. Effective January 1, 2020, we adopted the amended guidance and applied the modified retrospective approach to the most current period presented.  As a result, $14.6 million, or approximately 60% of our customer warrant liability of $24.3 million related to revenue contracts, which was included in Financial instruments and other liabilities as of December 31, 2019, was reclassified as Additional paid-in-capital within Total stockholders’ equity on January 1, 2020.  As a result, these customer warrants are no longer marked-to-market at the end of each reporting period with changes in fair value recorded as an unrealized (gain) loss on financial instruments.  The amended guidance did not impact the accounting for the remaining portion of our customer warrant liability related to Dry Lease contracts, which was approximately $9.7 million or approximately 40% of the total customer warrant liability as of December 31, 2019. The new guidance did not impact how we account for the amortization of the customer incentive asset (see Note 5 for further discussion).

In June 2016, the FASB amended its accounting guidance for the measurement of credit losses on financial instruments. The guidance requires entities to utilize an expected credit loss model for certain financial instruments, including most trade receivables, which replaces the incurred credit loss model previously used.  Under this new model, we are required to recognize estimated credit losses expected to occur over time using a broad range of information including historical information, current conditions and reasonable and supportable forecasts. Receivables related to lease contracts are not within the scope of this amended guidance. Effective January 1, 2020, we adopted the amended guidance under the modified retrospective approach and it did not have a material impact on our consolidated financial statements and related disclosures (see Note 6).

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COVID-19 Pandemic

6 Months Ended

Jun. 30, 2020

Extraordinary And Unusual Items [Abstract]

COVID-19 Pandemic

3. COVID-19 Pandemic

COVID-19

In December 2019, COVID-19 was first reported in China and has since spread to most other regions of the world.  In March 2020, COVID-19 was determined to be a global pandemic by the World Health Organization.  During the first six months of 2020, this public health crisis disrupted global manufacturing, supply chains, passenger travel and consumer spending, resulting in flight cancellations by our ACMI customers and lower U.S. Military Air Mobility Command (“AMC”) passenger flying as the military took precautionary measures to limit the movement of personnel.  A reduction of available cargo capacity in the market and increased demand for transporting goods due to the COVID-19 pandemic also resulted in increased commercial charter cargo yields, net of fuel, during the first six months of 2020.  We have incurred and expect to incur significant additional costs, including premium pay; other operational costs, including costs for continuing to provide a safe working environment for our employees; and higher crew costs related to increased pay rates resulting from our recent interim agreement with our pilots.  In addition, the availability of hotels and restaurants; evolving COVID-19-related travel restrictions and health screenings; and cancellations of passenger flights by other airlines globally or airport closures have impacted and could further impact our ability to position employees to operate our aircraft.    

Our ability to continue to service our debt and meet our lease and other obligations as they come due is dependent on our continued ability to generate earnings and cash flows.  To mitigate the impact of any continuation or worsening of the COVID-19 pandemic disruptions, we have:

• significantly reduced nonessential employee travel;

• reduced the use of contractors;

• limited ground staff hiring;

• secured vendor pricing discounts for engine overhauls and other maintenance;

• implemented a number of other cost reduction initiatives;

• taken other actions, such as the sale of certain nonessential assets;

• entered into a Payroll Support Program Agreement (the “PSP Agreement”) with the U.S. Department of the Treasury (the “U.S. Treasury”), with respect to payroll support funding (the “Payroll Support Program”) available to cargo air carriers under the CARES Act (see discussion below); and

• begun to defer payment of the employer portion of social security taxes as provided for under the CARES Act through the end of 2020.  

If we are unable to implement these or additional initiatives, or comply with the requirements under the PSP Agreement, it could have a material adverse effect on our financial position, results of operations, and cash flows.  We believe the Company will generate sufficient liquidity to satisfy its obligations over the next twelve months.

Payroll Support Program under the CARES Act

As of May 29, 2020 (the “PSP Closing Date”), Atlas and Southern Air (the “PSP Recipients”) entered into a PSP Agreement with the U.S. Treasury.  As of the PSP Closing Date, AAWW also entered into a Warrant Agreement (the “Warrant Agreement”) with the U.S. Treasury, and AAWW issued a senior unsecured promissory note to the U.S. Treasury (the “Promissory Note”), with Atlas and Southern Air as guarantors.

In connection with the Payroll Support Program, we are required to comply with the relevant provisions of the CARES Act, including the requirement that funds provided pursuant to the PSP Agreement be used exclusively for the payment of certain employee wages, salaries and benefits of the PSP Recipients.  The Payroll Support Program subjects the PSP Recipients and certain of their affiliates to a number of restrictions, including prohibitions against reductions in certain employee salaries, wages and benefits, and certain involuntary terminations and furloughs of employees until September 30, 2020, prohibitions of repurchasing shares in the open market of, or making dividend payments with respect to, our common stock through September 30, 2021, as well as certain limitations on executive compensation until March 24, 2022.  Under the PSP Agreement, we must also maintain certain internal controls and records relating to the payroll support funding and we are subject to additional reporting obligations.

Pursuant to the PSP Agreement, the U.S. Treasury provided us with payroll support funding in three installments totaling $406.8 million.  The first installment of $203.4 million was received on June 1, 2020, the second installment of $101.7 million was received on June 29, 2020 and the third installment of $101.7 million was received on July 30, 2020.

As compensation for payroll support funding under the PSP Agreement, we issued the Promissory Note to the U.S. Treasury, which provides for our unconditional promise to pay to the U.S. Treasury a total of $142.9 million as of June 30, 2020 and a total of $199.8 million as of July 30, 2020, after all installments were received from the U.S. Treasury.

The Promissory Note bears interest on the outstanding principal amount at a rate of 1.00% per annum until the fifth anniversary of the PSP Closing Date and the applicable Secured Overnight Financing Rate (“SOFR”) plus 2.00% per annum thereafter, and interest accrued thereon will be payable in arrears on the last business day of March and September of each year, beginning on September 30, 2020.  The aggregate principal amount outstanding under the Promissory Note, together with all accrued and unpaid interest thereon and all other amounts payable under the Promissory Note, will be due and payable in May 2030.  The Promissory Note contains customary representations and warranties, covenants and events of default provisions.  Interest expense is recognized using the effective interest method over the term of the Promissory Note.

We may, at any time and from time to time, voluntarily prepay amounts outstanding under the Promissory Note, in whole or in part, without penalty or premium.  If certain change of control triggering events occur, we would be required to prepay the aggregate outstanding principal amount of the Promissory Note within 30 days, together with any accrued interest or other amounts owing under the Promissory Note.

As compensation for payroll support funding under the PSP Agreement, we also entered into a Warrant Agreement pursuant to which we granted the U.S. Treasury warrants to acquire shares of our common stock.  In connection with the first and second payroll support funding installments from the U.S. Treasury, we issued warrants to acquire up to 447,180 shares of our common stock as of June 30, 2020.  As of July 30, 2020, the warrants issued to the U.S. Treasury, after all installments were received, were for up to 625,452 shares of our common stock.  

The Warrant Agreement provides the U.S Treasury certain registration rights with respect to each warrant and the underlying common stock.  Each warrant is exercisable at an exercise price of $31.95 per share of common stock (which was the closing price of our common stock on the Nasdaq Global Select Market on May 1, 2020) and will expire on the fifth anniversary of the issue date of such warrant.  Each warrant may be settled through net share settlement or net cash settlement, at our option.  Each warrant includes customary antidilution provisions and is freely transferable with registration rights.  The U.S. Treasury is not permitted to vote any shares it acquires upon exercise of each warrant. The grant date fair value, as determined using the Black-Scholes model, of each warrant is recognized as Additional paid-in-capital and was $9.2 million as of June 30, 2020.  Each warrant will not be remeasured as long as it continues to meet the conditions for equity classification. As of June 30, 2020, no portion of the warrants has been exercised.

We recognized deferred grant income within Accrued liabilities for the difference between the PSP proceeds received and the amounts recognized for the Promissory Note and the Warrant Agreement for each installment. Grant income is subsequently recognized within Other (income) expense, net in the consolidated statement of operations on a pro-rata basis over the periods that the

qualifying employee wages, salaries and benefits are paid.  For the three and six months ended June 30, 2020, we recognized grant income of $20.2 million.  We expect to recognize the remainder of the grant income through the first quarter of 2021.

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Related Parties

6 Months Ended

Jun. 30, 2020

Related Party Transactions [Abstract]

Related Parties

4. Related Parties

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, 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, which began in 2008, 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				For the Six Months Ended
Revenue and Expenses:	June 30, 2020		June 30, 2019		June 30, 2020		June 30, 2019
Revenue from Polar	$	82,858	$	99,889	$	159,092	$	198,356
Ground handling and airport fees to Polar		1,067		545		1,593		1,063
Accounts receivable/payable as of:	June 30, 2020		December 31, 2019
Receivables from Polar	$	26,370	$	10,855
Payables to Polar		1,841		2,161
Aggregate Carrying Value of Polar Investment as of:	June 30, 2020		December 31, 2019
Aggregate Carrying Value of Polar Investment	$	4,870	$	4,870

In addition to the amounts in the table above, Atlas recognized revenue of $83.1 million and $23.1 million for the three months ended June 30, 2020 and 2019, respectively, and $110.5 million and $46.4 million for the six months ended June 30, 2020 and 2019, respectively, from flying on behalf of Polar.

Dry Leasing Joint Venture

We hold a 10% interest in a joint venture with an unrelated third party, which we entered into in December 2019, to develop a diversified freighter aircraft dry leasing portfolio.  Through Titan, we provide aircraft and lease management services to the joint venture for fees based upon aircraft assets under management, among other things.  Our investment in the joint venture is accounted for under the equity method of accounting. Under the joint venture, we have a commitment to provide up to $40.0 million of capital contributions before December 2022.  Our investment in the joint venture was $0.5 million and $1.5 million as of June 30, 2020 and December 31, 2019, respectively, and our maximum exposure to losses from the entity is limited to our investment. The joint venture does not currently have any third-party debt obligations and no capital contributions have been made as of June 30, 2020.  We had Accounts receivable from the joint venture of $1.3 million as of June 30, 2020 related to the reimbursement of certain expenses by the joint venture.  We have recognized no service fee income for the three and six months ended June 30, 2020.

Parts Joint Venture

We hold a 50% interest in a joint venture with an unrelated third party to purchase rotable parts and provide repair services for those parts, primarily for 747-8F aircraft.  Our investment in the joint venture is accounted for under the equity method of accounting.  As of June 30, 2020 and December 31, 2019, our investment in the joint venture was $18.9 million and $20.0 million, respectively.  We had Accounts payable to the joint venture of $1.1 million as of June 30, 2020 and $0.5 million as of December 31, 2019.

