10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

________________________________________________________________

FORM 10-Q

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D)

OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended June 30, 2012

Commission file number 000-50368

________________________________________________________________

(Exact name of registrant as specified in its charter)

________________________________________________________________

Delaware	26-1631624
(State of Incorporation)	(I.R.S. Employer Identification No.)

145 Hunter Drive, Wilmington, OH 45177

(Address of principal executive offices)

937-382-5591

(Registrant’s telephone number, including area code)

________________________________________________________________

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 x NO o

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

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

Large accelerated filer o	Accelerated filer x
Non-accelerated filer o (Do not check if a smaller reporting company)	Smaller reporting company o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). YES o NO  x

As of August 2, 2012, Air Transport Services Group, Inc. had outstanding 64,235,586 shares of common stock, par value $0.01.

AIR TRANSPORT SERVICES GROUP, INC. AND SUBSIDIARIES

FORM 10-Q

TABLE OF CONTENTS

		Page
PART I. FINANCIAL INFORMATION
Item 1.	Financial Statements	1
	Unaudited Condensed Consolidated Statements of Earnings	1
	Unaudited Condensed Consolidated Statements of Comprehensive Income	2
	Unaudited Condensed Consolidated Balance Sheets	3
	Unaudited Condensed Consolidated Statements of Cash Flow	4
	Notes to Unaudited Condensed Consolidated Financial Statements	5
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	20
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	31
Item 4.	Controls and Procedures	31
PART II. OTHER INFORMATION
Item 1.	Legal Proceedings	33
Item 1A.	Risk Factors	33
Item 4.	Submission of Matters to a Vote of Security Holders	34
Item 5.	Other	34
Item 6.	Exhibits	35
SIGNATURES		36

FORWARD LOOKING STATEMENTS

Statements contained in this quarterly report on Form 10-Q that are not historical facts are considered forward-looking statements (as that term is defined in the Private Securities Litigation Reform Act of 1995). Words such as “projects,” “believes,” “anticipates,” “will,” “estimates,” “plans,” “expects,” “intends” and similar words and expressions are intended to identify forward-looking statements. These forward-looking statements are based on expectations, estimates and projections as of the date of this filing, and involve risks and uncertainties that are inherently difficult to predict. Actual results may differ materially from those expressed in the forward-looking statements for any number of reasons, including those described in this report and in our 2011 Annual Report filed on Form 10-K with the Securities and Exchange Commission.

Filings with the Securities and Exchange Commission

The Securities and Exchange Commission maintains an Internet site that contains reports, proxy and information statements and other information regarding Air Transport Services Group, Inc. at www.sec.gov. Additionally, our filings with the Securities and Exchange Commission, including annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to these reports, are available free of charge from our website at www.atsginc.com as soon as reasonably practicable after filing with the SEC.

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

AIR TRANSPORT SERVICES GROUP, INC. AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS

(In thousands, except per share data)

	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2012			2011			2012			2011
REVENUES	$	153,554		$	193,061		$	299,060		$	368,188
OPERATING EXPENSES
Salaries, wages and benefits	44,570			45,326			91,674			91,674
Fuel	14,084			48,640			27,924			88,316
Maintenance, materials and repairs	25,270			22,380			48,384			43,686
Depreciation and amortization	21,514			23,878			41,814			46,249
Travel	5,566			6,918			11,544			13,228
Rent	6,244			5,434			11,974			11,074
Landing and ramp	3,880			6,032			7,946			12,437
Insurance	1,826			2,394			3,836			4,744
Other operating expenses	8,998			9,258			18,560			18,550
	131,952			170,260			263,656			329,958
OPERATING INCOME	21,602			22,801			35,404			38,230
OTHER INCOME (EXPENSE)
Interest income	38			33			66			99
Interest expense	(3,671		)	(3,537		)	(7,218		)	(7,640		)
Net gain (loss) on derivative instruments	202			376			662			(3,556		)
Write-off of unamortized debt issuance costs	—			(16		)	—			(2,886		)
	(3,431		)	(3,144		)	(6,490		)	(13,983		)
EARNINGS FROM CONTINUING OPERATIONS BEFORE INCOME TAXES	18,171			19,657			28,914			24,247
INCOME TAX EXPENSE	(6,952		)	(7,377		)	(11,033		)	(9,086		)
EARNINGS FROM CONTINUING OPERATIONS	11,219			12,280			17,881			15,161
EARNINGS (LOSS) FROM DISCONTINUED OPERATIONS, NET OF TAXES	(160		)	19			(390		)	(98		)
NET EARNINGS	$	11,059		$	12,299		$	17,491		$	15,063
BASIC EARNINGS PER SHARE
Continuing operations	$	0.18		$	0.19		$	0.28		$	0.24
Discontinued operations	(0.01		)	—			—			—
TOTAL BASIC EARNINGS PER SHARE	$	0.17		$	0.19		$	0.28		$	0.24
DILUTED EARNINGS PER SHARE
Continuing operations	$	0.17		$	0.19		$	0.28		$	0.24
Discontinued operations	—			—			(0.01		)	—
TOTAL DILUTED EARNINGS PER SHARE	$	0.17		$	0.19		$	0.27		$	0.24
WEIGHTED AVERAGE SHARES
Basic	63,431			63,333			63,431			63,233
Diluted	64,393			64,172			64,383			64,055

See notes to unaudited condensed consolidated financial statements.

1

AIR TRANSPORT SERVICES GROUP, INC. AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(In thousands)

	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2012			2011			2012			2011
NET INCOME	$	11,059		$	12,299		$	17,491		$	15,063
OTHER COMPREHENSIVE INCOME:
Unrealized gain on derivative instruments, net of tax of $229 for the six month period in 2011	—			—			—			402
Reclassifications to net income:
Hedging gain realized, net of tax of $5 and $10 for the three and six month periods in 2012 and $61 and $70 for the three and six month periods in 2011.	(9		)	(107		)	(18		)	(123		)
Pension actuarial loss, net of tax of $988 and $1,976 for the three and six month periods in 2012 and $246 and $492 for the three and six month periods in 2011.	1,682			429			3,364			858
Post-retirement actuarial loss, net of tax of $40 and $80 for the three and six month periods in 2012 and $48 and $96 for the three and six month periods in 2011.	68			84			136			168
Post-retirement negative prior service cost, net of tax of $513 and $1,026 for the three and six month periods in 2012 and $506 and $1,012 for the three and six month periods in 2011.	(874		)	(882		)	(1,748		)	(1,764		)
Unrealized loss on derivative instruments, net of tax of $1,427 for the six month period in 2011	—			—			—			2,505
TOTAL OTHER COMPREHENSIVE INCOME (LOSS)	867			(476		)	1,734			2,046
TOTAL COMPREHENSIVE INCOME	$	11,926		$	11,823		$	19,225		$	17,109

See notes to unaudited condensed consolidated financial statements.

2

AIR TRANSPORT SERVICES GROUP, INC. AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except share data)

	June 30,			December 31,
	2012			2011
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$	47,527		$	30,503
Accounts receivable, net of allowance of $457 in 2012 and $434 in 2011	39,817			42,278
Inventory	8,657			8,906
Prepaid supplies and other	7,777			9,785
Deferred income taxes	17,418			31,548
Aircraft and engines held for sale	5,474			9,831
TOTAL CURRENT ASSETS	126,670			132,851
Property and equipment, net	778,113			748,913
Other assets	19,558			18,579
Intangibles	5,938			6,396
Goodwill	86,980			86,980
TOTAL ASSETS	$	1,017,259		$	993,719
LIABILITIES AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES:
Accounts payable	$	37,165		$	48,360
Accrued salaries, wages and benefits	20,645			23,226
Accrued expenses	10,287			10,291
Current portion of debt obligations	17,239			13,223
Unearned revenue	11,071			12,487
TOTAL CURRENT LIABILITIES	96,407			107,587
Long term debt obligations	345,956			333,681
Post-retirement liabilities	180,286			185,562
Other liabilities	63,281			54,212
Deferred income taxes	40,140			42,530
TOTAL LIABILITIES	726,070			723,572
Commitments and contingencies (Note G)
STOCKHOLDERS’ EQUITY:
Preferred stock, 20,000,000 shares authorized, including 75,000 Series A Junior Participating Preferred Stock	—			—
Common stock, par value $0.01 per share; 75,000,000 shares authorized; 64,261,289 and 64,015,789 shares issued and outstanding in 2012 and 2011, respectively	643			640
Additional paid-in capital	522,427			520,613
Accumulated deficit	(130,568		)	(148,059		)
Accumulated other comprehensive loss	(101,313		)	(103,047		)
TOTAL STOCKHOLDERS’ EQUITY	291,189			270,147
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	1,017,259		$	993,719

See notes to unaudited condensed consolidated financial statements.

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AIR TRANSPORT SERVICES GROUP, INC. AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

	Six Months Ended
	June 30,
	2012			2011
OPERATING ACTIVITIES:
Net earnings from continuing operations	$	17,881		$	15,161
Net loss from discontinued operations	(390		)	(98		)
Adjustments to reconcile net earnings to net cash provided by operating activities:
Depreciation and amortization	41,814			46,249
Pension and post-retirement	2,781			(1,161		)
Deferred income taxes	10,722			8,523
Amortization of stock-based compensation	1,816			1,301
Amortization of DHL promissory note	(3,100		)	(3,100		)
Net (gain) loss on derivative instruments	(662		)	3,556
Write-off of unamortized debt issuance costs	—			2,886
Changes in assets and liabilities:
Accounts receivable	3,793			(7,545		)
Inventory and prepaid supplies	501			(859		)
Accounts payable	(10,625		)	9,122
Unearned revenue	6,420			9,679
Accrued expenses, salaries, wages, benefits and other liabilities	(718		)	(87		)
Pension and post-retirement liabilities	(5,276		)	(6,172		)
Other	(343		)	1,086
NET CASH PROVIDED BY OPERATING ACTIVITIES	64,614			78,541
INVESTING ACTIVITIES:
Capital expenditures	(69,463		)	(102,724		)
Proceeds from property and equipment	2,482			223
Proceeds from the redemption of interest-bearing investments	—			1,750
NET CASH (USED IN) INVESTING ACTIVITIES	(66,981		)	(100,751		)
FINANCING ACTIVITIES:
Principal payments on long term obligations	(5,609		)	(198,902		)
Proceeds from borrowings	25,000			215,000
Financing fees	—			(2,536		)
NET CASH PROVIDED BY FINANCING ACTIVITIES	19,391			13,562
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS	17,024			(8,648		)
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR	30,503			46,543
CASH AND CASH EQUIVALENTS AT END OF PERIOD	$	47,527		$	37,895
SUPPLEMENTAL CASH FLOW INFORMATION:
Interest paid, net of amount capitalized	$	6,257		$	6,680
Federal alternative minimum and state income taxes paid	$	271		$	2,368
SUPPLEMENTAL NON-CASH INFORMATION:
Debt extinguished	$	3,100		$	3,100
Accrued capital expenditures	$	10,351		$	13,578

See notes to unaudited condensed consolidated financial statements.

4

AIR TRANSPORT SERVICES GROUP, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

The condensed consolidated financial statements and related notes contained in this report should be read in conjunction with the audited financial statements and the related notes contained in the Company's Annual Report on Form 10-K for the year ended December 31, 2011.

NOTE A—SUMMARY OF FINANCIAL STATEMENT PREPARATION AND SIGNIFICANT ACCOUNTING POLICIES

Nature of Operations

Air Transport Services Group, Inc. is a holding company whose principal subsidiaries include an aircraft leasing company and three independently certificated airlines. The Company provides airline operations, aircraft leases, aircraft maintenance and other support services primarily to the cargo transportation and package delivery industries. Through the Company's subsidiaries, it offers a range of complementary services to delivery companies, freight forwarders, airlines and government customers.

The three airlines, ABX Air, Inc. (“ABX”), Capital Cargo International Airlines, Inc. (“CCIA”) and Air Transport International, LLC (“ATI”), each have the authority, through their separate U.S. Department of Transportation ("DOT") and Federal Aviation Administration ("FAA") certificates, to transport cargo worldwide. The Company's leasing subsidiary, Cargo Aircraft Management, Inc. (“CAM”), leases aircraft to each of the Company's airlines as well as to non-affiliated airlines and other lessees.

The Company provides aircraft and airline operations to its customers, typically under contracts providing for a combination of aircraft, crews, maintenance and insurance ("ACMI") services. DHL Network Operations (USA), Inc. and its affiliates, “DHL,” is the Company's largest customer. The Company's airlines serve a base of concentrated customers who have a diverse line of international cargo traffic. Additionally, ATI provides passenger transportation, primarily to the U.S. Military, using its McDonnell Douglas DC-8 "combi" aircraft, which are certified to carry passengers as well as cargo on the main deck.

