Air T, Inc. (AIRT) is an industrious American company with a diversified portfolio of businesses, each operating independently yet interconnected. The company's core segments include overnight air cargo, ground equipment sales, commercial jet engines and parts, and corporate and other activities. Beyond these core operations, Air T also holds non-consolidated investments, notably in Crestone Asset Management, LLC and its joint venture, Crestone JV II LLC.

Company History and Evolution

Established in 1980 as a specialized freight transportation and logistics company, Air T has evolved over the decades, actively seeking out dynamic individuals and teams to helm its various subsidiaries. The company's initial focus on overnight air cargo services, particularly serving customers like FedEx, laid the foundation for its future growth and diversification. In the 1990s, Air T made a significant move by acquiring Global Ground Support, a manufacturer of mobile deicers and other specialized equipment for the aviation industry. This acquisition marked the company's entry into the ground equipment sales segment, allowing it to leverage its aviation expertise and broaden its revenue streams.

The 2000s saw Air T further expand its portfolio by venturing into the commercial jet engines and parts business. This strategic decision was driven by the growing demand for aftermarket services and aircraft disassembly. The company solidified its position in this sector through key acquisitions, including Contrail Aviation Support and Worthington Aviation. These moves demonstrated Air T's commitment to capitalizing on emerging opportunities within the commercial aviation industry.

Resilience and Strategy

Throughout its history, Air T has faced and overcome various challenges, including industry downturns, regulatory changes, and fierce competition. The company's resilience and adaptability have been key factors in its long-term success. Today, Air T's strategy revolves around leveraging corporate resources to help activate growth and overcome challenges faced by its operating units. This approach has allowed Air T to navigate the complexities of its diversified business model and create value for shareholders over the long term.

Financials

In the fiscal year ended March 31, 2024, Air T reported total revenues of $286.83 million, a modest increase from the prior year's $247.32 million. However, the company's net income during this period was a loss of $6.82 million, compared to a net loss of $12.30 million in the previous fiscal year. This improvement was driven by stronger performance in the commercial jet engines and parts segment, as well as cost-cutting measures implemented across the organization. Operating cash flow for the fiscal year 2024 was $17.18 million, with free cash flow reaching $16.10 million.

For the most recent quarter (Q2 2025), Air T reported revenue of $81.24 million, representing a 2.9% year-over-year increase. This growth was primarily driven by higher administrative fees and increased fleet size in the overnight air cargo segment, as well as increased software subscription revenue in the corporate and other segment. However, this was partially offset by lower revenue in the commercial jet engines and parts segment due to fewer whole engine sales. Net income for the quarter stood at $2.52 million, with operating cash flow of $2.93 million and free cash flow of $3.27 million.

Air T's balance sheet reflects a capital structure that has evolved to support its diversified operations. As of March 31, 2024, the company reported total assets of $177.17 million, with $125.20 million in total debt and $18.80 million in total equity (including minority interests). The company's working capital stood at $56.04 million, providing ample liquidity to fund ongoing operations and strategic initiatives.

One of the key financial metrics for Air T is its adjusted EBITDA, which serves as a proxy for the company's underlying operational performance. In the fiscal year ended March 31, 2024, Air T reported adjusted EBITDA of $6.74 million, a decrease from the prior year's $8.59 million. This decline was primarily due to lower profitability in the overnight air cargo and ground equipment sales segments, which offset improvements in the commercial jet engines and parts division.

Liquidity

As of September 30, 2024, Air T held $9.18 million in cash, cash equivalents, and restricted cash. The company also had $25.30 million in available funds under its lines of credit, providing substantial financial flexibility. The current ratio stood at 2.27, while the quick ratio was 1.14, indicating a solid short-term liquidity position. However, it's worth noting that the debt-to-equity ratio was relatively high at 18.68 as of the most recent quarter, reflecting the company's leveraged capital structure.

Segment Performance

Overnight Air Cargo Segment

The overnight air cargo segment is a significant part of Air T's business, contributing $61.57 million in revenue for the six months ended September 30, 2024. This represents a 10.1% increase compared to the same period in the prior year. The increase in revenue was primarily attributable to a higher number of aircraft operated for FedEx, up from 85 aircraft in the prior year to 105 aircraft in the current year, as well as the addition of new routes granted by FedEx. The segment generated $3.65 million in operating income for the six-month period, down slightly from $3.97 million in the prior year period, due to higher salaries and wage expenses. Adjusted EBITDA for the overnight air cargo segment was $3.90 million for the six months ended September 30, 2024, compared to $4.14 million in the same period of the prior year.