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Amazon

6 Months Ended

Jun. 30, 2020

Warrants And Rights Note Disclosure [Abstract]

Amazon

5. 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 up to 20 Boeing 767-300 freighter aircraft for Amazon by Atlas, as well as Dry Leasing by Titan.  The Dry Leases have a term of ten years from the commencement of each agreement, while the CMI operations are for seven years from the commencement of each agreement (with an option for Amazon to extend the term to ten years). Between August 2016 and November 2018, we placed all 20 767-300 freighter aircraft into service for Amazon.  In February 2019, the number of 767-300 freighters in CMI and Dry Lease service for Amazon was reduced to 19 with the

loss of an aircraft.  In September 2019, the number of 767-300 freighters in CMI service for Amazon was reduced to 17 with the early termination of CMI services for two aircraft, which remain under dry lease.

In conjunction with the agreements entered into in May 2016, 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 $37.34 per share, as adjusted (“Warrant A”).  As of December 31, 2018, this warrant to purchase 7.5 million shares, as adjusted, had vested in full.  Warrant A is exercisable in accordance with its terms through May 2021.  As of June 30, 2020, no portion of Warrant A has been exercised.

The agreements entered into in May 2016 also provided 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 $37.34 per share, as adjusted (“Warrant B”).  This warrant to purchase 3.77 million shares, as adjusted, will vest in increments of 37,660 shares, as adjusted, each time Amazon has paid $4.2 million of revenue to us, up to a total of $420.0 million, for incremental business beyond the original 20 767-300 freighters.  As of June 30, 2020, 225,690 shares, as adjusted, of Warrant B have vested.  Upon vesting, Warrant B becomes exercisable in accordance with its terms through May 2023. As of June 30, 2020, no portion of Warrant B has been exercised.

In March 2019, we amended the agreements entered into in 2016 with Amazon, pursuant to which we began providing CMI services using Boeing 737-800 freighter aircraft provided by Amazon.  The 737-800 CMI operations are for a term of seven years from the commencement of each agreement (with an option for Amazon to extend the term to ten years).  As of June 30, 2020, five 737-800 freighter aircraft entered CMI service.  Amazon may, in its sole discretion, place up to 15 additional 737-800 freighter aircraft into service with us by May 31, 2021.

In connection with the amended agreements, we granted Amazon a warrant to acquire up to an additional 9.9% of our outstanding common shares, after giving effect to the issuance of shares pursuant to the warrants, for an exercise price of $52.67 per share, as adjusted (“Warrant C”).  When combined with Warrant A and Warrant B, this would allow Amazon to acquire up to a total of 39.9% (after the issuance) of our outstanding common shares and Amazon would be entitled to vote the shares it owns up to 14.9% of our outstanding common shares, in its discretion.  Amazon would be required to vote any shares it owns in excess of 14.9% of our outstanding common shares in accordance with the recommendation of our board of directors.  After Warrant B has vested in full, this warrant to purchase 6.66 million shares, as adjusted, would vest in increments of 45,623 shares, as adjusted, each time Amazon has paid $6.9 million of revenue to us, up to a total of $1.0 billion, for incremental business beyond Warrant A and Warrant B.  As of June 30, 2020, no portion of Warrant C has vested.  Upon vesting, Warrant C would become exercisable in accordance with its terms through March 2026.

In May 2020, the warrants issued to the U.S. Treasury (see Note 3 for further discussion) triggered an antidilution adjustment to certain terms of the Amazon warrants as reflected above.

Upon the vesting of Warrant A in previous years, the fair value of the warrant was recognized as a customer incentive asset within Deferred costs and other assets, net and is amortized as a reduction of Operating Revenue in proportion to the amount of revenue recognized over the terms of the Dry Leases and CMI agreements.  Determining the amount of amortization related to the CMI agreements requires significant judgment to estimate the total number of Block Hours expected over the terms of those agreements.  The fair value of Warrant A was also initially recorded as a warrant liability within Financial instruments and other liabilities (the “Amazon Warrant”). The Amazon Warrant liability is marked-to-market at the end of each reporting period with changes in fair value recorded in Unrealized (gain) loss on financial instruments.  

As described in Note 2, we adopted the new accounting guidance for share-based payment awards issued to a customer as of January 1, 2020.  Under the amended guidance, approximately 60% of the Amazon Warrant liability related to the CMI agreements as of January 1, 2020 was reclassified to Additional paid-in-capital and will no longer be marked-to-market at the end of each reporting period.  The amended guidance does not impact the accounting for the remaining portion of the Amazon Warrant liability related to Dry Lease contracts. We recognized net unrealized losses of $30.7 million and $29.7 million on the Amazon Warrant liability during the three and six months ended June 30, 2020, respectively. We recognized a net unrealized gain of $42.3 million and a net unrealized loss of $4.3 million on the Amazon Warrant during the three and six months ended June 30, 2019, respectively. The fair value of the Amazon Warrant liability was $39.5 million as of June 30, 2020 and $24.3 million as of December 31, 2019.  

When it becomes probable that an increment of either Warrant B or C will vest and the related revenue begins to be recognized, the grant date fair value of such portion is recognized as a customer incentive asset within Deferred costs and other assets, net and is amortized as a reduction of Operating Revenue in proportion to the amount of related revenue recognized.  The grant date fair value of such increment is also recorded as Additional paid-in-capital. At the time of vesting, any amounts recorded in Additional paid-in-capital related to Dry Lease contracts would be reclassified to the Amazon Warrant liability.

We amortized $9.5 million and $6.9 million of the customer incentive asset as a reduction of Operating Revenue for the three months ended June 30, 2020 and 2019, respectively. We amortized $18.6 million and $13.2 million of the customer incentive asset for the six months ended June 30, 2020 and 2019, respectively

Customer incentive asset included within Deferred costs and other assets is as follows:

Balance at December 31, 2019	$	152,534
Initial value for estimate of vested or expected to vest warrants		5,186
Amortization of customer incentive asset		(18,556	)
Balance at June 30, 2020	$	139,164

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Supplemental Financial Information

6 Months Ended

Jun. 30, 2020

Supplemental Financial Information [Abstract]

Supplemental Financial Information

6. Supplemental Financial Information

Accounts Receivable

Accounts receivable, net of allowance for expected credit losses related to customer contracts, excluding Dry Leasing contracts, was $189.5 million as of June 30, 2020 and $247.5 million as of December 31, 2019.

Allowance for expected credit losses, included within Accounts receivable, is as follows:

Balance as of December 31, 2019	$	1,822
Bad debt recovery		(6	)
Amounts written off, net of recoveries		(930	)
Balance as of June 30, 2020	$	886

Accrued Liabilities

Accrued liabilities consisted of the following as of: 

	June 30, 2020		December 31, 2019
Maintenance	$	161,975	$	136,315
Deferred grant income		132,877		-
Customer maintenance reserves		96,131		110,355
Salaries, wages and benefits		88,180		75,719
Deferred revenue		38,437		26,357
Aircraft fuel		34,726		28,821
Other		100,927		104,158
Accrued liabilities	$	653,253	$	481,725

Revenue Contract Liability

Deferred revenue for customer contracts, excluding Dry Leasing contracts, represents amounts collected from, or invoiced to, customers in advance of revenue recognition.  The balance of Deferred revenue will increase or decrease based on the timing of invoices and recognition of revenue.

Significant changes in our Revenue contract liability balances during the six months ended June 30, 2020 were as follows:

	Deferred Revenue
Balance as of December 31, 2019	$	19,234
Revenue recognized		(95,027	)
Amounts collected or invoiced		108,556
Balance as of June 30, 2020	$	32,763

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 shown in the consolidated statements of cash flows:

	June 30, 2020		December 31, 2019
Cash and cash equivalents	$	726,402	$	103,029
Restricted cash		12,776		10,401
Total Cash, cash equivalents and restricted cash shown in Consolidated Statements of Cash Flows	$	739,178	$	113,430

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Assets Held For Sale and Other Income

6 Months Ended

Jun. 30, 2020

Assets Held For Sale And Other Income [Abstract]

Assets Held For Sale and Other Income

7. Assets Held For Sale and Other Income

As of December 31, 2019, we had two 737-400 passenger aircraft previously used for training purposes, certain spare CF6-80 engines and three aircraft in our Dry Leasing portfolio classified as held for sale.  During the six months ended June 30, 2020, we received net proceeds of $44.1 million from the completion of the sales of some of the spare CF6-80 engines and two aircraft in our Dry Leasing portfolio, and recognized a net gain of $6.7 million. During the three and six months ended June 30, 2020, we recognized an impairment loss of $15.9 million related to fair value adjustments for assets held for sale, within Special charge in the consolidated statement of operations.  The carrying value of the assets held for sale as of June 30, 2020 and December 31, 2019 was $99.0 million and $155.9 million, respectively, which was included within Prepaid expense, held for sale and other current assets in the consolidated balance sheets.  Sales of the remaining aircraft and engines held for sale are expected to be completed in 2020.

During the three and six months ended June 30, 2020, we recognized refunds of $31.5 million and $32.9 million, respectively, related to aircraft rent paid in previous years within Other (income) expense, net.

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Debt

6 Months Ended

Jun. 30, 2020

Debt Disclosure [Abstract]

Debt

8. Debt

Term Loans

In February 2020, we refinanced two secured term loans that were originally due later in 2020, with two new term loans.  One term loan is for 126 months in the amount of $82.0 million at a fixed interest rate of 3.27% with a final payment of $12.5 million due in July 2030 (the “First 2020 Term Loan”).  The other term loan is for 130 months in the amount of $82.0 million at a fixed interest rate of 3.28% with a final payment of $12.5 million due in November 2030 (the “Second 2020 Term Loan”). The First and Second 2020 Term Loans are each secured by a mortgage against a 777-200LRF aircraft and subject to usual and customary fees, covenants and events of default, with principal and interest payable quarterly.

In April 2020, we borrowed $14.6 million at a fixed interest rate of 1.15% under an unsecured five-year term loan due in April 2025 for GEnx engine performance upgrade kits and overhauls (the “Third 2020 Term Loan”).  The Third 2020 Term Loan is subject to customary fees, covenants and events of default, with principal and interest payable quarterly.

Promissory Note

See Note 3 for a discussion of the Promissory Note we issued to the U.S. Treasury during the three months ended June 30, 2020.