In addition to its airline operations and aircraft leasing services, the Company sells aircraft parts, provides aircraft and equipment maintenance services, and operates mail sorting facilities for the U.S. Postal Service (“USPS”).

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect amounts reported in the consolidated financial statements. Estimates and assumptions are used to record allowances for uncollectible amounts, self-insurance reserves, spare parts inventory, depreciation and impairments of property, equipment, goodwill and intangibles, post-retirement obligations, income taxes, contingencies and litigation. Changes in estimates and assumptions may have a material impact on the consolidated financial statements.

Subsequent Events

The Company evaluated subsequent events through the date the financial statements were issued and filed with the Securities and Exchange Commission. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included.

Consolidation

The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. Intercompany balances and transactions have been eliminated.

Cash and Cash Equivalents

The Company classifies short-term, highly liquid investments with maturities of three months or less at the time of purchase as cash and cash equivalents. These investments, consisting of money market funds, are recorded at cost,

5

which approximates fair value. Substantially all deposits of the Company’s cash are held in accounts that exceed federally insured limits. The Company deposits cash in common financial institutions which management believes are financially sound.

Accounts Receivable and Allowance for Uncollectible Accounts

The Company's accounts receivable is primarily due from its significant customers (see Note B), other airlines, the USPS and freight forwarders. The Company performs a quarterly evaluation of the accounts receivable and the allowance for uncollectible accounts by reviewing specific customers' recent payment history, growth prospects, financial condition and other factors that may impact a customer's ability to pay. The Company establishes an allowance for uncollectible accounts for probable losses due to a customer's potential inability or unwillingness to make contractual payments. Account balances are written off against the allowance when the Company ceases collection efforts.

Inventory

The Company’s inventory is comprised primarily of expendable aircraft parts and supplies used for aircraft maintenance. Inventory is generally charged to expense when issued for use on a Company aircraft. The Company values aircraft parts and supply inventory at weighted-average cost and maintains a related obsolescence reserve. The Company records an obsolescence reserve on a base stock of inventory for each fleet type. The amortization of base stock for the obsolescence reserve corresponds to the expected life of each fleet type. Additionally, the Company monitors the usage rates of inventory parts and segregates parts that are technologically outdated or no longer used in its fleet types. Slow moving and segregated items are actively marketed and written down to their estimated net realizable values based on market conditions.

Management analyzes the inventory reserve for reasonableness at the end of each quarter. That analysis includes consideration of the expected fleet life, amounts expected to be on hand at the end of a fleet life, and recent events and conditions that may impact the usability or value of inventory. Events or conditions that may impact the expected life, usability or net realizable value of inventory include additional aircraft maintenance directives from the FAA, changes in DOT regulations, new environmental laws and technological advances.

Goodwill and Intangible Assets

The Company assesses, during the fourth quarter of each year, the carrying value of goodwill and indefinite-lived intangible assets. Impairment assessments may be performed on an interim basis whenever events or changes in circumstance indicate an impairment may have occurred. Finite-lived intangible assets are amortized over their estimated useful economic lives and are periodically reviewed for impairment.

Property and Equipment

Property and equipment held for use is stated at cost, net of any impairment recorded. The cost and accumulated depreciation of disposed property and equipment are removed from the accounts with any related gain or loss reflected in earnings from operations.

Depreciation of property and equipment is provided on a straight-line basis over the lesser of the asset’s useful life or lease term. Depreciable lives are summarized as follows:

Boeing 727 and DC-8 aircraft and flight equipment	1 year
Boeing 767 and 757 aircraft and flight equipment	10 to 20 years
Support equipment	5 to 10 years
Vehicles and other equipment	3 to 8 years

6

The Company periodically evaluates the useful lives, salvage values and fair values of property and equipment. Acceleration of depreciation expense or the recording of significant impairment losses could result from changes in the estimated useful lives of assets due to a number of reasons, such as excess aircraft capacity or changes in regulations governing the use of aircraft.

Aircraft and other long-lived assets are tested for impairment when circumstances indicate the carrying value of the assets may not be recoverable. To conduct impairment testing, the Company groups assets and liabilities at the lowest level for which identifiable cash flows are largely independent of cash flows of other assets and liabilities. For assets that are to be held and used, impairment is recognized when the estimated undiscounted cash flows associated with the asset group is less than the carrying value. If impairment exists, an adjustment is made to write the assets down to fair value, and a loss is recorded as the difference between the carrying value and fair value. Fair values are determined considering quoted market values, discounted cash flows or internal and external appraisals, as applicable. For assets held for sale, impairment is recognized when the fair value less the cost to sell the asset is less than the carrying value.

The Company’s accounting policy for major airframe and engine maintenance varies by subsidiary and aircraft type. The costs for ABX's Boeing 767-200 airframe maintenance, which is the majority of the Company's aircraft fleet, are expensed as they are incurred. The costs of major airframe maintenance for the Company's other aircraft are capitalized and amortized over the useful life of the overhaul. The Company's General Electric CF6 engines that power the Boeing 767-200 aircraft are maintained under “power by the hour” agreements with an engine maintenance provider. Under the power by the hour agreements, the engines are maintained by the service provider for a fixed fee per flight hour; accordingly, the cost of engine maintenance is generally expensed as flight hours occur. Maintenance for the airlines’ other aircraft engines, including those on the Boeing 767-300 aircraft, are typically contracted to service providers on a time and material basis and the costs of those engine overhauls are capitalized and amortized over the useful life of the overhaul.

Under certain leases, the Company is required to make periodic payments to the lessor for future maintenance events such as engine overhauls and major airframe maintenance. These payments are recorded as deposits until drawn for qualifying maintenance costs. The maintenance costs are expensed or capitalized in accordance with the accounting policy for major airframe and engine maintenance. The Company evaluates at the balance sheet date, whether it is probable that an amount on deposit will be returned by the lessor to reimburse the costs of the maintenance activities. When an amount on deposit is less than probable of being returned, it is recognized as additional maintenance expense. 

Capitalized Interest

Interest costs incurred while aircraft are being modified are capitalized as an additional cost of the aircraft until the date the asset is placed in service. Capitalized interest was $0.6 million and $0.6 million for the quarters ended June 30, 2012 and 2011, respectively, and $1.3 million and $0.9 million for the six month periods ended June 30, 2012 and 2011, respectively.

Discontinued Operations

A business component whose operations are discontinued is reported as discontinued operations if the cash flows of the component have been eliminated from the ongoing operations of the Company, and the Company will no longer have any significant continuing involvement in the business component. The results of discontinued operations are aggregated and presented separately in the consolidated statements of operations. The Company reclassifies amounts presented in prior years that relate to discontinued business components to reflect the activities as discontinued operations.

The Company's results of discontinued operations consist primarily of pension expenses and other benefits for former employees previously associated with ABX's former freight sorting and aircraft fueling services provided to DHL. ABX is self insured for medical coverage and workers’ compensation, and may incur expenses and cash outlays in the future related to pension obligations, reserves for medical expenses and wage loss for former employees.

7

Exit Activities

The Company accounts for the costs associated with exit activities in accordance with FASB ASC Topic 420-10 Exit or Disposal Cost Obligations. One-time, involuntary employee termination benefits are generally expensed when the Company communicates the benefit arrangement to the employee that it will no longer require the services of the employee beyond a minimum retention period. Liabilities for contract termination costs associated with exit activities are recognized in the period incurred and measured initially at fair value.

Self-Insurance

The Company is self-insured for certain workers’ compensation, employee healthcare, automobile, aircraft, and general liability claims. The Company maintains excess claim coverage with common insurance carriers to mitigate its exposure to large claim losses. The Company records a liability for reported claims and an estimate for incurred claims that have not yet been reported. Accruals for these claims are estimated utilizing historical paid claims data and recent claims trends. Other liabilities included $31.2 million and $31.2 million at June 30, 2012 and December 31, 2011, respectively, for self-insured reserves. Changes in claim severity and frequency could result in actual claims being materially different than the costs accrued.

Income Taxes

Income taxes have been computed using the asset and liability method, under which deferred income taxes are provided for the temporary differences between the financial reporting basis and the tax basis of the Company’s assets and liabilities. Deferred taxes are measured using provisions of currently enacted tax laws. A valuation allowance against net deferred tax assets is recorded when it is more likely than not that such assets will not be fully realized. Tax credits are accounted for as a reduction of income taxes in the year in which the credit originates.

The Company recognizes the benefit of a tax position taken on a tax return, if that position is more likely than not of being sustained on audit, based on the technical merits of the position. An uncertain income tax benefit is not recognized if it has a less than a 50% likelihood of being sustained. The Company recognizes interest and penalties accrued related to uncertain tax positions in operating expense.

Comprehensive Income

Comprehensive income includes net earnings and other comprehensive income or loss. Other comprehensive income or loss results from certain changes in the Company’s liabilities for pension and other post retirement benefits and gains and losses associated with interest rate hedging instruments.

Fair Value Information

Assets or liabilities that are required to be measured at fair value are reported using the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. FASB ASC Topic 820-10 Fair Value Measurements and Disclosures establishes three levels of input that may be used to measure fair value:

• Level 1: Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities.

• Level 2: Observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

• Level 3: Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. Level 3 assets and liabilities include items where the determination of fair value requires significant management judgment or estimation.

8

Revenue Recognition

Revenues generated from airline service agreements are typically recognized based on hours flown or the amount of aircraft and crew resources provided during a reporting period. Certain agreements include provisions for incentive payments based upon on-time reliability. These incentives are typically measured on a monthly basis and recorded to revenue in the corresponding month earned. Revenues for operating expenses that are reimbursed through customer agreements, including consumption of aircraft fuel, are generally recognized as the costs are incurred. Revenues from charter service agreements are recognized on scheduled and non-scheduled flights when the specific flight has been completed. Aircraft lease revenues are recognized as operating lease revenues on a straight-line basis over the term of the applicable lease agreements. Revenues from the sale of aircraft parts are recognized when the parts are delivered. Revenues earned and expenses incurred in providing aircraft-related maintenance, repair or technical services are recognized in the period in which the services are completed and delivered to the customer. Revenues derived from sorting parcels are recognized upon completion of services.

NOTE B—SIGNIFICANT CUSTOMERS

DHL

Commencing March 31, 2010, the Company and DHL executed commercial agreements under which DHL leases 13 Boeing 767 freighter aircraft from CAM and contracts with ABX to operate those aircraft under a separate crew, maintenance and insurance (“CMI”) agreement. The CMI agreement pricing is based on pre-defined fees, scaled for the number of aircraft operated and the number of flight crews provided to DHL for its U.S. network. The initial term of the CMI agreement is five years and the terms of the aircraft leases are seven years, with early termination provisions. In addition to the 13 CAM-owned Boeing 767 aircraft, ABX also operates four DHL-owned Boeing 767 aircraft under the CMI agreement. Under the CMI agreement, ABX contracted with Airborne Maintenance and Engineering Services, Inc. (“AMES”), a wholly-owned subsidiary of the Company, to provide scheduled maintenance for the 13 Boeing 767 aircraft for at least the first three years of the CMI agreement. Under the terms of the lease agreements for the 13 CAM-owned Boeing 767 aircraft, DHL is responsible to reimburse ABX for its costs of scheduled airframe maintenance. AMES also provides scheduled maintenance for the four DHL-owned aircraft operated by ABX under the CMI agreement. Additionally, the Company's airlines are providing seven other Boeing 767 aircraft, four Boeing 727 aircraft and one Boeing 757 aircraft to DHL under other contracts having durations of one year or less and two Boeing 757 aircraft under multi-year contracts.

Continuing revenues from leases and contracted services for DHL were approximately 54% and 52% of the Company's consolidated revenues from continuing operations for the three and six month periods ended June 30, 2012, respectively, compared to 34% and 35% for the corresponding periods of 2011. The Company’s balance sheets include accounts receivable with DHL of $18.1 million and $9.8 million as of June 30, 2012 and December 31, 2011, respectively.

BAX/Schenker

A significant portion of the Company’s revenues, and cash flows have historically been derived from providing airlift to BAX Global, Inc.'s network in North America ("BAX/Schenker"). CCIA and ATI each had contracts to provide airlift to BAX/Schenker. BAX/Schenker provided freight transportation and supply chain management services, specializing in the heavy freight market for business-to-business shipping.