Ground Equipment Sales Segment

Air T's ground equipment sales segment manufactures and sells mobile deicers and other specialized equipment products to airlines, airports, the military, and industrial customers. For the six months ended September 30, 2024, the ground equipment sales segment generated $21.81 million in revenue, a 9.3% decrease compared to the prior year period. The decline was primarily driven by lower sales of deicing trucks, which the company believes was due to milder winter weather conditions reducing demand. The segment reported operating income of $358,000 for the six-month period, down from $97,000 in the same period of the prior year. Adjusted EBITDA for the ground equipment sales segment was $1.0 million for the six months ended September 30, 2024, compared to $28,000 in the prior year period.

Commercial Jet Engines and Parts Segment

Air T's commercial jet engines and parts segment manages and leases aviation assets, supplies surplus and aftermarket commercial jet engine components, provides commercial aircraft disassembly and part-out services, as well as overhaul and repair services to airlines. For the six months ended September 30, 2024, the segment generated $59.18 million in revenue, a 10.8% decrease compared to the prior year period. The decrease was primarily driven by a decline in whole engine sales, with five whole engine sales in the prior year period compared to none in the current year. However, the segment saw an increase in component part sales, which the company believes is driven by airlines focusing on maintaining their existing aircraft fleets rather than purchasing new equipment. The segment reported operating income of $4.74 million for the six-month period, up from $2.63 million in the same period of the prior year. Adjusted EBITDA for the commercial jet engines and parts segment was $5.81 million for the six months ended September 30, 2024, compared to $3.01 million in the prior year period.

Corporate and Other Segment

Air T's corporate and other segment primarily acts as the capital allocator and resource for the company's other consolidated businesses, as well as comprising insignificant businesses and business interests. For the six months ended September 30, 2024, the segment generated $5.10 million in revenue, a 23.9% increase compared to the prior year period. The increase was primarily attributable to higher software subscription revenue at the company's Shanwick subsidiary. The segment reported an operating loss of $4.71 million for the six-month period, an improvement from an operating loss of $5.08 million in the same period of the prior year. Adjusted EBITDA for the corporate and other segment was $3.81 million for the six months ended September 30, 2024, compared to $4.06 million in the prior year period.

Geographic Performance

Air T operates globally, with a significant presence in the United States. In the most recent fiscal year, 83.9% of the company's revenue came from the United States, while the remaining 16.1% was generated from international markets. This geographic diversification provides some insulation against regional economic fluctuations and demonstrates the company's ability to compete in global markets.

Risk Mitigation and Future Outlook

Air T's diverse business model has inherent risks and challenges. The company's overnight air cargo operations are heavily dependent on its relationship with FedEx, and any changes or disruptions to this partnership could have a significant impact on the segment's performance. Additionally, the ground equipment sales business is subject to seasonal fluctuations, with revenues and profitability typically lower in the first and fourth fiscal quarters.

The commercial jet engines and parts segment, while showing signs of improvement, continues to face industry-wide headwinds. The ongoing impact of the COVID-19 pandemic on air travel demand and the supply chain disruptions affecting the aviation industry have posed challenges for this business unit.

To mitigate these risks, Air T has taken steps to diversify its revenue streams and invest in growth opportunities. The company's non-consolidated investments, such as Crestone Asset Management, represent strategic efforts to expand into adjacent markets and leverage synergies across the organization.

Looking ahead, Air T's management remains committed to executing its long-term strategy of prudent diversification and operational optimization. The company's ability to navigate the evolving landscape of its various business segments, coupled with its strong liquidity position and experienced management team, positions Air T to capitalize on future growth opportunities.

Despite the challenges faced, Air T's diversified business model across its four segments has enabled the company to navigate various industry dynamics and deliver solid financial performance, with increases in revenue and profitability in several of its key segments during the first half of fiscal year 2025. Investors will closely monitor the company's ability to translate its strategic initiatives into tangible financial results in the quarters and years ahead, as Air T continues to adapt to changing market conditions and leverage its diverse portfolio of businesses.