Convertible Notes

In May 2017, we issued $289.0 million aggregate principal amount of 1.875% convertible senior notes that mature on June 1, 2024 (the “2017 Convertible Notes”) in an underwritten public offering.  In June 2015, we issued $224.5 million aggregate principal amount of 2.25% convertible senior notes that mature on June 1, 2022 (the “2015 Convertible Notes”) in an underwritten public offering.  The 2017 Convertible Notes and the 2015 Convertible Notes (collectively, the “Convertible Notes”) are senior unsecured obligations and accrue interest payable semiannually on June 1 and December 1 of each year.  The Convertible Notes are due on their respective maturity dates, unless earlier converted or repurchased pursuant to their respective terms.

The Convertible Notes consisted of the following as of June 30, 2020:

	2017 Convertible Notes			2015 Convertible Notes
Remaining life in months		47			23
Liability component:
Gross proceeds	$	289,000		$	224,500
Less: debt discount, net of amortization		(42,795	)		(16,934	)
Less: debt issuance cost, net of amortization		(3,318	)		(1,569	)
Net carrying amount	$	242,887		$	205,997
Equity component (1)	$	70,140		$	52,903

(1) Included in Additional paid-in-capital on the consolidated balance sheet as of June 30, 2020.

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

	For the Three Months Ended				For the Six Months Ended
	June 30, 2020		June 30, 2019		June 30, 2020		June 30, 2019
Contractual interest coupon	$	2,618	$	2,618	$	5,235	$	5,235
Amortization of debt discount		4,457		4,186		8,845		8,308
Amortization of debt issuance costs		391		375		777		747
Total interest expense recognized	$	7,466	$	7,179	$	14,857	$	14,290

Revolving Credit Facility

We have a $200.0 million secured revolving credit facility that matures in December 2022 (the “Revolver”). As of June 30, 2020, there was $175.0 million outstanding and we had $16.2 million of unused availability, based on the collateral borrowing base. In July 2020, our unused availability, based on the collateral borrowing base, increased to $25.0 million.  [In August 2020, we repaid $175.0 million and had $200.0 million of unused availability.]

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Income Taxes

6 Months Ended

Jun. 30, 2020

Income Tax Disclosure [Abstract]

Income Taxes

9. Income Taxes

The effective income tax expense for the three and six months ended June 30, 2020 differed from tax at the U.S. statutory rate primarily due to $6.7 million and $6.5 million of nondeductible changes in the fair value of a customer warrant liability, respectively (see Note 5 for further discussion).

The effective income tax benefit for the three and six months ended June 30, 2019 differed from tax at the U.S. statutory rate primarily due to $59.8 million of tax benefits related to the favorable completion of an IRS examination of our 2015 income tax return and, for the three months ended June 30, 2019, $9.3 million of nontaxable changes in the fair value of a customer warrant liability (see Note 5 for further discussion).  For interim accounting purposes, we recognize income taxes using an estimated annual effective tax rate. When finalized, the complete operational merger of Atlas and Southern Air (see Note 12 for further discussion) would result in a material increase to our deferred tax liability.

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Financial Instruments

6 Months Ended

Jun. 30, 2020

Fair Value Disclosures [Abstract]

Financial Instruments

10. 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.

Term loans and notes consist of term loans, notes guaranteed by the Export-Import Bank of the United States, the Promissory Note issued to the U.S. Treasury and equipment enhanced trust certificates. The fair values of these debt instruments and the Revolver 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 a customer warrant liability and certain long-term performance-based restricted shares are 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:

	June 30, 2020
	Carrying Value		Fair Value		Level 1		Level 2		Level 3
Assets
Cash and cash equivalents	$	726,402	$	726,402	$	726,402	$	-	$	-
Restricted cash		12,776		12,776		12,776		-		-
	$	739,178	$	739,178	$	739,178	$	-	$	-
Liabilities
Term loans and notes	$	1,850,350	$	1,886,041	$	-	$	-	$	1,886,041
Revolver		175,000		170,057		-		-		170,057
Convertible notes (1)		448,883		479,134		479,134		-		-
Customer warrant		39,539		39,539		-		39,539		-
	$	2,513,772	$	2,574,771	$	479,134	$	39,539	$	2,056,098

	December 31, 2019
	Carrying Value		Fair Value		Level 1		Level 2		Level 3
Assets
Cash and cash equivalents	$	103,029	$	103,029	$	103,029	$	-	$	-
Short-term investments		879		879		-		-		879
Restricted cash		10,401		10,401		10,401		-		-
	$	114,309	$	114,309	$	113,430	$	-	$	879
Liabilities
Term loans and notes	$	1,800,911	$	1,885,750	$	-	$	-	$	1,885,750
Revolver		100,000		103,575		-		-		103,575
Convertible notes (1)		439,261		450,668		450,668		-		-
Customer warrant		24,345		24,345		-		24,345		-
	$	2,364,517	$	2,464,338	$	450,668	$	24,345	$	1,989,325

(1) Carrying value is net of debt discounts and debt issuance costs (see Note 8).

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Segment Reporting

6 Months Ended

Jun. 30, 2020

Segment Reporting [Abstract]

Segment Reporting

11. 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 called Direct Contribution, which shows the profitability of each segment after allocation of direct operating and ownership costs.  Direct Contribution includes Income (loss) from continuing operations before income taxes and excludes the following: Special charges, Transaction-related expenses, nonrecurring items, Gain (losses) 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, other non-operating costs and Payroll Support Program grant income.

The following table sets forth Operating Revenue and Direct Contribution for our reportable segments reconciled to Operating Income and Income (loss) before income taxes:

	For the Three Months Ended						For the Six Months Ended
	June 30, 2020			June 30, 2019			June 30, 2020			June 30, 2019
Operating Revenue:
ACMI	$	291,951		$	307,278		$	570,695		$	613,845
Charter		497,547			315,679			825,176			620,793
Dry Leasing		40,906			43,535			82,832			113,481
Customer incentive asset amortization		(9,534	)		(6,936	)		(18,556	)		(13,222	)
Other		4,383			4,362			8,608			8,704
Total Operating Revenue	$	825,253		$	663,918		$	1,468,755		$	1,343,601

Direct Contribution:
ACMI	$	14,495		$	40,640		$	66,802		$	80,647
Charter		185,969			14,084			236,750			43,217
Dry Leasing		9,721			11,091			20,420			46,618
Total Direct Contribution for Reportable Segments		210,185			65,815			323,972			170,482
Unallocated expenses and (income), net		(50,308	)		(81,927	)		(139,029	)		(162,064	)
Loss on early extinguishment of debt		(74	)		-			(74	)		(245	)
Unrealized gain (loss) on financial instruments		(30,671	)		42,300			(29,747	)		(4,275	)
Special charge		(15,934	)		(3,269	)		(15,934	)		(3,269	)
Transaction-related expenses		(1,275	)		(734	)		(1,796	)		(3,261	)
Gain (loss) on disposal of aircraft		(2	)		-			6,715			-
Income (loss) before income taxes		111,921			22,185			144,107			(2,632	)
Add back (subtract):
Interest income		(224	)		(1,278	)		(704	)		(3,322	)
Interest expense		28,950			30,045			58,225			60,398
Capitalized interest		(132	)		(627	)		(325	)		(1,090	)
Loss on early extinguishment of debt		74			-			74			245
Unrealized (gain) loss on financial instruments		30,671			(42,300	)		29,747			4,275
Other (income) expense, net		(50,598	)		945			(49,392	)		(2,030	)
Operating Income	$	120,662		$	8,970		$	181,732		$	55,844

The following table disaggregates our Charter segment revenue by customer and service type:

	For the Three Months Ended
	June 30, 2020							June 30, 2019
		Cargo		Passenger		Total		Cargo		Passenger		Total
Commercial customers		$	394,062	$	17	$	394,079	$	133,178	$	3,054	$	136,232
AMC			49,762		53,706		103,468		92,017		87,430		179,447
Total Charter Revenue		$	443,824	$	53,723	$	497,547	$	225,195	$	90,484	$	315,679
	For the Six Months Ended
		June 30, 2020						June 30, 2019
		Cargo		Passenger		Total		Cargo		Passenger		Total
Commercial customers		$	568,551	$	3,122	$	571,673	$	282,082	$	10,661	$	292,743
AMC			112,236		141,267		253,503		149,463		178,587		328,050
Total Charter Revenue		$	680,787	$	144,389	$	825,176	$	431,545	$	189,248	$	620,793

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 AMC, Polar and DHL (see above and Note 4 to our Financial Statements for further discussion regarding Polar).  No other customer accounted for more than 10.0% of our Total Operating Revenue.  Revenue from DHL was $151.9 million for the three months ended June 30, 2020 and $87.4 million for the three months ended June 30, 2019.  Revenue from DHL was $250.2 million for the six months ended June 30, 2020 and $177.1 million for the six months ended June 30, 2019. We have not experienced any credit issues with these customers.

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Labor and Legal Proceedings

6 Months Ended

Jun. 30, 2020

Labor And Legal Proceedings [Abstract]

Labor and Legal Proceedings

12. 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.  The Atlas and Southern Air CBAs both have a defined and streamlined process for negotiating a joint CBA (“JCBA”) when a merger occurs, as in the case with the Atlas and Southern Air merger.  Pursuant to the merger provisions in both CBAs, joint negotiations for a single CBA for Atlas and Southern Air should commence promptly.  Further, once an integrated seniority list (“ISL”) of Atlas and Southern Air pilots is presented to the Company by the union, it triggers a nine month agreed-upon timeframe to negotiate a new JCBA with any unresolved issues promptly submitted to binding arbitration.  

The IBT has refused to follow the merger provisions in the Atlas and Southern Air CBAs. This has resulted in significant litigation, arbitrations and delay.  As more fully stated below, the Company has prevailed in all of the merger related proceedings.

After the merger process began, the IBT also 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 pilots.  We have opposed both mediation applications as they are not in accordance with the merger provisions in the parties’ existing CBAs.  The NMB conducted a premediation investigation on the IBT’s Atlas application in June 2016, which has remained pending (along with the IBT’s Southern Air application) since 2016.  

Due to the IBT’s refusal to adhere to the merger provisions of the respective CBAs, in February 2017, the Company 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.  On March 13, 2018, the U.S. District Court for the Southern District of New York (“NY District Court”) ruled in the Company’s favor and ordered arbitration of this issue.  The IBT appealed the NY District Court’s decision, and on November 21, 2019, the U.S. Court of Appeals for the Second Circuit Court issued its decision in the Company’s favor affirming the NY District Court’s decision.