On July 22, 2011, BAX/Schenker announced its plan to adopt a new operating model that phased-out the dedicated air cargo network in North America supported by the Company. To execute that plan, on September 2, 2011, BAX/Schenker ceased air cargo operations at its air hub in Toledo, Ohio and began to conduct air operations from the Cincinnati/Northern Kentucky airport, utilizing DHL's U.S. air hub. The Company provided limited airlift directly to BAX/Schenker through the peak delivery season, until late December 2011. Beginning in January 2012, DHL contracted with the Company's airlines to supplement DHL's U.S. air network to service BAX/Schenker freight volumes on its expanded air network without the use of ATI's DC-8 aircraft and with only limited use of CCIA's Boeing 727 aircraft.

No services were performed for Bax/Schenker during 2012. Revenues from the services performed for BAX/Schenker were approximately 31% and 32% of the Company’s total revenues from continuing operations for the three and six month periods ended June 30, 2011, respectively. The Company’s balance sheets had no accounts receivable with BAX/Schenker as of June 30, 2012, and included accounts receivable with BAX/Schenker of $5.5 million as of December 31, 2011.

9

U.S. Military

A substantial portion of the Company's revenues are also derived from the U.S. Military. The U.S. Military awards flights to U.S. certificated airlines through annual contracts and through temporary "expansion" routes. Revenues from services performed for the U.S. Military were approximately 16% and 16% of the Company's total revenues from continuing operations for the three and six month periods ended June 30, 2012, respectively, compared to 12% and 11% for the corresponding periods of 2011. The Company's balance sheets included accounts receivable with the U.S. Military of $4.3 million and $5.2 million as of June 30, 2012 and December 31, 2011.

NOTE C—GOODWILL AND OTHER INTANGIBLES

The Company has two reporting units, ATI (a component of the ACMI Services segment) and CAM, that have goodwill. The carrying amounts of goodwill by reportable segment, are as follows (in thousands):

	ACMI Services		CAM		Total
Carrying value as of December 31, 2011	$	52,585	$	34,395	$	86,980
Carrying value as of June 30, 2012	$	52,585	$	34,395	$	86,980

The Company's intangible assets relate to the ACMI Services segment and are as follows (in thousands):

	Customer			Airline
	Relationships			Certificates			Total
Carrying value as of December 31, 2011	$	2,396		$	4,000		$	6,396
Amortization	(125		)	(333		)	(458		)
Carrying value as of June 30, 2012	$	2,271		$	3,667		$	5,938

The customer relationship intangible amortizes over nine more years. The Company recorded amortization expense for the customer relationships intangible asset of $0.4 million for the six month period ending June 30, 2011. The airline certificate related to CCIA' s Boeing 727 aircraft operations, having a carrying value of $0.7 million at June 30, 2012, amortizes through December 31, 2012, the expected remaining life of those operations. The remaining airline certificates have an indefinite life and therefore are not amortized.

NOTE D—FAIR VALUE MEASUREMENTS

The Company’s money market funds and interest rate swaps are reported on the Company’s consolidated balance sheet at fair values based on market values from identical or comparable transactions. The fair value of the Company’s money market funds and interest rate swaps are based on observable inputs (Level 2) from comparable market transactions. The use of significant unobservable inputs (Level 3) was not necessary in determining the fair value of the Company’s financial assets and liabilities.

The following table reflects assets and liabilities that are measured at fair value on a recurring basis (in thousands):

As of June 30, 2012	Fair Value Measurement Using							Total
	Level 1		Level 2			Level 3
Assets
Cash equivalents—money market	$	30,013	$	9,563		$	—	$	39,576
Total Assets	$	30,013	$	9,563		$	—	$	39,576
Liabilities
Interest rate swap	$	—	$	(4,362	)	$	—	$	(4,362	)
Total Liabilities	$	—	$	(4,362	)	$	—	$	(4,362	)

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As of December 31, 2011	Fair Value Measurement Using							Total
	Level 1		Level 2			Level 3
Assets
Cash equivalents—money market	$	10,002	$	11,541		$	—	$	21,543
Total Assets	$	10,002	$	11,541		$	—	$	21,543
Liabilities
Interest rate swap	$	—	$	(5,024	)	$	—	$	(5,024	)
Total Liabilities	$	—	$	(5,024	)	$	—	$	(5,024	)

As a result of lower market interest rates compared to the stated interest rates of the Company’s fixed and variable rate debt obligations, the fair value of the Company’s debt obligations, based on Level 2 observable inputs, was approximately $6.2 million more than the carrying value, which was $363.2 million at June 30, 2012. The non-financial assets, including goodwill, intangible assets and property and equipment are measured at fair value on a non-recurring basis.

NOTE E—PROPERTY AND EQUIPMENT

The Company's property and equipment consists primarily of cargo aircraft, aircraft engines and flight equipment. Property and equipment, to be held and used, is summarized as follows (in thousands):

	June 30, 2012			December 31, 2011
Aircraft and flight equipment	$	1,073,054		$	1,012,000
Support equipment	51,499			51,297
Vehicles and other equipment	1,577			1,589
Leasehold improvements	754			714
	1,126,884			1,065,600
Accumulated depreciation	(348,771		)	(316,687		)
Property and equipment, net	$	778,113		$	748,913

CAM owned aircraft with a carrying value of $303.0 million and $316.4 million that were under leases to external customers as of June 30, 2012 and December 31, 2011, respectively.

The carrying value of Boeing 727 and DC-8 freighter aircraft and engines available for sale totaled $5.5 million as of June 30, 2012. Cash flows generated from sales of aircraft and engines totaled $2.5 million for the six month period ended June 30, 2012.

NOTE F—DEBT OBLIGATIONS

Long term obligations consisted of the following (in thousands):

	June 30,			December 31,
	2012			2011
Unsubordinated term loan	$	148,125		$	150,000
Revolving credit facility	131,000			106,000
Aircraft loans	67,020			70,754
Promissory note due to DHL, unsecured	17,050			20,150
Total long term obligations	363,195			346,904
Less: current portion	(17,239		)	(13,223		)
Total long term obligations, net	$	345,956		$	333,681

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The Company executed a syndicated credit agreement ("Senior Credit Agreement") in May 2011 which includes a term loan of $150 million and a $175 million revolving credit loan, of which the Company has drawn $131.0 million, net of repayments as of June 30, 2012. On July 20, 2012, the Company executed the first amendment to the Senior Credit Agreement (“Credit Amendment”). The Credit Amendment increased the amount available under the revolving credit loan by $50 million to $225.0 million, extended the maturity of the term loan and revolving credit loan to July 20, 2017, and provided for an accordion feature whereby the Company may draw up to an additional $50.0 million, subject to the lenders' consent.

Under the terms of the Senior Credit Agreement, interest rates are adjusted quarterly based on the Company's earnings before interest, taxes, depreciation and amortization expenses ("EBITDA"), its outstanding debt level and prevailing LIBOR or prime rates. At the Company's current debt-to-EBITDA ratio, the LIBOR based financing for the unsubordinated term loan and revolving credit facility bear a variable interest rate of 2.72% and 2.5%, respectively. The Credit Amendment did not effect the EBITDA based pricing or covenants of the Senior Credit Agreement . The Senior Credit Agreement provides for the issuance of letters of credit on the Company's behalf. During the next twelve months, the Company expects to make further draws on the revolving credit loan to fund its fleet expansion plans. As of June 30, 2012, the unused revolving credit facility totaled $24.8 million, net of draws of $131.0 million and outstanding letters of credit of $19.2 million.

The aircraft loans are collateralized by six aircraft, and amortize monthly with a balloon payment of approximately 20% with maturities between 2016 and early 2018. Interest rates range from 6.74% to 7.36% per annum payable monthly.

The promissory note payable to DHL becomes due in August 2028 as a balloon payment, unless it is extinguished sooner under the terms of the CMI agreement. Beginning April 1, 2010 and extending through the term of the CMI agreement, the balance of the note is amortized ratably without cash payment, in exchange for services provided and thus is expected to be completely amortized by April 2015. The promissory note bears interest at a rate of 5% per annum, and DHL reimburses ABX the interest expense from the note through the term of the CMI agreement.

The Senior Credit Agreement is collateralized by certain of the Company's Boeing 767 and 757 aircraft that are not collateralized under aircraft loans. Under the terms of the Senior Credit Agreement, the Company is required to maintain collateral coverage equal to 150% of the outstanding balance of the term loan and total revolving credit facility. The Senior Credit Agreement contains covenants including, among other things, limitations on certain additional indebtedness, guarantees of indebtedness, as well as a total debt to EBITDA ratio and a fixed charge coverage ratio. The Senior Credit Agreement stipulates events of default, including unspecified events that may have material adverse effects on the Company. If an event of default occurs, the Company may be forced to repay, renegotiate or replace the Senior Credit Agreement. The Company is currently in compliance with the financial covenants specified in the Senior Credit Agreement . The Senior Credit Agreement limits the amount of dividends the Company can pay and the amount of common stock it can repurchase to $50.0 million during any calendar year. Under the provisions of its promissory note due to DHL, the Company is required to prepay the DHL note in the amount of $0.20 for each dollar of dividend distributed to its stockholders. The same prepayment stipulation applies to stock repurchases.

In conjunction with the execution of the Senior Credit Agreement in 2011, the Company terminated its previous credit agreement, which resulted in the write-off of unamortized debt issuance costs associated with that credit agreement and losses for certain interest rate swaps which had previously been designated as cash flow hedges of interest payments required by the former debt. These charges, which totaled $6.8 million before income taxes, were recorded in March 2011.

NOTE G—COMMITMENTS AND CONTINGENCIES

Leases

The Company leases airport facilities and certain operating equipment under operating lease agreements. ABX leases portions of the air park in Wilmington, Ohio under a lease agreement with a regional port authority, the term of which expires in May of 2019.

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Commitments

In August 2010, the Company entered into an agreement with M&B Conversions Limited and Israel Aerospace Industries Ltd. ("IAI"), for the conversion by IAI of up to ten Boeing 767-300 series passenger aircraft to a standard freighter configuration during the 10-year term of the agreement. As of June 30, 2012, four such aircraft have completed the modification process, two Boeing 767-300 aircraft were undergoing modification to a standard freighter configuration and one Boeing 767-300 aircraft was awaiting modification. If the Company were to cancel the conversion program as of June 30, 2012, it would owe IAI approximately $18.9 million associated with non-recurring engineering efforts, conversion part kits and to complete the modification.

In October 2010, the Company entered into an agreement with Precision Conversions, LLC (“Precision”) for the design, engineering and certification of a Boeing 757 "combi" aircraft variant. The Boeing 757 combi variant to be developed by Precision will incorporate 10 full cargo pallet positions along with seating for up to 58 passengers. As of June 30, 2012, one Boeing 757 had completed the modification process for standard freighter configuration while one Boeing 757 aircraft was in the freighter conversion process and another was in the combi conversion process. If the Company were to cancel the conversion program as of June 30, 2012, it would owe Precision approximately $10.2 million associated with engineering efforts, conversion part kits which have been ordered and to complete the modifications.

Guarantees and Indemnifications

Certain operating leases and agreements of the Company contain indemnification obligations to the lessor, or one or more other parties that are considered reasonable and customary (e.g. use, tax and environmental indemnifications), the terms of which range in duration and are often limited. Such indemnification obligations may continue after expiration of the respective lease or agreement.

Civil Action Alleging Violations of Immigration Laws

On December 31, 2008, a former ABX employee filed a complaint against ABX, a total of four current and former executives and managers of ABX, Garcia Labor Company of Ohio, and three former executives of the Garcia Labor companies, in the U.S. District Court for the Southern District of Ohio. The case was filed as a putative class action against the defendants, and asserts violations of the Racketeer Influenced and Corrupt Practices Act (RICO). The complaint, which was later amended to include a second former employee plaintiff, seeks damages in an unspecified amount and alleges that the defendants engaged in a scheme to hire illegal immigrant workers to depress the wages paid to hourly wage employees during the period from December 1999 to January 2005.

The complaint is similar to a prior complaint filed by another former employee in April 2007. The prior complaint was subsequently dismissed without prejudice at the plaintiff’s request on November 3, 2008.

On March 18, 2010, the Court issued a decision in response to a motion filed by ABX and the other ABX defendants, dismissing three of the five claims constituting the basis of Plaintiffs' complaint. Thereafter, on October 7, 2010, the Court issued a decision permitting the plaintiffs’ to amend their complaint for the purpose of reinstating one of their dismissed claims. On October 26, 2010, ABX and the other ABX defendants filed an answer denying the allegations contained in plaintiffs’ second amended complaint.