The Company and the IBT conducted the Atlas and Southern Air arbitrations for this issue in October 2018.  The Company prevailed in both the Atlas and Southern Air management grievance arbitrations against the IBT, with decisions rendered on June 12, 2019 and August 26, 2019, respectively.  Both arbitrators ruled that the IBT violated the CBAs by refusing to follow merger provisions in the parties’ respective CBAs, which require formulation of a JCBA covering the combined pilot group.  The arbitrators each ordered the IBT to promptly comply with the CBAs by submitting an ISL to the Company within 45 days of each arbitration decision, respectively.  The IBT failed to comply with both deadlines for submitting the ISL, which passed on July 27, 2019 for Southern Air, and on October 10, 2019 for Atlas. As a result, on October 25, 2019, the Company filed an action in the U.S. District Court for the District of Columbia (“DC District Court”) to enforce the Atlas and Southern Air arbitration decisions. On March 31, 2020, the DC District Court ruled in the Company’s favor, enforcing the arbitration decisions and directing the IBT to produce the ISL by May 15, 2020.  

The IBT subsequently requested additional time from the Company to complete the ISL and the parties agreed to a joint stipulation.  As a result, on April 24, 2020, the DC District Court issued an order modifying its March 31st order, providing that the nine-month timeframe to bargain for a new JCBA will be triggered on May 15, 2020 and that the IBT must produce the ISL by March 31, 2021.  Any remaining open issues will then be determined by binding interest arbitration pursuant to the merger provisions in the CBAs.  On April 28, 2020, the IBT and Local 2750 filed a Notice of Appeal of the DC District Court’s March 31st order, which remains in place pending appeal.

In connection with its opposition to application of the merger provisions, the IBT commenced lawsuits in the DC District Court seeking to vacate both arbitration awards.  On January 28, 2020, the DC District Court ruled in the Company’s favor, granting its motions to dismiss both of the IBT’s lawsuits. On April 28, 2020, the IBT and Local 2750 filed a Notice of Appeal of the DC District Court’s January 28th orders, which remains in place pending appeal.

The Company and the IBT continue to meet virtually to move the process forward and bargain in good faith for a new JCBA.  Substantive progress has been made with tentative agreements for more than half of the articles in a new JCBA.  Despite repeated requests from the Company, the IBT has yet to provide the Company with a comprehensive economic proposal.

In late September 2019, the Atlas pilots represented by the IBT formed a new local union, IBT Local 2750 to represent them. The Southern Air pilots continue to be represented by IBT Local 1224.  The Company continues to work with both Local 2750 and Local 1224 leadership groups.

On May 7, 2020, the Company announced that Atlas and Southern Air reached an agreement with IBT Locals 2750 and 1224, which provides for a ten percent pay increase for all pilots, effective as of May 1, 2020.  This pay increase provides interim additional compensation to our pilots until a new JCBA is reached.

In late November 2017, the DC District Court granted the Company’s request to issue a preliminary injunction to stop an illegal work slowdown and require the IBT to meet its obligations under the Railway Labor Act. Specifically, the DC District Court ordered the IBT to stop “authorizing, encouraging, permitting, calling, engaging in, or continuing” any illegal pilot slowdown activities, which were intended to gain leverage in pilot contract negotiations with the Company.  In addition, the Court ordered the IBT to take affirmative action to prevent and to refrain from continuing any form of interference with the Company’s operations or any other concerted refusal to perform normal pilot operations consistent with its status quo obligations under the Railway Labor Act.  In December 2017, the IBT appealed the District Court’s decision to the U.S. Court of Appeals for the District of Columbia Circuit (“Court of Appeals”).  On July 5, 2019, the Court of Appeals, in a unanimous three judge panel, affirmed the DC District Court’s ruling and denied the IBT’s appeal.

On May 22,^, 2020, the IBT filed a motion to dismiss the Company’s action for a preliminary injunction, asserting the Company’s claim for injunctive relief was mooted by the DC District Court’s March 31, 2020 decision in a separate case enforcing the management grievance arbitration awards in the Company’s favor.  The Company filed an opposition to the IBT’s motion on June 22, 2020, and the IBT’s reply was filed on July 3, 2020.  The preliminary injunction remains in full force and effect pending the court’s decision.  

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

Matters Related to Alleged Pricing Practices

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 allegedly unlawful pricing practices of such defendants.  In response, British Airways, KLM, Martinair, Air France and Lufthansa filed third-party indemnification lawsuits against Polar Air Cargo, LLC (“Old Polar”), a consolidated subsidiary of the Company, and Polar, seeking indemnification in the event the defendants are found to be liable in the main proceedings.  Another defendant, Thai Airways, filed a similar indemnification claim.  Activities in the case have focused on various procedural issues, some of which are awaiting court determination.  The Netherlands proceedings are likely to be affected by a decision readopted by the European Commission in March 2017, finding EU competition law violations by British Airways, KLM, Martinair, Air France and Lufthansa, among others, but not Old Polar or Polar.  If the Company, Old Polar or Polar were to incur an unfavorable outcome, 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 $3.8 million in aggregate based on June 30, 2020 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.  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.  In the other case, we received an administrative decision in favor of the Brazil customs authorities and we are in the process of appealing this decision to the Brazil courts.  As required to defend such claims, we have made deposits pending resolution of these matters.  The balance was $3.1 million as of June 30, 2020 and $4.1 million as of December 31, 2019, and is included in Deferred costs 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.

Other

In addition to the matters described in this note, we have certain other contingencies incident to the ordinary course of business.  Unless disclosed otherwise, management does not expect that the ultimate disposition of such other contingencies or matters will materially affect our financial condition, results of operations or cash flows.

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Earnings Per Share

6 Months Ended

Jun. 30, 2020

Earnings Per Share [Abstract]

Earnings Per Share

13. 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.  The calculations of basic and diluted EPS were as follows:

	For the Three Months Ended					For the Six Months Ended
Numerator:	June 30, 2020		June 30, 2019			June 30, 2020		June 30, 2019
Net Income	$	78,912	$	86,868		$	102,265	$	57,158
Less: Unrealized gain on financial instruments, net of tax		-		(43,379	)		-		-
Diluted Net income	$	78,912	$	43,489		$	102,265	$	57,158
Denominator:
Basic EPS weighted average shares outstanding		26,129		25,851			26,048		25,794
Effect of dilutive warrants		9		1,089			4		-
Effect of dilutive restricted stock		44		13			22		127
Diluted EPS weighted average shares outstanding		26,182		26,953			26,074		25,921
Earnings per share:
Basic	$	3.02	$	3.36		$	3.93	$	2.22
Diluted	$	3.01	$	1.61		$	3.92	$	2.21

Antidilutive shares related to warrants issued in connection with our Convertible Notes and warrants issued to a customer that were out of the money and excluded from the calculation of diluted EPS were 15.5 million for the three and six months ended June 30, 2020, respectively and 7.8 million for the three and six months ended June 30, 2019.  Diluted shares reflect the potential dilution that could occur from restricted shares using the treasury stock method.  The calculation of EPS does not include restricted share units and customer warrants in which performance or market conditions were not satisfied of 10.5 million for the three and six months ended June 30, 2020 and 10.6 million for the three and six months ended June 30, 2019.

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Accumulated Other Comprehensive Income (Loss)

6 Months Ended

Jun. 30, 2020

Accumulated Other Comprehensive Income Loss [Abstract]

Accumulated Other Comprehensive Income (Loss)

14. 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, 2018	$	(3,841	)	$	9	$	(3,832	)
Reclassification to interest expense		681			-		681
Tax effect		(161	)		-		(161	)
Balance as of June 30, 2019	$	(3,321	)	$	9	$	(3,312	)
Balance as of December 31, 2019	$	(2,827	)	$	9	$	(2,818	)
Reclassification to interest expense		604			-		604
Tax effect		(133	)		-		(133	)
Balance as of June 30, 2020	$	(2,356	)	$	9	$	(2,347	)

Interest Rate Derivatives

As of June 30, 2020, there was $3.1 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 both $0.3 million for the three months ended June 30, 2020 and 2019.  Net realized losses reclassified into earnings were $0.6 million and $0.7 million for the six months ended June 30, 2020 and 2019, respectively. Net realized losses expected to be reclassified into earnings within the next 12 months are $1.1 million as of June 30, 2020.

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Summary of Significant Accounting Policies (Policies)

6 Months Ended

Jun. 30, 2020

Accounting Policies [Abstract]

Warrant Liability

Warrant Liability

Common stock warrants that are classified as a liability are marked-to-market at the end of each reporting period with changes in fair value recorded in Unrealized (gain) loss on financial instruments.  We utilize a Monte Carlo simulation approach to estimate the fair value of the warrant liability, 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.  Our earnings are affected by changes in our common stock price due to the impact those changes have on the fair value of our warrant liability (see Note 5 for further discussion).

Heavy Maintenance

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 $10.3 million and $5.3 million for the three months ended June 30, 2020 and 2019, respectively, and was $18.2 million and $9.7 million for the six months ended June 30, 2020 and 2019, respectively.

Deferred maintenance included within Deferred costs and other assets is as follows:  

Balance as of December 31, 2019	$	184,279
Deferred maintenance costs		24,307
Amortization of deferred maintenance		(18,237	)
Balance as of June 30, 2020	$	190,349

Recent Accounting Pronouncements

Recent Accounting Pronouncements Adopted in 2020

In November 2019, the Financial Accounting Standards Board (“FASB”) amended its accounting guidance for share-based payment awards issued to a customer. The amended guidance requires share-based payment awards issued to a customer to be recorded as a reduction of the transaction price in revenue based on the fair value at grant date and to be classified on the balance sheet using accounting guidance for stock-based compensation. The amended guidance was effective for fiscal years beginning after December 15, 2019. Effective January 1, 2020, we adopted the amended guidance and applied the modified retrospective approach to the most current period presented.  As a result, $14.6 million, or approximately 60% of our customer warrant liability of $24.3 million related to revenue contracts, which was included in Financial instruments and other liabilities as of December 31, 2019, was reclassified as Additional paid-in-capital within Total stockholders’ equity on January 1, 2020.  As a result, these customer warrants are no longer marked-to-market at the end of each reporting period with changes in fair value recorded as an unrealized (gain) loss on financial instruments.  The amended guidance did not impact the accounting for the remaining portion of our customer warrant liability related to Dry Lease contracts, which was approximately $9.7 million or approximately 40% of the total customer warrant liability as of December 31, 2019. The new guidance did not impact how we account for the amortization of the customer incentive asset (see Note 5 for further discussion).