On December 2, 2011, the parties attended a settlement conference presided over by the Court and agreed to settle this matter. The settlement calls for ABX to pay to the plaintiffs a monetary amount, which management believes to be less than it would have cost for ABX to defend the case at trial. Once the plaintiffs have provided notice to the putative class members of the settlement, the Court will hold a hearing to consider any objections and seek final confirmation of the settlement.

Brussels Noise Ordinance

The Brussels Instituut voor Milieubeheer ("BIM"), a governmental authority in the Brussels-Capital Region of Belgium that oversees the enforcement of environmental matters, brought an administrative action against ABX alleging numerous violations of an ordinance limiting the noise caused by aircraft overflying the Brussels-Capital Region, which is located near the Brussels Airport. In May and November 2011, the BIM levied separate administrative penalties on ABX in the approximate amount of €0.1 million ($0.1 million) each, for numerous alleged violations of the ordinance during the period from May 2009 through November 2009 and December 2009 through May 2010; respectively. ABX

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appealed both of these matters to the Environmental College in Brussels, which affirmed the administrative penalties. ABX has subsequently appealed both of these matters to the Council of State, which appeals are currently pending.

In June 2012, the BIM levied an additional administrative penalty on ABX in the approximate amount of €0.1 million ($0.2 million) for numerous alleged violations of the ordinance during the period from June 2010 through October 2010, and has also commenced administrative action for numerous alleged violations of the ordinance during the period from November 2010 through December 2010.

The ordinance in question is controversial for the reason that it was adopted by the Brussels-Capital Region and is more restrictive than the noise limitations in effect in the Flemish Region, which is where the Brussels Airport is located. The ordinance is the subject of several court cases currently pending in the Belgian courts and numerous airlines have been levied fines thereunder.

Other

In addition to the foregoing matters, we are also currently a party to legal proceedings, including FAA enforcement actions, in various federal and state jurisdictions arising out of the operation of our business. The amount of alleged liability, if any, from these proceedings cannot be determined with certainty; however, we believe that our ultimate liability, if any, arising from the pending legal proceedings, as well as from asserted legal claims and known potential legal claims which are probable of assertion, taking into account established accruals for estimated liabilities, should not be material to our financial condition or results of operations.

Employees Under Collective Bargaining Agreements

As of June 30, 2012, the flight crewmember employees of ABX, ATI and CCIA were represented by the labor unions listed below:

Airline	Labor Agreement Unit	Percentage of the Company’s Employees
ABX	International Brotherhood of Teamsters	14.9%
ATI	Airline Pilots Association	8.6%
CCIA	Airline Pilots Association	3.8%

NOTE H—PENSION AND OTHER POST-RETIREMENT BENEFIT PLANS

Defined Benefit and Post-retirement Healthcare Plans

ABX sponsors a qualified defined benefit pension plan for ABX crewmembers and a qualified defined benefit pension plan for a major portion of its other ABX employees that meet minimum eligibility requirements. ABX also sponsors non-qualified defined benefit pension plans for certain employees. These non-qualified plans are unfunded. Employees are no longer accruing benefits under any of the defined benefit pension plans. ABX also sponsors a post-retirement healthcare plan for its ABX employees, which is unfunded.

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The accounting and valuation for these post-retirement obligations are determined by prescribed accounting and actuarial methods that consider a number of assumptions and estimates. The selection of appropriate assumptions and estimates is significant due to the long time period over which benefits will be accrued and paid. The long term nature of these benefit payouts increases the sensitivity of certain estimates of our post-retirement costs. The assumptions considered most sensitive in actuarially valuing ABX’s pension obligations and determining related expense amounts are discount rates and expected long term investment returns on plan assets. Additionally, other assumptions concerning retirement ages, mortality and employee turnover also affect the valuations. Actual results and future changes in these assumptions could result in future costs significantly higher than those recorded in our results of operations. The Company's net periodic benefit costs for its qualified defined benefit pension and post-retirement healthcare plans for both continuing and discontinued operations are as follows (in thousands):

	Three Months Ended June 30,												Six Months Ended June 30,
	Pension Plans						Post-Retirement Healthcare Plan						Pension Plans						Post-Retirement Healthcare Plan
	2012			2011			2012			2011			2012			2011			2012			2011
Service cost	$	—		$	—		$	67		$	62		$	—		$	—		$	134		$	124
Interest cost	9,272			9,290			95			97			18,544			18,581			190			194
Expected return on plan assets	(9,970		)	(9,757		)	—			—			(19,940		)	(19,514		)	—			—
Amortization of prior service cost	—			—			(1,388		)	(1,388		)	—			—			(2,776		)	(2,776		)
Amortization of net loss	2,670			675			108			132			5,340			1,350			216			264
Net periodic benefit cost	$	1,972		$	208		$	(1,118	)	$	(1,097	)	$	3,944		$	417		$	(2,236	)	$	(2,194	)

During the three and six month periods ended June 30, 2012, the Company contributed $2.8 million and $3.6 million to the pension plans. The Company plans to contribute an additional $21.4 million in 2012.

NOTE I—INCOME TAXES

The provision for income taxes for interim periods is based on management's best estimate of the effective income tax rate expected to be applicable for the current year, plus any adjustments arising from changes in the estimated amount of taxable income related to prior periods. Income taxes recorded through June 30, 2012 have been estimated utilizing a 38.2% rate based on year-to-date income and projected results for the full year. The final effective tax rate to be applied to 2012 will depend on the actual amount of pre-tax book income generated by the Company for the full year.

The Company has operating loss carryforwards for U.S. federal income tax purposes. Management expects to utilize the loss carryforwards to offset federal income tax liabilities in the future. During 2012, management revised the projection of qualified tax deductions for 2012. As a result of anticipated additional tax deductions, management does not expect to utilize the existing loss carryforward assets to offset the federal income tax liability during the next 12 months. Accordingly, as of June 30, 2012, the Company's balance sheet reflects the reclassification of approximately $14 million of deferred tax assets to offset deferred tax liabilities. Due to the Company's deferred tax assets, including its loss carryforwards, management does not expect to pay federal income taxes through 2014 or later. The Company may, however, be required to pay alternative minimum taxes and certain state and local income taxes before then.

NOTE J—DERIVATIVE INSTRUMENTS

In conjunction with the unsubordinated term loan under the former credit agreement, the Company entered into interest rate swaps in January 2008 to reduce the effects of fluctuating LIBOR-based interest rates on forecasted interest payments stemming from the scheduled repayment of the debt. Under the interest rate swap agreements, the Company pays a fixed rate of 3.105% and receives a floating rate that resets quarterly based on LIBOR. The notional value of the interest rate swaps step downward through December 31, 2012. In accordance with FASB ASC Topic 815-30 Derivatives and Hedging, the Company accounted for the interest rate swaps as hedges of the forecasted cash flows. Accordingly, losses caused by lower floating interest rates had been recorded to accumulated other comprehensive income for the effective portion. Effective March 31, 2011, in conjunction with its decision to refinance the

15

unsubordinated term loan, the Company ceased hedge accounting after determining that the forecasted interest payments will not occur near the time originally expected. As a result, the Company recorded a pre-tax charge of $3.9 million in the first quarter of 2011 based on the fair market value of the derivatives on March 31, 2011, to recognize the losses previously recorded in accumulated other comprehensive income.

In addition to the interest rate swaps noted above, the Company's Senior Credit Agreement requires the Company to maintain derivative instruments for protection from fluctuating interest rates, for at least fifty percent of the outstanding balance of term loan. As a result, the Company entered into an interest rate swap in July of 2011 having an initial notional value of $75.0 million and a forward start date of December 31, 2011. Under this swap, the Company pays a fixed rate of 2.02% and receives a floating rate that resets quarterly based on LIBOR. The Company did not designate the recent interest rate swap as a hedge for accounting purposes. The effects of future fluctuations in LIBOR interest rates on derivatives held by the Company will result in the recording of unrealized gains and losses into the statement of operations.

The liability for outstanding derivatives is recorded in other liabilities and in accrued expenses. The table below provides information about the Company’s interest rate swaps (in thousands):

			June 30, 2012					December 31, 2011
Expiration Date	Stated Interest Rate		Notional Amount		Market Value (Liability)			Notional Amount		Market Value (Liability)
December 31, 2012	3.105	%	$	55,250	$	(732	)	$	59,500	$	(1,394	)
December 31, 2012	3.105	%	32,500		(430		)	35,000		(820		)
May 9, 2016	2.020	%	74,063		(3,200		)	75,000		(2,810		)

NOTE K—STOCK-BASED COMPENSATION

The Company's Board of Directors has granted stock incentive awards to certain employees and board members pursuant to a long term incentive plan which was approved by the Company's stockholders in May 2005. Employees have been awarded non-vested stock units with performance conditions, non-vested stock units with market conditions and non-vested restricted stock. The restrictions on the non-vested restricted stock awards lapse at the end of a specified service period, which is typically approximately three years from the date of grant. Restrictions could lapse sooner upon a business combination, death, disability or after an employee qualifies for retirement. The non-vested stock units will be converted into a number of shares of Company stock depending on performance and market conditions at the end of a specified service period, lasting approximately three years. The performance condition awards will be converted into a number of shares of Company stock based on the Company's average return on invested capital, depending on the form of award, during the service period. Similarly, the market condition awards will be converted into a number of shares depending on the appreciation of the Company's stock compared to the NASDAQ Transportation Index. Board members were granted time-based awards with approximately a six-month vesting period, which will settle when the board member ceases to be a director of the Company. The Company expects to settle all of the stock unit awards by issuing new shares of stock. The table below summarizes award activity.

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	Six Months Ended				Six Months Ended
	June 30, 2012				June 30, 2011
	Number of Awards		Weighted average grant-date fair value		Number of Awards		Weighted average grant-date fair value
Outstanding at beginning of period	1,458,037		$	5.77	1,514,300		$	3.55
Granted	601,647		5.93		555,237		8.72
Converted	—		—		(291,500	)	3.14
Expired	—		—		—		—
Forfeited	(17,400	)	6.15		(41,600	)	4.97
Outstanding at end of period	2,042,284		$	5.81	1,736,437		$	5.22
Vested	390,037		$	4.45	326,400		$	3.71

The average grant-date fair value of each performance condition award, non-vested restricted stock award and time-based award granted by the Company in 2012 was $5.63, the fair value of the Company’s stock on the date of grant. The average grant-date fair value of each market condition award granted in 2012 was $7.05. The market condition awards were valued using a Monte Carlo simulation technique, a risk-free interest rate of 0.44%, a term of 36 months, and a volatility of 90.1% based on historical volatility over three years using daily stock prices.

For the six month periods ended June 30, 2012 and 2011, the Company recorded expense of $1.8 million and $1.3 million, respectively, for stock incentive awards. At June 30, 2012, there was $4.6 million of unrecognized expense related to the stock incentive awards that is expected to be recognized over a weighted-average period of 1.5 years. As of June 30, 2012, none of the awards were convertible, 390,037 units of the Board members time-based awards had vested and none of the outstanding shares of the restricted stock had vested. These awards could result in a maximum number of 2,406,684 additional outstanding shares of the Company’s common stock depending on service, performance and market results through December 31, 2014.

NOTE L—EARNINGS PER SHARE

The calculation of basic and diluted earnings per common share follows (in thousands, except per share amounts):

	Three Months Ending				Six Months Ending
	June 30,				June 30,
	2012		2011		2012		2011
Earnings from continuing operations	$	11,219	$	12,280	$	17,881	$	15,161
Weighted-average shares outstanding for basic earnings per share	63,431		63,333		63,431		63,233
Common equivalent shares:
Effect of stock-based compensation awards	962		839		952		822
Weighted-average shares outstanding assuming dilution	64,393		64,172		64,383		64,055
Basic earnings per share from continuing operations	$	0.18	$	0.19	$	0.28	$	0.24
Diluted earnings per share from continuing operations	$	0.17	$	0.19	$	0.28	$	0.24

The number of equivalent shares that were not included in weighted average shares outstanding assuming dilution, because their effect would have been anti-dilutive, was 49,000 and 54,000 at June 30, 2012 and 2011, respectively.

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NOTE M—SEGMENT INFORMATION

The Company operates in two reportable segments, as described below. The CAM segment consists of the Company's aircraft leasing operations and its segment earnings includes an allocation of interest expense. The ACMI Services segment consists of the Company's airline operations including the CMI agreement with DHL, as well as ACMI and charter service agreements that the Company provides to other customers. Due to the similarities among

the Company's airline operations, the airline operations are aggregated into a single reportable segment, ACMI Services. The Company's other activities, which include contracts with the USPS, the sale of aircraft parts and maintenance services, management services for workers' compensation and logistics services, do not constitute reportable segments and are combined in “All other” with inter-segment profit eliminations. Inter-segment revenues are valued at arms-length, market rates. Cash, cash equivalents and deferred tax assets are reflected in Assets - All other below. The Company's segment information from continuing operations is presented below (in thousands):

	Three Months Ending						Six Months Ending
	June 30,						June 30,
	2012			2011			2012			2011
Total revenues:
CAM	$	38,067		$	32,762		$	75,918		$	64,890
ACMI Services	121,630			164,709			234,825			311,414
All other	26,682			25,469			55,103			50,907
Eliminate inter-segment revenues	(32,825		)	(29,879		)	(66,786		)	(59,023		)
Total	$	153,554		$	193,061		$	299,060		$	368,188
Customer revenues:
CAM	$	18,635		$	15,824		$	38,024		$	29,895
ACMI Services	121,389			164,597			234,584			311,032
All other	13,530			12,640			26,452			27,261
Total	$	153,554		$	193,061		$	299,060		$	368,188
Depreciation and amortization expense:
CAM	$	14,680		$	13,663		$	29,101		$	25,926
ACMI Services	6,755			10,253			12,559			20,401
All other	79			(38		)	154			(78		)
Total	$	21,514		$	23,878		$	41,814		$	46,249
Segment earnings (loss):
CAM	$	16,667		$	13,634		$	33,485		$	27,100
ACMI Services	(1,582		)	4,560			(9,797		)	2,050
All other	3,228			1,675			5,229			3,329
Net unallocated interest expense	(344		)	(572		)	(665		)	(1,790		)
Net gain (loss) on derivative instruments	202			376			662			(3,556		)
Write-off of unamortized debt issuance costs	—			(16		)	—			(2,886		)
Pre-tax earnings from continuing operations	$	18,171		$	19,657		$	28,914		$	24,247

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The Company's assets are presented below by segment (in thousands):

	June 30,		December 31,
	2012		2011
Assets:
CAM	$	780,858	$	760,588
ACMI Services	153,557		137,640
All other	82,844		95,491
Total	$	1,017,259	$	993,719

Interest expense of $0.2 million and $0.5 million for the three and six month periods ending June 30, 2012, respectively, compared to $0.3 million and $0.6 million for the corresponding periods in 2011, respectively, was included in the ACMI Services segment earnings above. Interest expense allocated to CAM was $3.1 million and $6.0 million for the three and six month periods ending June 30, 2012, respectively, compared to $2.6 million and $5.1 million for the corresponding periods of 2011.

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

The following Management’s Discussion and Analysis has been prepared with reference to the historical financial condition and results of operations of Air Transport Services Group, Inc., and its subsidiaries. Air Transport Services Group, Inc. and its subsidiaries may hereinafter individually and collectively be referred to as "the Company", "we", "our" or "us" from time to time. The following discussion and analysis describes the principal factors affecting the results of operations, financial condition, cash flows, liquidity and capital resources. It should be read in conjunction with the accompanying unaudited financial statements and the related notes contained in this report and our Annual Report on Form 10-K for the year ended December 31, 2011.

BACKGROUND

Air Transport Services Group, Inc. (the “Company”) provides airline operations, aircraft leases, aircraft maintenance and other support services primarily to the cargo transportation and package delivery industries. Through the Company's subsidiaries, it offers a range of complementary services to delivery companies, freight forwarders, airlines and government customers. The Company's principal subsidiaries include three independently certificated airlines, ABX Air, Inc. (“ABX”), Capital Cargo International Airlines, Inc. (“CCIA”) and Air Transport International, LLC (“ATI”), and an aircraft leasing company, Cargo Aircraft Management, Inc. (“CAM”).

At June 30, 2012, the Company’s subsidiaries owned 54 aircraft in service condition consisting of 21 Boeing 767-200 standard freighter aircraft leased to external customers, 32 freighter aircraft operated by the Company's airlines and one Boeing 767 passenger aircraft. The 32 freighter aircraft operated by the Company's airlines consisted of 15 Boeing 767-200, four Boeing 767-300, three Boeing 757, four Boeing 727, two McDonnell Douglas DC-8 freighter aircraft and four McDonnell Douglas DC-8 "combi" aircraft. The combi aircraft are capable of simultaneously carrying passengers and cargo containers on the main flight deck. The Company's subsidiaries also leased four Boeing 767-200 freighter aircraft and two Boeing 767-300 freighter aircraft as of June 30, 2012. Additionally, as of June 30, 2012, the Company had three Boeing 767-300 aircraft undergoing freighter modification, one Boeing 757 aircraft undergoing freighter modification and one Boeing 757 aircraft undergoing combi modification.

The Company has two reportable segments: ACMI Services, which primarily includes the cargo transportation operations of its three airlines and the CAM segment, which includes the Company's aircraft leasing business. The Company's other business operations, which primarily provide support services to the transportation industry, include aircraft maintenance, aircraft part sales, ground equipment leasing and mail handling services. These operations do not constitute reportable segments due to their size.

The Company's largest customer is DHL Network Operations (USA), Inc. and its affiliates ("DHL"), which accounted for 52% and 35% of the Company's consolidated revenues for the six month periods ending June 30, 2012 and 2011, respectively. The Company has had long term contracts with DHL since August of 2003. Commencing March 31, 2010, the Company and DHL executed commercial agreements under which DHL leases 13 Boeing 767 freighter aircraft from CAM and contracted with ABX to operate those aircraft under a separate crew, maintenance and insurance (“CMI”) agreement. The CMI agreement pricing is based on pre-defined fees, scaled for the number of aircraft operated and the number of flight crews provided to DHL for its U.S. network. The initial term of the CMI agreement is five years and the terms of the aircraft leases are seven years, with early termination provisions. In addition to the 13 CAM-owned Boeing 767 aircraft, ABX also operates four DHL-owned Boeing 767 aircraft under the CMI agreement. Additionally, the Company's airlines are providing seven other Boeing 767 aircraft, four Boeing 727 aircraft and one Boeing 757 aircraft to DHL under other contracts having durations of one year or less and two Boeing 757 aircraft under multi-year contracts.

The U.S. Military comprised 16% and 11% of the Company's consolidated revenues for the six month periods ended June 30, 2012 and 2011, respectively. The Company's airlines contract their services to the Air Mobility Command ("AMC"), which is organized under the U.S. Military. ATI contracts its unique fleet of McDonnell Douglas DC-8 combi aircraft to the AMC.

A substantial portion of the Company’s revenues and cash flows have historically been derived from providing airlift in North America to BAX Global, Inc., an affiliate of DB Schenker ("BAX/Schenker"). BAX/Schenker is a specialized heavy weight, business to business shipper. In July 2011, BAX/Schenker announced its plans to adopt a new operating model that phased out the dedicated air cargo network in North America supported by the Company. In

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September 2011, BAX/Schenker ceased air cargo operations at its air hub in Toledo, Ohio and began to conduct air operations from the Cincinnati/Northern Kentucky airport, utilizing DHL's U.S. air hub. Instead of dedicated aircraft, BAX/Schenker now utilizes DHL and other delivery services for its air transportation delivery requirements.

The Company provided limited airlift directly to BAX/Schenker through the peak delivery season, until late December 2011. Beginning in January 2012, DHL contracted with the Company's airlines to supplement DHL's U.S. air network to service BAX/Schenker freight volumes on its expanded air network without use of the Company's DC-8 aircraft and with only limited use of Boeing 727 aircraft.

The Company ceased providing services to BAX/Schenker as of the end of 2011. The Company's revenues from the services performed for BAX/Schenker, derived primarily by providing Boeing 727 and DC-8 airlift, were $60.3 million and $116.3 million for the three and six month periods ended June 30, 2011, respectively. The Company's revenues from BAX/Schenker comprised approximately 31% and 32% of the Company's total revenues during the three and six months ended June 30, 2011 (17% and 18% of total revenues excluding directly reimbursable revenues).

RESULTS OF OPERATIONS

Summary

The consolidated net earnings from continuing operations were $11.2 million and $17.9 million for the three and six months periods ended June 30, 2012, respectively, compared to $12.3 million and $15.2 million for the corresponding periods of 2011. Pre-tax earnings from continuing operations were $18.2 million and $28.9 million for the three and six months periods ended June 30, 2012, respectively, compared to $19.7 million and $24.2 million for the corresponding periods of 2011.

Earnings during the first six months of 2011 were impacted by pre-tax charges totaling $6.8 million stemming from the refinancing of the Company's former credit agreement. After removing the charges related to debt refinancing and the effects of interest rate derivatives, adjusted pre-tax earnings from continuing operations, a non-GAAP measure, were $18.0 million and $28.3 million for the three and six month periods ended June 30, 2012 compared to $19.3 million and $30.7 million for the corresponding periods of 2011. (A definition and reconciliation of adjusted pre-tax earnings is shown below.) Adjusted pre-tax earnings from continuing operations during the three and six month periods ending June 30, 2012 compared to the corresponding periods of 2011 were bolstered by additional external aircraft leases and increased operations for the Company's Boeing 767 and Boeing 757 aircraft, but were negatively impacted by the discontinuation of the BAX/Schenker North American air network in the fourth quarter of 2011.

Total customer revenues from continuing operations decreased by $39.5 million to $153.6 million during the second quarter of 2012 and by $69.1 million to $299.1 million for the first six months of 2012 compared to the corresponding periods of 2011. The declines reflect $60.3 million and $116.3 million of revenues during the three and six month periods ending June 30, 2011, respectively, from services for the BAX/Schenker air network which was discontinued. Revenues from reimbursed fuel and other reimbursed operating expenses declined $29.3 million and $56.7 million during the three and six month periods ending June 30, 2012, respectively, compared to the corresponding periods of 2011. These declines were also primarily due to the discontinuation of the BAX/Schenker air network. Excluding directly reimbursed revenues, customer revenues decreased by $10.2 million and $12.4 million during the three and six month periods ending June 30, 2012, respectively, compared to the corresponding periods of 2011. Revenue growth during 2012, driven by additional external aircraft leases by CAM and additional Boeing 767 and Boeing 757 aircraft operations by ACMI Services, was offset by the revenue decline from the discontinuation of the BAX/Schenker air network.

During 2011, the Company executed a new credit facility ("Senior Credit Agreement") with a consortium of banks to expand and extend its borrowing capacity to support growth of the Boeing 767 and 757 aircraft fleet. The Senior Credit Agreement refinanced the Company's previous term and revolving credit loan. In conjunction with the execution of the Senior Credit Agreement, the Company terminated its previous credit agreement, which resulted in the write-off of $2.9 million of unamortized debt issuance costs associated with that credit agreement and the recognition of $3.9 million of losses for certain interest rate swaps previously designated as cash flow hedges of interest payments stemming from the former term loan during the first quarter of 2011.

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A summary of our revenues and pre-tax earnings from continuing operations is shown below (in thousands):

	Three Months Ending						Six Months Ending
	June 30,						June 30,
	2012			2011			2012			2011
Revenues from Continuing Operations:
CAM	$	38,067		$	32,762		$	75,918		$	64,890
ACMI Services
Airline services	101,261			115,050			197,603			217,500
Reimbursable	20,369			49,659			37,222			93,914
Total ACMI Services	121,630			164,709			234,825			311,414
Other Activities	26,682			25,469			55,103			50,907
Total Revenues	186,379			222,940			365,846			427,211
Eliminate internal revenues	(32,825		)	(29,879		)	(66,786		)	(59,023		)
Customer Revenues	$	153,554		$	193,061		$	299,060		$	368,188
Pre-Tax Earnings from Continuing Operations:
CAM, inclusive of interest expense	$	16,667		$	13,634		$	33,485		$	27,100
ACMI Services	(1,582		)	4,560			(9,797		)	2,050
Other Activities	3,228			1,675			5,229			3,329
Net unallocated interest expense	(344		)	(572		)	(665		)	(1,790		)
Net gain (loss) on derivative instruments	202			376			662			(3,556		)
Write-off of unamortized debt issuance costs	—			(16		)	—			(2,886		)
Pre-Tax Earnings from Continuing Operations	18,171			19,657			28,914			24,247
Less Net (gain) loss on derivative instruments	(202		)	(376		)	(662		)	3,556
Add Write-off of unamortized debt issuance costs	—			16			—			2,886
Adjusted Pre-Tax Earnings	$	17,969		$	19,297		$	28,252		$	30,689

Reimbursable revenues include certain operating costs that are reimbursed to the airlines by their customers. Such costs include fuel used, landing fees and certain aircraft maintenance expenses. The types of costs that are reimbursed varies by customer operating agreement.