In June 2016, the FASB amended its accounting guidance for the measurement of credit losses on financial instruments. The guidance requires entities to utilize an expected credit loss model for certain financial instruments, including most trade receivables, which replaces the incurred credit loss model previously used.  Under this new model, we are required to recognize estimated credit losses expected to occur over time using a broad range of information including historical information, current conditions and reasonable and supportable forecasts. Receivables related to lease contracts are not within the scope of this amended guidance. Effective January 1, 2020, we adopted the amended guidance under the modified retrospective approach and it did not have a material impact on our consolidated financial statements and related disclosures (see Note 6).

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Summary of Significant Accounting Policies (Tables)

6 Months Ended

Jun. 30, 2020

Accounting Policies [Abstract]

Schedule of Deferred Maintenance

Deferred maintenance included within Deferred costs and other assets is as follows

Balance as of December 31, 2019	$	184,279
Deferred maintenance costs		24,307
Amortization of deferred maintenance		(18,237	)
Balance as of June 30, 2020	$	190,349

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Related Parties (Tables)

6 Months Ended

Jun. 30, 2020

Related Party Transactions [Abstract]

Summary of Transactions with Polar

The following table summarizes our transactions with Polar:

	For the Three Months Ended				For the Six Months Ended
Revenue and Expenses:	June 30, 2020		June 30, 2019		June 30, 2020		June 30, 2019
Revenue from Polar	$	82,858	$	99,889	$	159,092	$	198,356
Ground handling and airport fees to Polar		1,067		545		1,593		1,063
Accounts receivable/payable as of:	June 30, 2020		December 31, 2019
Receivables from Polar	$	26,370	$	10,855
Payables to Polar		1,841		2,161
Aggregate Carrying Value of Polar Investment as of:	June 30, 2020		December 31, 2019
Aggregate Carrying Value of Polar Investment	$	4,870	$	4,870

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Amazon (Tables)

6 Months Ended

Jun. 30, 2020

Warrants And Rights Note Disclosure [Abstract]

Summary of Customer Incentive Asset within Deferred Costs and Other Assets

Customer incentive asset included within Deferred costs and other assets is as follows:

Balance at December 31, 2019	$	152,534
Initial value for estimate of vested or expected to vest warrants		5,186
Amortization of customer incentive asset		(18,556	)
Balance at June 30, 2020	$	139,164

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Supplemental Financial Information (Tables)

6 Months Ended

Jun. 30, 2020

Supplemental Financial Information [Abstract]

Summary of Allowance for Expected Credit Losses

Allowance for expected credit losses, included within Accounts receivable, is as follows:

Balance as of December 31, 2019	$	1,822
Bad debt recovery		(6	)
Amounts written off, net of recoveries		(930	)
Balance as of June 30, 2020	$	886

Schedule of Accrued Liabilities

Accrued liabilities consisted of the following as of: 

	June 30, 2020		December 31, 2019
Maintenance	$	161,975	$	136,315
Deferred grant income		132,877		-
Customer maintenance reserves		96,131		110,355
Salaries, wages and benefits		88,180		75,719
Deferred revenue		38,437		26,357
Aircraft fuel		34,726		28,821
Other		100,927		104,158
Accrued liabilities	$	653,253	$	481,725

Summary of Significant Changes in Revenue Contract Liability Balances

Significant changes in our Revenue contract liability balances during the six months ended June 30, 2020 were as follows:

	Deferred Revenue
Balance as of December 31, 2019	$	19,234
Revenue recognized		(95,027	)
Amounts collected or invoiced		108,556
Balance as of June 30, 2020	$	32,763

Reconciliation of Cash, Cash Equivalents and Restricted Cash

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

	June 30, 2020		December 31, 2019
Cash and cash equivalents	$	726,402	$	103,029
Restricted cash		12,776		10,401
Total Cash, cash equivalents and restricted cash shown in Consolidated Statements of Cash Flows	$	739,178	$	113,430

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Debt (Tables)

6 Months Ended

Jun. 30, 2020

Debt Disclosure [Abstract]

Schedule of Convertible Notes

The Convertible Notes consisted of the following as of June 30, 2020:

	2017 Convertible Notes			2015 Convertible Notes
Remaining life in months		47			23
Liability component:
Gross proceeds	$	289,000		$	224,500
Less: debt discount, net of amortization		(42,795	)		(16,934	)
Less: debt issuance cost, net of amortization		(3,318	)		(1,569	)
Net carrying amount	$	242,887		$	205,997
Equity component (1)	$	70,140		$	52,903

(1) Included in Additional paid-in-capital on the consolidated balance sheet as of June 30, 2020.

Summary of Interest Expense Recognized

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

	For the Three Months Ended				For the Six Months Ended
	June 30, 2020		June 30, 2019		June 30, 2020		June 30, 2019
Contractual interest coupon	$	2,618	$	2,618	$	5,235	$	5,235
Amortization of debt discount		4,457		4,186		8,845		8,308
Amortization of debt issuance costs		391		375		777		747
Total interest expense recognized	$	7,466	$	7,179	$	14,857	$	14,290

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Financial Instruments (Tables)

6 Months Ended

Jun. 30, 2020

Fair Value Disclosures [Abstract]

Summary of Carrying Value, Estimated Fair Value and Classification of Financial Instruments

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

	June 30, 2020
	Carrying Value		Fair Value		Level 1		Level 2		Level 3
Assets
Cash and cash equivalents	$	726,402	$	726,402	$	726,402	$	-	$	-
Restricted cash		12,776		12,776		12,776		-		-
	$	739,178	$	739,178	$	739,178	$	-	$	-
Liabilities
Term loans and notes	$	1,850,350	$	1,886,041	$	-	$	-	$	1,886,041
Revolver		175,000		170,057		-		-		170,057
Convertible notes (1)		448,883		479,134		479,134		-		-
Customer warrant		39,539		39,539		-		39,539		-
	$	2,513,772	$	2,574,771	$	479,134	$	39,539	$	2,056,098

	December 31, 2019
	Carrying Value		Fair Value		Level 1		Level 2		Level 3
Assets
Cash and cash equivalents	$	103,029	$	103,029	$	103,029	$	-	$	-
Short-term investments		879		879		-		-		879
Restricted cash		10,401		10,401		10,401		-		-
	$	114,309	$	114,309	$	113,430	$	-	$	879
Liabilities
Term loans and notes	$	1,800,911	$	1,885,750	$	-	$	-	$	1,885,750
Revolver		100,000		103,575		-		-		103,575
Convertible notes (1)		439,261		450,668		450,668		-		-
Customer warrant		24,345		24,345		-		24,345		-
	$	2,364,517	$	2,464,338	$	450,668	$	24,345	$	1,989,325

(1) Carrying value is net of debt discounts and debt issuance costs (see Note 8).

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Segment Reporting (Tables)

6 Months Ended

Jun. 30, 2020

Segment Reporting Tables [Abstract]

Operating Revenue and Direct Contribution For Our Reportable Business Segments

The following table sets forth Operating Revenue and Direct Contribution for our reportable segments reconciled to Operating Income and Income (loss) before income taxes:

	For the Three Months Ended						For the Six Months Ended
	June 30, 2020			June 30, 2019			June 30, 2020			June 30, 2019
Operating Revenue:
ACMI	$	291,951		$	307,278		$	570,695		$	613,845
Charter		497,547			315,679			825,176			620,793
Dry Leasing		40,906			43,535			82,832			113,481
Customer incentive asset amortization		(9,534	)		(6,936	)		(18,556	)		(13,222	)
Other		4,383			4,362			8,608			8,704
Total Operating Revenue	$	825,253		$	663,918		$	1,468,755		$	1,343,601

Direct Contribution:
ACMI	$	14,495		$	40,640		$	66,802		$	80,647
Charter		185,969			14,084			236,750			43,217
Dry Leasing		9,721			11,091			20,420			46,618
Total Direct Contribution for Reportable Segments		210,185			65,815			323,972			170,482
Unallocated expenses and (income), net		(50,308	)		(81,927	)		(139,029	)		(162,064	)
Loss on early extinguishment of debt		(74	)		-			(74	)		(245	)
Unrealized gain (loss) on financial instruments		(30,671	)		42,300			(29,747	)		(4,275	)
Special charge		(15,934	)		(3,269	)		(15,934	)		(3,269	)
Transaction-related expenses		(1,275	)		(734	)		(1,796	)		(3,261	)
Gain (loss) on disposal of aircraft		(2	)		-			6,715			-
Income (loss) before income taxes		111,921			22,185			144,107			(2,632	)
Add back (subtract):
Interest income		(224	)		(1,278	)		(704	)		(3,322	)
Interest expense		28,950			30,045			58,225			60,398
Capitalized interest		(132	)		(627	)		(325	)		(1,090	)
Loss on early extinguishment of debt		74			-			74			245
Unrealized (gain) loss on financial instruments		30,671			(42,300	)		29,747			4,275
Other (income) expense, net		(50,598	)		945			(49,392	)		(2,030	)
Operating Income	$	120,662		$	8,970		$	181,732		$	55,844

Schedule of Disaggregated Charter Segment Revenue by Customer and Service Type

The following table disaggregates our Charter segment revenue by customer and service type:

	For the Three Months Ended
	June 30, 2020							June 30, 2019
		Cargo		Passenger		Total		Cargo		Passenger		Total
Commercial customers		$	394,062	$	17	$	394,079	$	133,178	$	3,054	$	136,232
AMC			49,762		53,706		103,468		92,017		87,430		179,447
Total Charter Revenue		$	443,824	$	53,723	$	497,547	$	225,195	$	90,484	$	315,679
	For the Six Months Ended
		June 30, 2020						June 30, 2019
		Cargo		Passenger		Total		Cargo		Passenger		Total
Commercial customers		$	568,551	$	3,122	$	571,673	$	282,082	$	10,661	$	292,743
AMC			112,236		141,267		253,503		149,463		178,587		328,050
Total Charter Revenue		$	680,787	$	144,389	$	825,176	$	431,545	$	189,248	$	620,793

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Earnings Per Share (Tables)

6 Months Ended

Jun. 30, 2020

Earnings Per Share [Abstract]

Calculations of Basic and Diluted EPS

The calculations of basic and diluted EPS were as follows:

	For the Three Months Ended					For the Six Months Ended
Numerator:	June 30, 2020		June 30, 2019			June 30, 2020		June 30, 2019
Net Income	$	78,912	$	86,868		$	102,265	$	57,158
Less: Unrealized gain on financial instruments, net of tax		-		(43,379	)		-		-
Diluted Net income	$	78,912	$	43,489		$	102,265	$	57,158
Denominator:
Basic EPS weighted average shares outstanding		26,129		25,851			26,048		25,794
Effect of dilutive warrants		9		1,089			4		-
Effect of dilutive restricted stock		44		13			22		127
Diluted EPS weighted average shares outstanding		26,182		26,953			26,074		25,921
Earnings per share:
Basic	$	3.02	$	3.36		$	3.93	$	2.22
Diluted	$	3.01	$	1.61		$	3.92	$	2.21

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Accumulated Other Comprehensive Income (Loss) (Tables)

6 Months Ended

Jun. 30, 2020

Accumulated Other Comprehensive Income Loss [Abstract]

Components of 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, 2018	$	(3,841	)	$	9	$	(3,832	)
Reclassification to interest expense		681			-		681
Tax effect		(161	)		-		(161	)
Balance as of June 30, 2019	$	(3,321	)	$	9	$	(3,312	)
Balance as of December 31, 2019	$	(2,827	)	$	9	$	(2,818	)
Reclassification to interest expense		604			-		604
Tax effect		(133	)		-		(133	)
Balance as of June 30, 2020	$	(2,356	)	$	9	$	(2,347	)

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Basis of Presentation - Additional Information (Details) - Polar [Member]	6 Months Ended
	Jun. 30, 2020
Basis Of Presentation [Line Items]
Equity interest	51.00%
Voting interest	75.00%

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Summary of Significant Accounting Policies - Additional Information (Details) - USD ($) $ in Thousands		3 Months Ended		6 Months Ended
	Jan. 01, 2020	Jun. 30, 2020	Jun. 30, 2019	Jun. 30, 2020	Jun. 30, 2019
Significant Accounting Policies [Line Items]
Deferred maintenance amortization expense		$ 10,300	$ 5,300	$ 18,237	$ 9,700
Customer warrant liability reclassified as additional paid in capital	$ 14,600
Percentage of customer warrant liability	60.00%
Customer warrant liability	$ 24,300
Dry Leases [Member]
Significant Accounting Policies [Line Items]
Percentage of customer warrant liability	40.00%
Customer warrant liability	$ 9,700

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Summary of Significant Accounting Policies - Schedule of Deferred Maintenance (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2020	Jun. 30, 2019	Jun. 30, 2020	Jun. 30, 2019
Accounting Policies [Abstract]
Beginning Balance			$ 184,279
Deferred maintenance costs			24,307
Amortization of deferred maintenance	$ (10,300)	$ (5,300)	(18,237)	$ (9,700)
Ending Balance	$ 190,349		$ 190,349

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COVID-19 Pandemic - Additional Information (Details) $ / shares in Units, $ in Thousands					3 Months Ended		6 Months Ended
	Jul. 30, 2020 USD ($) shares	Jun. 29, 2020 USD ($)	Jun. 01, 2020 USD ($)	May 29, 2020 USD ($) Installment	Jun. 30, 2020 USD ($) $ / shares shares	Jun. 30, 2019 USD ($)	Jun. 30, 2020 USD ($) $ / shares shares	Jun. 30, 2019 USD ($)
Collaborative Arrangements And Noncollaborative Arrangement Transactions [Line Items]
Operating Revenue					$ 825,253	$ 663,918	$ 1,468,755	$ 1,343,601
Payroll Support Program Agreement [Member] | Grant [Member]
Collaborative Arrangements And Noncollaborative Arrangement Transactions [Line Items]
Operating Revenue					$ 20,200		$ 20,200
Payroll Support Program Agreement [Member] | US Treasury [Member]
Collaborative Arrangements And Noncollaborative Arrangement Transactions [Line Items]
Number of installment | Installment				3
Payroll support funding				$ 406,800
Number of warrants issued to acquire common stock | shares					447,180		447,180
Exercise price of warrants exercisable | $ / shares					$ 31.95		$ 31.95
Warrants grant date fair value recognized as additional paid in capital					$ 9,200		$ 9,200
Number of warrant exercised | shares					0		0
Payroll Support Program Agreement [Member] | US Treasury [Member] | Commercial Paper
Collaborative Arrangements And Noncollaborative Arrangement Transactions [Line Items]
Proceeds from line of credit							$ 142,900
Interest on outstanding principal amount until fifth anniversary				1.00%
Payroll Support Program Agreement [Member] | US Treasury [Member] | Commercial Paper | SOFR [Member]
Collaborative Arrangements And Noncollaborative Arrangement Transactions [Line Items]
Percentage of additional bears interest after fifth anniversary				2.00%
Payroll Support Program Agreement [Member] | US Treasury [Member] | Subsequent Event [Member] | Maximum [Member]
Collaborative Arrangements And Noncollaborative Arrangement Transactions [Line Items]
Number of warrants issued to acquire common stock | shares	625,452
Payroll Support Program Agreement [Member] | US Treasury [Member] | Subsequent Event [Member] | Commercial Paper
Collaborative Arrangements And Noncollaborative Arrangement Transactions [Line Items]
Proceeds from line of credit	$ 199,800
Payroll Support Program Agreement [Member] | US Treasury [Member] | First Installment on June 1, 2020 [Member]
Collaborative Arrangements And Noncollaborative Arrangement Transactions [Line Items]
Payroll support funding received			$ 203,400
Payroll Support Program Agreement [Member] | US Treasury [Member] | Second Installment on June 29, 2020 [Member]
Collaborative Arrangements And Noncollaborative Arrangement Transactions [Line Items]
Payroll support funding received		$ 101,700
Payroll Support Program Agreement [Member] | US Treasury [Member] | Third Installment on July 30, 2020 [Member]
Collaborative Arrangements And Noncollaborative Arrangement Transactions [Line Items]
Payroll support funding received	$ 101,700

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Related Parties - Polar - Additional Information (Details) - USD ($) $ in Millions	3 Months Ended		6 Months Ended
	Jun. 30, 2020	Jun. 30, 2019	Jun. 30, 2020	Jun. 30, 2019
Polar [Member]
Related Party Transaction [Line Items]
Revenue recognized	$ 83.1	$ 23.1	$ 110.5	$ 46.4
Polar [Member]
Related Party Transaction [Line Items]
Equity interest	51.00%		51.00%
Voting interest			75.00%
DHL [Member] | Polar [Member]
Related Party Transaction [Line Items]
Equity interest	49.00%		49.00%
Voting interest			25.00%

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Related Parties - Summary of Transactions with Polar (Details) - Polar [Member] - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2020	Jun. 30, 2019	Jun. 30, 2020	Jun. 30, 2019	Dec. 31, 2019
Related Party Transaction [Line Items]
Revenue from related party	$ 82,858	$ 99,889	$ 159,092	$ 198,356
Ground handling and airport fees to Polar	1,067	$ 545	1,593	$ 1,063
Receivables from related party	26,370		26,370		$ 10,855
Payables to related party	1,841		1,841		2,161
Aggregate Carrying Value of Polar Investment	$ 4,870		$ 4,870		$ 4,870

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Related Parties - Dry Leasing Joint Venture - Additional Information (Details) - Dry Leasing Joint Venture [Member] - USD ($)	1 Months Ended	3 Months Ended	6 Months Ended
	Dec. 31, 2019	Jun. 30, 2020	Jun. 30, 2020
Related Party Transaction [Line Items]
Voting interest	10.00%
Investment in joint venture	$ 1,500,000	$ 500,000	$ 500,000
Capital contributions		0	0
Accounts receivable from joint venture		1,300,000	1,300,000
Service fee income		0	0
Maximum [Member]
Related Party Transaction [Line Items]
Commitment to capital contributions		$ 40,000,000.0	$ 40,000,000.0

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Related Parties - Parts Joint Venture - Additional Information (Details) - Parts Joint Venture [Member] - Variable Interest Entity Not Primary Beneficiary [Member] - USD ($) $ in Millions	6 Months Ended	12 Months Ended
	Jun. 30, 2020	Dec. 31, 2019
Related Party Transaction [Line Items]
Voting interest	50.00%	50.00%
Investment in joint venture	$ 18.9	$ 20.0
Payables to related party	$ 1.1	$ 0.5

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Amazon - Additional Information (Details) - USD ($) $ / shares in Units, $ in Thousands		1 Months Ended		3 Months Ended		6 Months Ended		12 Months Ended
	Jan. 01, 2020	Mar. 31, 2019	May 31, 2016	Jun. 30, 2020	Jun. 30, 2019	Jun. 30, 2020	Jun. 30, 2019	Dec. 31, 2018	Dec. 31, 2019
Class Of Warrant Or Right [Line Items]
Revenues				$ 825,253	$ 663,918	$ 1,468,755	$ 1,343,601
Percentage of customer warrant liability	60.00%
Warrant liability unrealized (gains) losses				30,700	(42,300)	29,700	4,300
Fair value of warrant liability				39,500		39,500			$ 24,300
Amortization of customer incentive asset				$ 9,500	$ 6,900	$ 18,556	$ 13,200
Warrant A [Member]
Class Of Warrant Or Right [Line Items]
Right to acquire outstanding common shares						up to 20% of our outstanding common shares
Warrant exercise price			$ 37.34
Warrant for number of shares fully vested								7,500,000
Warrant vesting year			2021-05
Warrants exercised						0
Exercise price of warrants exercisable			$ 37.34
Warrant B [Member]
Class Of Warrant Or Right [Line Items]
Warrant exercise price			37.34
Warrants exercised						0
Additional warrant to acquire outstanding shares						up to an additional 10% of our outstanding common shares
Exercise price of warrants exercisable			$ 37.34
Additional warrant to buy number of shares vesting			3,770,000
Vesting increments of Amazon warrants			37,660
Revenues			$ 4,200
Warrant vested				225,690		225,690
Additional warrant vesting year			2023-05
Warrant C [Member]
Class Of Warrant Or Right [Line Items]
Right to acquire outstanding common shares						up to an additional 9.9% of our outstanding common shares
Warrant exercise price		$ 52.67
Warrant vesting year						2026-03
Exercise price of warrants exercisable		$ 52.67
Vesting increments of Amazon warrants		45,623
Revenues		$ 6,900
Warrant vested				0		0
Incremental warrant to buy number of shares vesting.		6,660,000
Warrant A, B and C [Member]
Class Of Warrant Or Right [Line Items]
Right to acquire outstanding common shares						up to a total of 39.9% (after the issuance) of our outstanding common shares
Maximum [Member]
Class Of Warrant Or Right [Line Items]
Amazon entitled to vote shares of it owns of outstanding common shares percentage		14.90%
Maximum [Member] | Warrant A [Member]
Class Of Warrant Or Right [Line Items]
Warrant providing right to acquire outstanding common shares percentage			20.00%
Maximum [Member] | Warrant B [Member]
Class Of Warrant Or Right [Line Items]
Percentage of additional warrant to acquire outstanding common shares			10.00%
Revenues			$ 420,000
Maximum [Member] | Warrant C [Member]
Class Of Warrant Or Right [Line Items]
Warrant providing right to acquire outstanding common shares percentage		9.90%
Revenues		$ 1,000,000
Maximum [Member] | Warrant A, B and C [Member]
Class Of Warrant Or Right [Line Items]
Warrant providing right to acquire outstanding common shares percentage		39.90%
Dry Leases [Member]
Class Of Warrant Or Right [Line Items]
Lease term				10 years		10 years
Percentage of customer warrant liability	40.00%
CMI Operation [Member]
Class Of Warrant Or Right [Line Items]
Lease term		7 years		7 years		7 years
Lease term option to extend		true				true
Lease term of extension		10 years		10 years		10 years
Percentage of customer warrant liability	60.00%