Adjusted pre-tax earnings, a non-GAAP measure, is pre-tax earnings excluding interest rate derivative gains and losses and the write-off of debt issuance costs. Management uses adjusted pre-tax earnings to compare the performance of core operating results between periods. Adjusted pre-tax earnings, should not be considered in isolation or as a substitute for analysis of the Company's results as reported under GAAP.

CAM

Through the CAM subsidiary, the Company offers aircraft leasing to external customers and leases aircraft internally to the Company's airlines. Aircraft leases normally cover a term of five to seven years. In a typical leasing agreement, customers pay rent and maintenance deposits on a monthly basis.

As of June 30, 2012, CAM had 54 aircraft in service condition, 32 of them leased internally to the Company's airlines. CAM's revenues grew $5.3 million and $11.0 million for the three and six months periods ended June 30, 2012, respectively, compared to the corresponding periods of 2011, as a result of additional aircraft leases. Since June 30, 2011, CAM has completed the modification from passenger to freighter of four Boeing 767-200 aircraft, three Boeing 767-300 aircraft and one Boeing 757 aircraft, and placed those aircraft under leases with internal and external customers. Revenues from external customers accounted for $2.8 million and $8.1 million of the increased revenue for the three and six months periods ended June 30, 2012, respectively, driven by two additional aircraft leases placed with external customers since June 2011. CAM's revenues from internal leases of Boeing 727 and DC-8 freighter aircraft for the three and six months periods ended June 30, 2012 declined $4.8 million and $10.0 million, respectively, compared to the corresponding periods of 2011 due to the retirement of Boeing 727 and DC-8 aircraft previously operated for BAX/Schenker, but the decline was more than offset by additional Boeing 767 and 757 aircraft leases.

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CAM's pre-tax earnings, inclusive of an interest expense allocation, increased $3.0 million and $6.4 million for the three and six months periods ending June 30, 2012, respectively, compared to the corresponding periods of 2011. Improved earnings reflected eight additional Boeing 767 and 757 aircraft under lease since June 30, 2011. CAM's pre-tax earnings for the second quarter of 2012 does not reflect $0.7 million of unpaid rents related to a Boeing 767 aircraft under lease with a regional airline. Management and the lessee are discussing the timing of future payments which could result in the early return of the leased aircraft.

During 2012, CAM completed the modification from passenger to freighter configuration of one Boeing 767-200 and two Boeing 767-300 aircraft and leased those aircraft internally to a Company airline. CAM has five other passenger Boeing 767-300 and 757-200 aircraft, as discussed further below, that are being modified for future deployment.

ACMI Services Segment

The ACMI Services segment provides airline operations to its customers, typically under contracts providing for a combination of aircraft, crews, maintenance and insurance ("ACMI"). Our customers are usually responsible for supplying the necessary aviation fuel and cargo handling services and reimbursing our airline for other operating expenses, such as landing fees, ramp expenses and certain aircraft maintenance expenses. Aircraft charter agreements, including those for the U.S. Military, usually require the airline to provide full service, including fuel and other operating expenses for a fixed, all-inclusive price. As of June 30, 2012, ACMI Services included 51 in-service aircraft, including 32 leased internally from CAM, six leased from external providers and 13 CAM-owned freighter aircraft which are under lease to DHL and operated by ABX under the CMI agreement.

Revenues from ACMI Services decreased 26% and 25% during the three and six months periods ended June 30, 2012, respectively, compared to corresponding periods of 2011 as a result of the discontinuation of services for BAX/Schenker's North American air network. Since June 30, 2011, ACMI Services has retired seven Boeing 727 and eight DC-8 freighter aircraft in response to the discontinuation of BAX/Schenker's North American air network in 2011. During the three and six month periods ended June 30, 2011, ACMI Services revenues included $35.0 million and $66.5 million for the reimbursement of fuel and other operating expenses for the BAX/Schenker air network. Airline services revenues, which do not include revenues for the reimbursement of fuel and certain operating expenses, declined 12% and 9%, reflecting the loss of BAX/Schenker revenues of $25.0 million and $49.6 million during the three and six month periods ended June 30, 2011, respectively.

Revenue declines from BAX/Schenker were offset by revenues from additional Boeing 767 and Boeing 757 aircraft added to the ACMI Services fleet since June 2011. Since June 30, 2011, ACMI Services has added two Boeing 767-200, four Boeing 767-300 and one Boeing 757 aircraft into the operating fleet. Airline service revenues, excluding those from BAX/Schenker, increased $11.3 million and $29.7 million during the three and six month periods ended June 30, 2012, respectively, compared to the corresponding periods of 2011, driven by these additional Boeing 767 and 757 aircraft. Aircraft block hours flown for customers other than BAX/Schenker increased 15% during the three and six months periods ending June 30, 2012, compared to the corresponding periods of 2011.

ACMI Services incurred pre-tax losses of $1.6 million and $9.8 million during the three and six months periods ending June 30, 2012, respectively, compared to pre-tax earnings of $4.6 million and $2.1 million for the corresponding periods of 2011. Operating results during 2012 were negatively impacted by the discontinuation of BAX/Schenker's North American air network, the cost of training flight crew members for the Boeing 767 aircraft, increased pension expenses, higher engine maintenance expenses and delays in placing aircraft into revenue service. During the second quarter of 2012, ABX added three Boeing 767-300 aircraft into its in-service fleet. Delays in placing two of the recently deployed Boeing 767-300 aircraft into incremental revenue generating services adversely impacted operating results during the second quarter of 2012. While ATI and CCIA have reduced the number of crew members and other employees in the ACMI Services segment due to the termination of the BAX/Schenker network, salaries and benefits expenses during 2012, included the cost of training senior, former DC-8 crewmembers for the Boeing 767 aircraft.

To further streamline the operations impacted by the loss of the BAX/Schenker business, we intend to effect a corporate reorganization pursuant to which the airline operations of ATI and CCIA will be merged near the end of 2012. In May 2012, ATI and CCIA reached a tentative agreement with their respective flight crewmembers, as represented by the Air Line Pilots Association International ("ALPA"). The tentative agreement sets out the essential terms under which the parties intend to pursue a joint collective bargaining agreement and merge their flight crewmember seniority lists. The airlines and ALPA intend to have the definitive agreement in place and complete the integration of the seniority

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lists by the end of 2012.

Continued stagnant economic conditions may slow the pace by which we deploy aircraft into incremental revenue operations. We may further reduce staff levels as required to match with customer demand and aircraft utilization levels. Additionally, customer demand for air cargo services depends on the cost competitiveness of the airlines, aircraft reliability and market preferences for the type of aircraft that we operate. New customer agreements typically involve start-up expenses, including those for proving flights, route authorities, overfly rights, travel and other activities, and may impact future operating results. Revenue-generating service may begin sometime later; however, depending on the satisfaction of a number of conditions, including international regulations and laws, contract negotiations, flight crew availability, and arranging resources for aircraft handling.

ATI currently operates four DC-8 combi aircraft for the U.S. Military. In July 2012, the U.S. Military's Air Mobility Command notified ATI that it was awarded a two-year agreement to continue the combi aircraft flights through September of 2014. ATI intends to service the award with its DC-8 combi aircraft and phase-in more modern Boeing 757 combi aircraft starting in the fourth quarter of 2012, replacing the DC-8 combi aircraft in conjunction with the U.S. Military's preference.

Other Activities

The Company sells aircraft parts and provides aircraft maintenance and modification services to other airlines. The Company also operates five U.S. Postal Service (“USPS”) sorting facilities and provides ground equipment leasing and facility maintenance services, including fuel services. Other activities also include the management of workers' compensation claims under an agreement with DHL and gains from the reduction in employee post-retirement obligations.

External customer revenues from all other activities were $13.5 million and $26.5 million for the three and six month periods ending June 30, 2012, compared to $12.6 million and $27.3 million for the three and six months periods ending June 30, 2011.

The pre-tax earnings from other activities were $3.2 million and $5.2 million for the three and six month periods ending June 30, 2012, respectively. Pre-tax earnings from other activities increased $1.6 and $1.9 million for the three and six month periods ending June 30, 2012, respectively, compared to the corresponding periods of 2011, primarily reflecting process streamlining initiatives at the sorting facilities and higher aircraft maintenance revenues. The Company's contracts with the USPS generated $10.3 million of revenue during the first half of 2012. While these contracts expire in 2012, we expect to renew them under similar terms.

Discontinued Operations

Pre-tax losses related to the former hub services operations were $0.6 million for the first six months of 2012 compared to $0.2 million during the first six months of 2011. The results of discontinued operations primarily contain pension expense for former employees that supported sort operations under a hub services agreement with DHL and expenses for certain legal matters associated with those former sorting operations.

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Fleet Summary 2012

The Company’s aircraft fleet is summarized below as of June 30, 2012 ($'s in thousands):

	ACMI Services	CAM	Total
In-service aircraft
Aircraft owned
Boeing 767-200	15	22	37
Boeing 767-300	4	—	4
Boeing 757	3	—	3
Boeing 727	4	—	4
DC-8	6	—	6
Total	32	22	54
Carrying value			$	660,404
Operating lease
Boeing 767-200	4	—	4
Boeing 767-300	2	—	2
Total	6	—	6
Carrying value			$	593
Aircraft for freighter and combi modification
Boeing 767-300	—	3	3
Boeing 757	—	2	2
Total	—	5	5
Carrying value			$	83,240

As of June 30, 2012, ACMI Services leased 32 of its in-service aircraft internally from CAM. As of June 30, 2012, 13 of CAM's 22 Boeing 767-200 aircraft shown above were leased to DHL and operated by ABX, CAM leased eight other Boeing 767-200 aircraft to external airlines and CAM's one Boeing 767-200 passenger aircraft was not leased.

Aircraft fleet activity during the first half of 2012 is summarized below:

- CAM completed the freighter modification of one Boeing 767-200 aircraft and leased the aircraft internally to an airline affiliate.

- We removed one DC-8 aircraft from the in-service fleet as a result of BAX/Schenker's discontinuation of its North American air network and diminished demand for these aircraft types.

- ABX began to lease a Boeing 767-300 aircraft from an external lessor.

- CAM purchased two Boeing 767-300 passenger aircraft for modification into standard freighter aircraft. CAM completed the freighter modification of two Boeing 767-300 aircraft and leased the aircraft internally to an airline affiliate. We expect to complete the modification of two Boeing 767-300 aircraft from passenger to freighter configuration in the third quarter of 2012 and complete the modification of one Boeing 767-300 aircraft from passenger to freighter configuration in the fourth quarter of 2012.

- We expect to complete the modification of one Boeing 757 passenger aircraft into a combi configuration and another Boeing 757 passenger aircraft into a standard freighter configuration during 2012.

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As of June 30, 2012, ACMI Services included four Boeing 727 aircraft having a carrying value of $0.4 million which were being operated temporary for DHL's U.S. network. These aircraft will be removed from service through March of 2013 as their current airframe maintenance time expires.

As of June 30, 2012, the Company had Boeing 727 and DC-8 airframes and engines with a carrying value of $5.5 million which were available for sale. This carrying value is based on fair market values less the estimated costs to sell the airframes, engines and parts.

Expenses from Continuing Operations

Salaries, wages and benefits expense decreased $0.8 million during the quarter ended June 30, 2012 and did not change for the six month period ended June 30, 2012, when compared to the corresponding periods of 2011. Reductions in the number of Boeing 727 and DC-8 crew members since June 30, 2011 were offset by costs of additional crew members for the expanded number of Boeing 767 aircraft operated by the Company and by increased pension expense compared to 2011. Pension expense for continuing operations increased $1.4 million and $2.8 million during the three and six month periods ended June 30, 2012, respectively, when compared to the corresponding periods of 2011 due to the affects of lower discount rates used to actuarially calculate the Company's annual pension expense.

Fuel expense decreased by $34.6 million and $60.4 million during the three and six month periods ending June 30, 2012, respectively, compared to the corresponding periods of 2011. The decrease occurred in conjunction with BAX/Schenker's discontinuation of its North American air network in the fourth quarter of 2011. During 2011, while under contract with BAX/Schenker, ATI provided aviation fuel for the BAX/Schenker air network and was reimbursed by BAX/Schenker for the costs of fuel. The Company is no longer incurring aviation fuel expenses or recording a related reimbursable revenue for the BAX/Schenker network. Fuel expense during 2012 primarily reflects the costs of fuel to operate U.S. Military charters, position aircraft for service and for maintenance purposes.