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Amazon - Summary of Customer Incentive Asset within Deferred Costs and Other Assets (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2020	Jun. 30, 2019	Jun. 30, 2020	Jun. 30, 2019
Warrants And Rights Note Disclosure [Abstract]
Balance at December 31, 2019			$ 152,534
Initial value for estimate of vested or expected to vest warrants			5,186
Amortization of customer incentive asset	$ (9,500)	$ (6,900)	(18,556)	$ (13,200)
Balance at June 30, 2020	$ 139,164		$ 139,164

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Supplemental Financial Information - Additional Information (Details) - USD ($) $ in Millions	Jun. 30, 2020	Dec. 31, 2019
Supplemental Financial Information [Abstract]
Accounts receivable related to customer contracts excluding dry leasing contracts	$ 189.5	$ 247.5

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Supplemental Financial Information - Summary of Allowance for Expected Credit Losses (Details) $ in Thousands	6 Months Ended
	Jun. 30, 2020 USD ($)
Supplemental Financial Information [Abstract]
Balance as of December 31, 2019	$ 1,822
Bad debt recovery	(6)
Amounts written off, net of recoveries	(930)
Balance as of June 30, 2020	$ 886

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Supplemental Financial Information - Schedule of Accrued Liabilities (Details) - USD ($) $ in Thousands	Jun. 30, 2020	Dec. 31, 2019
Supplemental Financial Information [Abstract]
Maintenance	$ 161,975	$ 136,315
Deferred grant income	132,877	0
Customer maintenance reserves	96,131	110,355
Salaries, wages and benefits	88,180	75,719
Deferred revenue	38,437	26,357
Aircraft fuel	34,726	28,821
Other	100,927	104,158
Accrued liabilities	$ 653,253	$ 481,725

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Supplemental Financial Information - Summary of Significant Changes in Revenue Contract Liability Balances (Details) - Non-Dry Lease Revenue Contracts with Customers [Member] $ in Thousands	6 Months Ended
	Jun. 30, 2020 USD ($)
Revenue Recognition [Line Items]
Balance as of December 31, 2019	$ 19,234
Revenue recognized	(95,027)
Amounts collected or invoiced	108,556
Balance as of June 30, 2020	$ 32,763

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Supplemental Financial Information - Reconciliation of Cash, Cash Equivalents and Restricted Cash (Details) - USD ($) $ in Thousands	Jun. 30, 2020	Dec. 31, 2019	Jun. 30, 2019	Dec. 31, 2018
Supplemental Financial Information [Abstract]
Cash and cash equivalents	$ 726,402	$ 103,029
Restricted cash	12,776	10,401
Total Cash, cash equivalents and restricted cash shown in Consolidated Statements of Cash Flows	$ 739,178	$ 113,430	$ 120,758	$ 232,741

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Assets Held For Sale and Other Income - Additional Information (Details) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2020 USD ($) Engine	Jun. 30, 2019 USD ($)	Jun. 30, 2020 USD ($) Engine	Jun. 30, 2019 USD ($)	Dec. 31, 2019 USD ($) Engine
Impairment Of Aircraft Engines Held For Sale [Line Items]
Net gain from sale of aircraft	$ (2)	$ 0	$ 6,715	$ 0
Net proceeds from sale of aircraft			44,110	0
Impairment loss on assets held for sale	15,934	$ 3,269	15,934	$ 3,269
Prepaid Expenses and Other Current Assets [Member]
Impairment Of Aircraft Engines Held For Sale [Line Items]
Carrying value of asset held for sale	$ 99,000		$ 99,000		$ 155,900
Certain Spare CF6-80 Engines [Member]
Impairment Of Aircraft Engines Held For Sale [Line Items]
Number of aircraft held for sale | Engine	2		2
Aircraft Engines [Member] | Other (Income) Expense , Net [Member]
Impairment Of Aircraft Engines Held For Sale [Line Items]
Aircraft rent refunds	$ 31,500		$ 32,900
Dry Leasing Portfolio [Member]
Impairment Of Aircraft Engines Held For Sale [Line Items]
Number of aircraft held for sale | Engine	2		2		3

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Debt - Term Loans - Additional Information (Details)		1 Months Ended
	Feb. 01, 2020 USD ($) TermLoan	Apr. 30, 2020 USD ($)
Secured Term Loan [Member]
Debt Instrument [Line Items]
Number of term loans | TermLoan	2
Secured Term Loan [Member] | First 2020 Term Loan [Member]
Debt Instrument [Line Items]
Debt instrument, term	126 months
Debt instrument face amount	$ 82,000,000.0
Debt instrument fixed interest rate	3.27%
Debt instrument final payment	$ 12,500,000
Debt instrument maturity	2030-07
Secured Term Loan [Member] | Second 2020 Term Loan [Member]
Debt Instrument [Line Items]
Debt instrument, term	130 months
Debt instrument face amount	$ 82,000,000.0
Debt instrument fixed interest rate	3.28%
Debt instrument final payment	$ 12,500,000
Debt instrument maturity	2030-11
Unsecured Term Loan [Member] | Third 2020 Term Loan [Member]
Debt Instrument [Line Items]
Debt instrument, term		5 years
Debt instrument face amount		$ 14,600,000
Debt instrument fixed interest rate		1.15%
Debt instrument maturity		2025-04

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Debt - Convertible Notes - Additional Information (Details) - USD ($) $ in Thousands	1 Months Ended
	May 31, 2017	Jun. 30, 2015	Jun. 30, 2020
2017 Convertible Notes [Member]
Debt Instrument [Line Items]
Convertible notes aggregate principal amount	$ 289,000		$ 289,000
Convertible notes, interest rate	1.875%
Convertible notes, date of maturity	Jun. 01, 2024
2015 Convertible Notes [Member]
Debt Instrument [Line Items]
Convertible notes aggregate principal amount		$ 224,500	$ 224,500
Convertible notes, interest rate		2.25%
Convertible notes, date of maturity		Jun. 01, 2022

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Debt - Schedule of Convertible Notes (Details) - USD ($) $ in Thousands		6 Months Ended
		Jun. 30, 2020	May 31, 2017	Jun. 30, 2015
2017 Convertible Notes [Member]
Debt Instrument [Line Items]
Remaining life in months		47 months
Gross proceeds		$ 289,000	$ 289,000
Less: debt discount, net of amortization		(42,795)
Less: debt issuance cost, net of amortization		(3,318)
Net carrying amount		242,887
Equity component	[1]	$ 70,140
2015 Convertible Notes [Member]
Debt Instrument [Line Items]
Remaining life in months		23 months
Gross proceeds		$ 224,500		$ 224,500
Less: debt discount, net of amortization		(16,934)
Less: debt issuance cost, net of amortization		(1,569)
Net carrying amount		205,997
Equity component	[1]	$ 52,903

[1] Included in Additional paid-in-capital on the consolidated balance sheet as of June 30, 2020.

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Debt - Summary of Interest Expense Recognized (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2020	Jun. 30, 2019	Jun. 30, 2020	Jun. 30, 2019
Short Term Debt [Line Items]
Total interest expense recognized	$ 28,950	$ 30,045	$ 58,225	$ 60,398
Convertible Notes [Member]
Short Term Debt [Line Items]
Contractual interest coupon	2,618	2,618	5,235	5,235
Amortization of debt discount	4,457	4,186	8,845	8,308
Amortization of debt issuance costs	391	375	777	747
Total interest expense recognized	$ 7,466	$ 7,179	$ 14,857	$ 14,290

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Debt - Revolving Credit Facility - Additional Information (Details) - Revolver [Member] - USD ($) $ in Millions		6 Months Ended
	Aug. 06, 2020	Jun. 30, 2020	Jul. 31, 2020
Debt Instrument [Line Items]
Borrowing capacity		$ 200.0
Debt instrument maturity		2022-12
Outstanding balance		$ 175.0
Unused availability		$ 16.2
Subsequent Event [Member]
Debt Instrument [Line Items]
Unused availability	$ 200.0		$ 25.0
Repayment line of credit outstanding balance	$ 175.0

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Income Taxes - Additional Information (Details) - U.S. Internal Revenue Service [Member] - USD ($) $ in Millions	3 Months Ended		6 Months Ended
	Jun. 30, 2020	Jun. 30, 2019	Jun. 30, 2020	Jun. 30, 2019
Income Taxes [Line Items]
Tax (benefits) expense related to favorable completion of examination		$ (59.8)		$ (59.8)
Income tax examination tax year under examination			2015
Nontaxable changes in fair value of customer warrant liability		$ 9.3
Non deductible changes In fair value of customer warrant liability	$ 6.7		$ 6.5

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Financial Instruments - Summary of Carrying Value, Estimated Fair Value and Classification of Financial Instruments (Details) - USD ($) $ in Thousands		Jun. 30, 2020	Dec. 31, 2019
Assets
Short-term investments		$ 0	$ 879
Restricted cash		12,776	10,401
Liabilities
Customer warrant		139,164	152,534
Carrying (Reported) Amount, Fair Value Disclosure [Member]
Assets
Cash and cash equivalents		726,402	103,029
Short-term investments			879
Restricted cash		12,776	10,401
Financial instruments assets		739,178	114,309
Liabilities
Term loans and notes		1,850,350	1,800,911
Revolver		175,000	100,000
Convertible notes	[1]	448,883	439,261
Customer warrant		39,539	24,345
Financial instruments liabilities		2,513,772	2,364,517
Estimate of Fair Value, Fair Value Disclosure [Member]
Assets
Cash and cash equivalents		726,402	103,029
Short-term investments			879
Restricted cash		12,776	10,401
Financial instruments assets		739,178	114,309
Liabilities
Term loans and notes		1,886,041	1,885,750
Revolver		170,057	103,575
Convertible notes	[1]	479,134	450,668
Customer warrant		39,539	24,345
Financial instruments liabilities		2,574,771	2,464,338
Fair Value, Inputs, Level 1 [Member]
Assets
Cash and cash equivalents		726,402	103,029
Short-term investments			0
Restricted cash		12,776	10,401
Financial instruments assets		739,178	113,430
Liabilities
Term loans and notes		0	0
Revolver		0	0
Convertible notes	[1]	479,134	450,668
Customer warrant		0	0
Financial instruments liabilities		479,134	450,668
Fair Value, Inputs, Level 2 [Member]
Assets
Cash and cash equivalents		0	0
Short-term investments			0
Restricted cash		0	0
Financial instruments assets		0	0
Liabilities
Term loans and notes		0	0
Revolver		0	0
Convertible notes	[1]	0	0
Customer warrant		39,539	24,345
Financial instruments liabilities		39,539	24,345
Fair Value, Inputs, Level 3 [Member]
Assets
Cash and cash equivalents		0	0
Short-term investments			879
Restricted cash		0	0
Financial instruments assets		0	879
Liabilities
Term loans and notes		1,886,041	1,885,750
Revolver		170,057	103,575
Convertible notes	[1]	0	0
Customer warrant		0	0
Financial instruments liabilities		$ 2,056,098	$ 1,989,325

[1] Carrying value is net of debt discounts and debt issuance costs (see Note 8).

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Segment Reporting - Additional Information (Details) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2020 USD ($)	Jun. 30, 2019 USD ($)	Jun. 30, 2020 USD ($) Segment	Jun. 30, 2019 USD ($)
Segment Reporting Information [Line Items]
Number of operating segments | Segment			3
Operating Revenue	$ 825,253	$ 663,918	$ 1,468,755	$ 1,343,601
DHL [Member]
Segment Reporting Information [Line Items]
Operating Revenue	$ 151,900	$ 87,400	$ 250,200	$ 177,100

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Segment Reporting - Operating Revenue and Direct Contribution For Our Reportable Business Segments (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2020	Jun. 30, 2019	Jun. 30, 2020	Jun. 30, 2019
Operating Revenue:
Customer incentive asset amortization	$ (9,534)	$ (6,936)	$ (18,556)	$ (13,222)
Other	4,383	4,362	8,608	8,704
Total Operating Revenue	825,253	663,918	1,468,755	1,343,601
Direct Contribution:
Total Direct Contribution for Reportable Segments	210,185	65,815	323,972	170,482
Unallocated expenses and (income), net	(50,308)	(81,927)	(139,029)	(162,064)
Loss on early extinguishment of debt	(74)	0	(74)	(245)
Unrealized gain (loss) on financial instruments	(30,671)	42,300	(29,747)	(4,275)
Special charge	(15,934)	(3,269)	(15,934)	(3,269)
Transaction-related expenses	(1,275)	(734)	(1,796)	(3,261)
Gain (loss) on disposal of aircraft	(2)	0	6,715	0
Income (loss) before income taxes	111,921	22,185	144,107	(2,632)
Interest income	(224)	(1,278)	(704)	(3,322)
Interest expense	28,950	30,045	58,225	60,398
Capitalized interest	(132)	(627)	(325)	(1,090)
Loss on early extinguishment of debt	74	0	74	245
Unrealized (gain) loss on financial instruments	30,671	(42,300)	29,747	4,275
Other (income) expense, net	(50,598)	945	(49,392)	(2,030)
Operating Income	120,662	8,970	181,732	55,844
ACMI [Member]
Operating Revenue:
Operating Revenue	291,951	307,278	570,695	613,845
Direct Contribution:
Total Direct Contribution for Reportable Segments	14,495	40,640	66,802	80,647
Charter [Member]
Operating Revenue:
Operating Revenue	497,547	315,679	825,176	620,793
Direct Contribution:
Total Direct Contribution for Reportable Segments	185,969	14,084	236,750	43,217
Dry Leasing [Member]
Operating Revenue:
Operating Revenue	40,906	43,535	82,832	113,481
Direct Contribution:
Total Direct Contribution for Reportable Segments	$ 9,721	$ 11,091	$ 20,420	$ 46,618

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Segment Reporting - Schedule of Disaggregated Charter Segment Revenue by Customer and Service Type (Details) - Charter [Member] - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2020	Jun. 30, 2019	Jun. 30, 2020	Jun. 30, 2019
Segment Reporting Information [Line Items]
Total Charter Revenue	$ 497,547	$ 315,679	$ 825,176	$ 620,793
Commercial Customers [Member]
Segment Reporting Information [Line Items]
Total Charter Revenue	394,079	136,232	571,673	292,743
AMC [Member]
Segment Reporting Information [Line Items]
Total Charter Revenue	103,468	179,447	253,503	328,050
Cargo [Member]
Segment Reporting Information [Line Items]
Total Charter Revenue	443,824	225,195	680,787	431,545
Cargo [Member] | Commercial Customers [Member]
Segment Reporting Information [Line Items]
Total Charter Revenue	394,062	133,178	568,551	282,082
Cargo [Member] | AMC [Member]
Segment Reporting Information [Line Items]
Total Charter Revenue	49,762	92,017	112,236	149,463
Passenger [Member]
Segment Reporting Information [Line Items]
Total Charter Revenue	53,723	90,484	144,389	189,248
Passenger [Member] | Commercial Customers [Member]
Segment Reporting Information [Line Items]
Total Charter Revenue	17	3,054	3,122	10,661
Passenger [Member] | AMC [Member]
Segment Reporting Information [Line Items]
Total Charter Revenue	$ 53,706	$ 87,430	$ 141,267	$ 178,587

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Labor and Legal Proceedings - Additional Information (Details) - USD ($) $ in Millions		6 Months Ended
	May 01, 2020	Jun. 30, 2020	Dec. 31, 2019
Brazilian Customs Claim [Member]
Loss Contingencies [Line Items]
Brazilian claims in the aggregate		$ 3.8
Amounts on deposit for Brazilian claims included in deferred costs and other assets		$ 3.1	$ 4.1
Atlas Pilots [Member]
Loss Contingencies [Line Items]
Collective bargaining agreement period		5 years
Southern Air Pilots [Member]
Loss Contingencies [Line Items]
Collective bargaining agreement period		4 years
Atlas and Polar Dispatchers [Member]
Loss Contingencies [Line Items]
Collective bargaining agreement period		5 years
All Pilots [Member]
Loss Contingencies [Line Items]
Percentage of pay increase to pilots	10.00%

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Earnings Per Share - Calculations of Basic and Diluted EPS (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2020	Jun. 30, 2019	Jun. 30, 2020	Jun. 30, 2019
Numerator:
Net Income	$ 78,912	$ 86,868	$ 102,265	$ 57,158
Less: Unrealized gain on financial instruments, net of tax	0	(43,379)	0	0
Diluted Net income	$ 78,912	$ 43,489	$ 102,265	$ 57,158
Denominator:
Basic EPS weighted average shares outstanding	26,129	25,851	26,048	25,794
Effect of dilutive warrants	9	1,089	4	0
Effect of dilutive restricted stock	44	13	22	127
Diluted EPS weighted average shares outstanding	26,182	26,953	26,074	25,921
Earnings per share:
Basic	$ 3.02	$ 3.36	$ 3.93	$ 2.22
Diluted	$ 3.01	$ 1.61	$ 3.92	$ 2.21

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Earnings Per Share - Additional Information (Details) - shares shares in Millions	3 Months Ended		6 Months Ended
	Jun. 30, 2020	Jun. 30, 2019	Jun. 30, 2020	Jun. 30, 2019
Antidilutive Securities Excluded From Computation Of Earnings Per Share [Line Items]
Restricted shares and units in which performance or market conditions were not satisfied	10.5	10.6	10.5	10.6
Warrants [Member]
Antidilutive Securities Excluded From Computation Of Earnings Per Share [Line Items]
Anti-dilutive shares excluded from the calculation of diluted EPS	15.5	7.8	15.5	7.8

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Accumulated Other Comprehensive Income (Loss) - Components of Accumulated Other Comprehensive Income (Loss) (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2020	Jun. 30, 2019	Jun. 30, 2020	Jun. 30, 2019
Accumulated Other Comprehensive Income Loss [Line Items]
Beginning Balance	$ 1,832,750	$ 2,034,949	$ 1,792,179	$ 2,067,964
Reclassification to interest expense	296	337	604	681
Tax effect			(133)	(161)
Ending Balance	1,930,367	2,127,109	1,930,367	2,127,109
Interest Rate Derivatives [Member]
Accumulated Other Comprehensive Income Loss [Line Items]
Beginning Balance			(2,827)	(3,841)
Reclassification to interest expense			604	681
Tax effect			(133)	(161)
Ending Balance	(2,356)	(3,321)	(2,356)	(3,321)
Foreign Currency Translation [Member]
Accumulated Other Comprehensive Income Loss [Line Items]
Beginning Balance			9	9
Reclassification to interest expense			0	0
Tax effect			0	0
Ending Balance	9	9	9	9
Accumulated Other Comprehensive Income (Loss) [Member]
Accumulated Other Comprehensive Income Loss [Line Items]
Beginning Balance	(2,573)	(3,569)	(2,818)	(3,832)
Ending Balance	$ (2,347)	$ (3,312)	$ (2,347)	$ (3,312)

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Accumulated Other Comprehensive Income (Loss) - Additional Information (Details) - USD ($) $ in Millions	3 Months Ended		6 Months Ended
	Jun. 30, 2020	Jun. 30, 2019	Jun. 30, 2020	Jun. 30, 2019
Accumulated Other Comprehensive Income Loss [Abstract]
Unamortized realized loss in Accumulated other comprehensive income (loss) related to forward-starting interest rate swaps	$ 3.1		$ 3.1
Net realized losses reclassified into earnings	0.3	$ 0.3	0.6	$ 0.7
Realized losses related to forward-starting interest rate swaps expected to be reclassified into earnings within the next 12 months	$ 1.1		$ 1.1