Maintenance, materials and repairs expense increased by $2.9 million and $4.7 million during the three and six month periods ending June 30, 2012, respectively, compared to the corresponding periods of 2011. During the first six months of 2012, maintenance expense reductions stemming from the discontinuation of Boeing 727 aircraft and DC-8 freighter aircraft since the fourth quarter of 2011 were offset by higher maintenance expenses to support the larger fleet of Boeing 767 and 757 aircraft.

Depreciation and amortization expense decreased $2.4 million and $4.4 million during the three and six month periods ending June 30, 2012, respectively, compared to the corresponding periods of 2011. The decline in depreciation expense reflects the removal of seven Boeing 727 aircraft and eight DC-8 freighter aircraft from service offset by incremental depreciation expense for seven Boeing 767 aircraft and one Boeing 757 aircraft added to the fleet since June 2011. The Boeing 727 aircraft and DC-8 freighter aircraft were removed from service in conjunction with BAX/Schenker's discontinuation of its North American air network in the fourth quarter of 2011.

Travel expense decreased by $1.4 million and $1.7 million during the three and six month periods ending June 30, 2012, respectively, compared to the corresponding periods of 2011. The decrease is a result of the discontinuation of the BAX/Schenker North American air network in the fourth quarter of 2011.

Rent expense increased by $0.8 million and $0.9 million during the three and six month periods ending June 30, 2012, respectively, compared to the corresponding periods of 2011. Rent expense was not significantly affected by the discontinuation of the BAX/Schenker North American air network because the Company did not lease the aircraft used in that network.

Landing and ramp expense, which includes the cost of deicing chemicals, decreased by $2.2 million and $4.5 million during the three and six month periods ending June 30, 2012, respectively, compared to the corresponding periods of 2011. The decrease during 2012 reflects the discontinuation of the BAX/Schenker North American air network in the fourth quarter of 2011.

Insurance expenses decreased by $0.6 million and $0.9 million during the three and six month periods ending June 30, 2012, respectively, compared to the corresponding periods of 2011, primarily due to the reduction in Boeing 727 and DC-8 aircraft during the fourth quarter of 2011 and the first quarter of 2012.

Other operating expenses include professional fees, navigational services, employee training, utilities, and the cost of parts sold to customers. Other operating expenses decreased by $0.3 million and $0.0 million during the three and

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six month periods ending June 30, 2012, respectively, compared to the corresponding periods of 2011. During 2012, increased expenses for international aircraft operations were offset by lower costs stemming from the discontinuation of the BAX/Schenker North American air network.

Interest expense increased by $0.1 million and decreased by $0.4 million during the three and six month periods ending June 30, 2012, respectively, compared to the corresponding periods of 2011. Interest expense was higher for the three months ending June 30, 2012 compared to the corresponding 2011 period primarily due to an increase in the amount of borrowings under the revolving credit loan and an increase in the interest rates. The decline in interest expense for the first six months of 2012 compared to 2011 reflects the payoff of an aircraft loan in 2011 and an increase in capitalized interest for the aircraft undergoing freighter modification. Interest rates on the Company’s variable interest, unsubordinated term loan increased to 2.72% at June 30, 2012 from 2.25% at June 30, 2011. We expect interest expense to increase during the remainder of 2012 due to a higher level of debt which is being used to expand the Company's aircraft fleet.

During the three and six month period ending June 30, 2012, the Company recorded pre-tax net gains on derivatives of $0.2 million and $0.7 million, reflecting the impact of higher market interest rates since December 31, 2011 on the interest rate swaps held by the Company at June 30, 2012.

In 2011, the Company executed a new credit facility replacing its previous credit agreement. During the first six months of 2011, the Company wrote off $2.9 million of unamortized debt issuance costs associated with the former credit agreement. During the first six months of 2011, in conjunction with the termination of the former credit agreement, the Company terminated its hedge accounting of interest rate swaps related to the former term loan, which resulted in the recognition of $3.9 million of pre-tax losses which had previously been reflected in other comprehensive income.

Income tax expenses recorded through June 30, 2012, have been estimated based on year-to-date income and projected results for the full year, excluding discrete items. The effective tax rate for the full year 2012 is projected to be approximately 38.2%. The effective tax rate from continuing operations for the three and six months ended June 30, 2012 was 38.3% and 38.2% compared to 37.5% for the corresponding periods in 2011. The effective tax rate increased for 2012 due to having more earnings in certain taxing districts with higher tax rates as compared to 2011.

FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES

Cash Flows

Net cash generated from operating activities totaled $64.6 million for the first six months of 2012 compared to $78.5 million for the first six months of 2011. Cash flows generated from operating activities decreased for the first six months of 2012 compared to 2011 primarily reflecting payments to vendors associated with the wind-down of the BAX/Schenker operations, partially offset by customer collections.

Capital spending levels were primarily the result of aircraft modification costs and the acquisition of aircraft for freighter modification. Cash payments for capital expenditures were $69.5 million in the first six months of 2012 compared to $102.7 million in the first six months of 2011. Capital expenditures in 2012 included $59.9 million for the acquisition of two Boeing 767-300 aircraft and the modification of aircraft, $5.3 million for required heavy maintenance and $2.8 million for other equipment costs. Capital expenditures for the first six months of 2011 included $84.2 million for the acquisition and modification of aircraft, $17.1 million for required heavy maintenance and $1.4 million for other equipment costs.

Proceeds of $2.5 million were received during the first six months of 2012 for the sale of aircraft engines and parts.

Net cash provided by financing activities was $19.4 million in the first six months of 2012 compared to $13.6 million used in the corresponding period in 2011. During the first six months of 2012, we drew $25.0 million from the revolver under the Senior Credit Agreement to fund capital spending and we made debt principal payments of $5.6 million. Additionally, $3.1 million of the principal balance of the DHL promissory note was extinguished during the first six months of 2012, pursuant to the CMI agreement with DHL.

Commitments

Through CAM, the Company continues to make investments in Boeing 767 and 757 aircraft. As these aircraft are modified, we will place them into service under dry leasing arrangements to external customers or ACMI operations using our airlines, depending on which alternative provides the best long term return and considering other factors,

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including geographical placement and customer diversification.

In August 2010, the Company entered into an agreement with M&B Conversions Limited and Israel Aerospace Industries Ltd. ("IAI"), for the conversion by IAI of up to ten Boeing 767-300 series passenger aircraft to a standard freighter configuration during the 10-year term of the agreement. As of June 30, 2012, four such aircraft have completed the modification process, two Boeing 767-300 aircraft were undergoing modification to a standard freighter configuration and one Boeing 767-300 aircraft was awaiting modification. If the Company were to cancel the conversion program as of June 30, 2012, it would owe IAI approximately $18.9 million associated with non-recurring engineering efforts, conversion part kits and to complete the modification.

In October 2010, the Company entered into an agreement with Precision Conversions, LLC (“Precision”) for the design, engineering and certification of a Boeing 757 "combi" aircraft variant. The Boeing 757 combi variant to be developed by Precision will incorporate 10 full cargo pallet positions along with seating for up to 58 passengers. As of June 30, 2012, one Boeing 757 had completed the modification process from a passenger to a standard freighter configuration and two other Boeing 757 aircraft were respectively in the process of undergoing modification from a passenger to a standard freighter configuration and from a passenger to a combi configuration. If the Company were to cancel the conversion program as of June 30, 2012, it would owe Precision approximately $10.2 million associated with engineering efforts, conversion part kits which have been ordered and to complete the modifications.

We estimate that total capital expenditures for 2012 could total $180 million to $200 million primarily for aircraft acquisitions and related modification costs involving Boeing 767-300 and Boeing 757 aircraft. Actual capital spending for any future period will be impacted by the progress in the aircraft modification process. We expect to finance the aircraft purchases and modifications from current cash balances, future operating cash flow and the Senior Credit Agreement.

Liquidity

The Company's Senior Credit Agreement with a consortium of banks includes a fully drawn term loan of $150 million and a revolving credit facility, of which the Company has drawn $131 million, net of repayments as of June 30, 2012. The Company intends to make further draws on the revolving loan to fund its fleet expansion plans. On July 20, 2012, the Company executed the first amendment to the Senior Credit Amendment ("Credit Amendment"). The Credit Amendment increased the amount available under the revolving credit loan by $50 million to $225 million, extended the maturity of the term loan and revolving credit loan to July 20, 2017, and provided for an accordion feature whereby the Company may draw up to an additional $50 million, subject to the lenders' consent. If the Company exercises the accordion feature, the same terms and conditions of the Senior Credit Agreement would apply to the accordion feature and additional collateral would need to be posted to maintain the 150% collateral coverage requirement. The additional debt may result in higher interest rates. Under the Senior Credit Agreement, interest rates are adjusted quarterly based on the prevailing LIBOR or prime rates and a ratio of the Company's outstanding debt level to earnings before interest, taxes, depreciation and amortization expenses ("EBITDA"). At the Company's current debt-to-EBITDA ratio, the unsubordinated term loan and revolving loan bear a variable interest rate of 2.72% and 2.50%, respectively. The Credit Amendment did not effect the EBITDA based pricing or covenants of the Senior Credit Agreement.

The Senior Credit Agreement is collateralized by certain of the Company's Boeing 767 and 757 aircraft that are not collateralized under aircraft loans. Under the terms of the Senior Credit Agreement, the Company is required to maintain collateral coverage equal to 150% of the outstanding balance of the term loan and the total revolving credit facility. Under the Senior Credit Agreement, the Company is subject to covenants and warranties that are usual and customary, including among other things, limitations on certain additional indebtedness, guarantees of indebtedness, as well as a total debt to EBITDA ratio and a fixed charge coverage ratio. The Senior Credit Agreement stipulates events of default including unspecified events that may have a material adverse effect on the Company. If an event of default occurs, the Company may be forced to repay, renegotiate or replace the Senior Credit Agreement.

At June 30, 2012, the Company had approximately $47.5 million of cash balances and, upon execution of the Credit Amendment on July 20, 2012, $74.8 million available under the revolving credit facility, net of outstanding letters of credit, which totaled $19.2 million. The Company also expects to have available the $50 million accordion feature noted above. As specified under the terms of ABX's CMI agreement with DHL, the $17.1 million balance at June 30, 2012 of the unsecured note payable to DHL will be extinguished ratably without payment through March 31, 2015. We believe that the Company's current cash balances and forecasted cash flows provided from its operating agreements,

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combined with its Senior Credit Agreement, will be sufficient to fund operations, scheduled debt payments, required pension funding and planned capital expenditures for at least the next 12 months.

Off-Balance Sheet Arrangements

As part of our ongoing business, we do not participate in transactions that generate relationships with unconsolidated entities or financial partnerships, such as entities often referred to as structured finance or special purpose entities (“SPEs”), which would have been established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes. As of June 30, 2012 and 2011, we were not involved in any material unconsolidated SPE transactions.

Certain of our operating leases and agreements contain indemnification obligations to the lessor or one or more other parties that are considered usual and customary (e.g. use, tax and environmental indemnifications), the terms of which range in duration and are often limited. Such indemnification obligations may continue after the expiration of the respective lease or agreement. No amounts have been recognized in our financial statements for the underlying fair value of guarantees and indemnifications.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

“Management’s Discussion and Analysis of Financial Condition and Results of Operations,” as well as certain disclosures included elsewhere in this report, are based upon our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these financial statements requires us to select appropriate accounting policies and make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosures of contingencies. In certain cases, there are alternative policies or estimation techniques which could be selected. On an ongoing basis, we evaluate our selection of policies and the estimation techniques we use, including those related to revenue recognition, post-retirement liabilities, bad debts, self-insurance reserves, valuation of spare parts inventory, useful lives, salvage values and impairment of property and equipment, income taxes, contingencies and litigation. We base our estimates on historical experience, current conditions and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources, as well as for identifying and assessing our accounting treatment with respect to commitments and contingencies. Actual results may differ from these estimates under different assumptions or conditions. We believe the following significant and critical accounting policies involve the more significant judgments and estimates used in preparing the consolidated financial statements.

Revenue Recognition

Revenues generated from airline service agreements are typically recognized based on hours flown or the amount of aircraft and crew resources provided during a reporting period. Certain agreements include provisions for incentive payments based upon on-time reliability. These incentives are typically measured on a monthly basis and recorded to revenue in the corresponding month earned. Revenues for operating expenses that are reimbursed through customer agreements, including consumption of aircraft fuel, are generally recognized as the costs are incurred. Revenues from charter service agreements are recognized on scheduled and non-scheduled flights when the specific flight has been completed. Revenues from the sale of aircraft parts are recognized when the parts are delivered. Revenues earned and expenses incurred in providing aircraft-related maintenance, repair or technical services are recognized in the period in which the services are completed and delivered to the customer. Revenues derived from transporting freight and sorting parcels are recognized upon delivery of shipments and completion of services. Aircraft lease revenues are recognized as operating lease revenue on a straight-line basis over the term of the applicable lease agreements.

Goodwill and Intangible Assets

In accordance with the Financial Accounting Standards Board Accounting Standards Codification (“FASB ASC”) Topic 350-20 Intangibles—Goodwill and Other, we assess in the fourth quarter of each year whether the Company’s goodwill acquired in acquisitions is impaired. Additional assessments may be performed on an interim basis whenever events or changes in circumstances indicate an impairment may have occurred. Indefinite-lived intangible assets are not amortized but are assessed for impairment annually, or more frequently if impairment indicators occur. Finite-lived

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intangible assets are amortized over their estimated useful economic lives and are periodically reviewed for impairment.

Long-lived assets

Aircraft and other long-lived assets are tested for impairment whenever events or changes in circumstances indicate the carrying value of the assets may not be recoverable. Factors which may cause an impairment include termination of aircraft from a customer's network, extended operating cash flow losses from the assets and management's decisions regarding the future use of assets. To conduct impairment testing, the Company groups assets and liabilities at the lowest level for which identifiable cash are largely independent of cash flows of other assets and liabilities. For assets that are to be held and used, impairment is recognized when the estimated undiscounted cash flows associated with an asset group is less than the carrying value. If impairment exists, an adjustment is made to write the assets down to fair value, and a loss is recorded as the difference between the carrying value and fair value. Fair values are determined considering quoted market values, discounted cash flows or internal and external appraisals, as applicable.

Depreciation

Depreciation of property and equipment is provided on a straight-line basis over the lesser of an asset’s useful life or lease term. We periodically evaluate the estimated service lives and residual values used to depreciate our property and equipment. The acceleration of depreciation expense or the recording of significant impairment losses could result from changes in the estimated useful lives of our assets. We may change the estimated useful lives due to a number of reasons, such as the existence of excess capacity in our air networks, or changes in regulations grounding or limiting the use of aircraft.

Self-Insurance

We self-insure certain claims related to workers’ compensation, aircraft, automobile, general liability and employee healthcare. We record a liability for reported claims and an estimate for incurred claims that have not yet been reported. Accruals for these claims are estimated utilizing historical paid claims data and recent claims trends. Changes in claim severity and frequency could result in actual claims being materially different than the costs provided for in our results of operations. We maintain excess claim coverage with common insurance carriers to mitigate our exposure to large claim losses.

Contingencies

We are involved in legal matters that have a degree of uncertainty associated with them. We continually assess the likely outcomes of these matters and the adequacy of amounts, if any, provided for these matters. There can be no assurance that the ultimate outcome of these matters will not differ materially from our assessment of them. There also can be no assurance that we know all matters that may be brought against us at any point in time.

Income Taxes

We account for income taxes under the provisions of FASB ASC Topic 740-10 Income Taxes. The objectives of accounting for income taxes are to recognize the amount of taxes payable or refundable for the current year and deferred tax liabilities and assets for the future tax consequences of events that have been recognized in the Company’s financial statements or tax returns. Judgment is required in assessing the future tax consequences of events that have been recognized in the Company’s financial statements or tax returns. Fluctuations in the actual outcome of expected future tax consequences could materially impact the Company’s financial position or its results of operations.

The Company has significant deferred tax assets including net operating loss carryforwards (“NOL CFs”) for federal income tax purposes which begin to expire in 2024. Based upon projections of taxable income, we determined that it was more likely than not that the NOL CF’s will be realized prior to their expiration. Accordingly, we do not have an allowance against these deferred tax assets at this time.

We recognize the impact of a tax position, if that position is more likely than not of being sustained on audit, based on the technical merits of the position.

Post-retirement Obligations

The Company sponsors qualified defined benefit pension plans for ABX’s flight crewmembers and other eligible employees. The Company also sponsors non-qualified, unfunded excess plans that provide benefits to executive

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management and crewmembers that are in addition to amounts permitted to be paid through our qualified plans under provisions of the tax laws. Employees are no longer accruing benefits under any of the defined benefit pension plans. The Company also sponsors unfunded post-retirement healthcare plans for ABX’s flight crewmembers and non-flight crewmember employees.

The accounting and valuation for these post-retirement obligations are determined by prescribed accounting and actuarial methods that consider a number of assumptions and estimates. The selection of appropriate assumptions and estimates is significant due to the long time period over which benefits will be accrued and paid. The long term nature of these benefit payouts increases the sensitivity of certain estimates on our post-retirement costs. In actuarially valuing our pension obligations and determining related expense amounts, assumptions we consider most sensitive are discount rates and expected long term investment returns on plan assets. Other assumptions concerning retirement ages and mortality also affect the valuations. Actual results and future changes in these assumptions could result in future costs that are materially different than those recorded in our annual results of operations.

Discontinued Operations

In accordance with the guidance of FASB ASC Topic 205-20 Presentation of Financial Statements, a business component whose operations are discontinued is reported as discontinued operations if the cash flows of the component have been eliminated from the ongoing operations of the Company and the Company will no longer have any significant continuing involvement in the business component. The results of discontinued operations are aggregated and presented separately in the consolidated statement of operations. FASB ASC Topic 205-20 requires the reclassification of amounts presented for prior years to reflect their classification as discontinued operations.

Exit Activities

We account for the costs associated with exit activities in accordance with FASB ASC Topic 420-10 Exit or Disposal Cost Obligations. One-time, involuntary employee termination benefits are generally expensed when the Company communicates the benefit arrangement to the employee that it will no longer require the services of the employee beyond a minimum retention period. Liabilities for contract termination costs associated with exit activities are recognized in the period incurred and measured initially at fair value.

New Accounting Pronouncements

In December 2011, the FASB issued Accounting Standards Update No. 2011-11, “Balance Sheet (Topic 210): Disclosures about Offsetting Assets and Liabilities,” (“ASU 2011-11”). ASU 2011-11 enhances disclosures regarding financial instruments and derivative instruments. Entities are required to provide both net information and gross information for these assets and liabilities. This new guidance is to be applied retrospectively beginning in 2013. The Company anticipates that the adoption of this standard will expand its consolidated financial statement footnote disclosures.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The Company is exposed to market risk for changes in interest rates and changes in the price of jet fuel. The risk associated with jet fuel, however, is largely mitigated by reimbursement through the agreements with our customers. The Company is exposed to concentration of credit risk primarily through cash deposits, cash equivalents, marketable securities and derivatives.

No significant changes have occurred to the market risks the Company faces since information about those risks were disclosed in item 7A of the Company's 2011 Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 5, 2012.

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ITEM 4. CONTROLS AND PROCEDURES

(a) Evaluation of Disclosure Controls and Procedures

As of June 30, 2012, the Company carried out an evaluation, under the supervision and with the participation of the Company's Chief Executive Officer and Chief Financial Officer of the effectiveness of the design and operation of the Company's disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the "Exchange Act")). Based upon the evaluation, the Company's Chief Executive Officer and Chief Financial Officer concluded that the Company's disclosure controls and procedures were effective to ensure that information required to be disclosed by the Company in the reports filed or submitted by it under the Exchange Act is recorded, processed, summarized and reported within time periods specified in the Securities and Exchange Commission rules and forms and is accumulated and communicated to management, including the Chief Executive Officer and Chief Financial Officer, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.

(b) Changes in Internal Controls

There were no changes in internal control over financial reporting during the most recently completed fiscal quarter that has materially affected, or is reasonably likely to materially affect, the Company's internal control over financial reporting.

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PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

Civil Action Alleging Violations of Immigration Laws

On December 31, 2008, a former ABX employee filed a complaint against ABX, a total of four current and former executives and managers of ABX, Garcia Labor Company of Ohio, and three former executives of the Garcia Labor companies, in the U.S. District Court for the Southern District of Ohio. The case was filed as a putative class action against the defendants, and asserts violations of the Racketeer Influenced and Corrupt Practices Act (RICO). The complaint, which was later amended to include a second former employee plaintiff, seeks damages in an unspecified amount and alleges that the defendants engaged in a scheme to hire illegal immigrant workers to depress the wages paid to hourly wage employees during the period from December 1999 to January 2005.

The complaint is similar to a prior complaint filed by another former employee in April 2007. The prior complaint was subsequently dismissed without prejudice at the plaintiff’s request on November 3, 2008.

On March 18, 2010, the Court issued a decision in response to a motion filed by ABX and the other ABX defendants, dismissing three of the five claims constituting the basis of Plaintiffs' complaint. Thereafter, on October 7, 2010, the Court issued a decision permitting the plaintiffs’ to amend their complaint for the purpose of reinstating one of their dismissed claims. On October 26, 2010, ABX and the other ABX defendants filed an answer denying the allegations contained in plaintiffs’ second amended complaint.

On December 2, 2011, the parties attended a settlement conference presided over by the Court and agreed to settle this matter. The settlement calls for ABX to pay to the plaintiffs a monetary amount, which management believes to be less than it would have cost for ABX to defend the case at trial. Once the plaintiffs have provided notice to the putative class members of the settlement, the Court will hold a hearing to consider any objections and seek final confirmation of the settlement.

Brussels Noise Ordinance

The Brussels Instituut voor Milieubeheer ("BIM"), a governmental authority in the Brussels-Capital Region of Belgium that oversees the enforcement of environmental matters, brought an administrative action against ABX alleging numerous violations of an ordinance limiting the noise caused by aircraft overflying the Brussels-Capital Region, which is located near the Brussels Airport. In May and November 2011, the BIM levied separate administrative penalties on ABX in the approximate amount of €0.1 million ($0.1 million) each, for numerous alleged violations of the ordinance during the period from May 2009 through November 2009 and December 2009 through May 2010; respectively. ABX appealed both of these matters to the Environmental College in Brussels, which affirmed the administrative penalties. ABX has subsequently appealed both of these matters to the Council of State, which appeals are currently pending.

In June 2012, the BIM levied an additional administrative penalty on ABX in the approximate amount of €0.1 million ($0.2 million) for numerous alleged violations of the ordinance during the period from June 2010 through October 2010, and has also commenced administrative action for numerous alleged violations of the ordinance during the period from November 2010 through December 2010.

The ordinance in question is controversial for the reason that it was adopted by the Brussels-Capital Region and is more restrictive than the noise limitations in effect in the Flemish Region, which is where the Brussels Airport is located. The ordinance is the subject of several court cases currently pending in the Belgian courts and numerous airlines have been levied fines thereunder.

Other

In addition to the foregoing matters, we are also currently a party to legal proceedings, including FAA enforcement actions, in various federal and state jurisdictions arising out of the operation of our business. The amount of alleged liability, if any, from these proceedings cannot be determined with certainty; however, we believe that our ultimate liability, if any, arising from the pending legal proceedings, as well as from asserted legal claims and known potential legal claims which are probable of assertion, taking into account established accruals for estimated liabilities, should not be material to our financial condition or results of operations.

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ITEM 1A. RISK FACTORS

The Company faces risks that could adversely affect its financial condition or results of operations. Many of these risks are disclosed in Item 1A of the Company's 2011 Annual Report on Form 10-K, filed with the Securities and Exchange Commission on March 5, 2012. Other risks that are currently unknown to management or are currently considered immaterial or unlikely, could also adversely affect the Company.

The Company intends to merge the airline operations of ATI and CCIA by the end of 2012 with the approval of the DOT and FAA. Execution of the merger plan could be delayed due to regulatory requirements, which could increase costs and have an adverse effect on future operating results. The airlines, with their respective flight crewmembers, as represented by the Air Line Pilots Association International ("ALPA"), intend to integrate the seniority lists and establish pay scales by the end of 2012. Ratification by ALPA members may take longer than anticipated and detrimentally affect operating costs. In conjunction with the merger, management is considering a tax reorganization which would incorporate the combined airline operations of ATI and CCIA as a single, new C-corporation for U.S. tax purposes. A reorganization for tax purposes could result in charges for deferred tax allowances or goodwill.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

The response to this item is contained in the Company's Form 8-K filed with the Securities and Exchange Commission on May 11, 2012 and the information contained therein is incorporated herein by reference.

ITEM 5. OTHER

On July 31, 2012, the Board of Directors of Air Transport Services Group, Inc. (the "Company") adopted and authorized the Company to offer to enter into amended and restated change-in-control agreements with its executive officers, including the named executive officers, which are currently a party to change-in-control agreements. The amended and restated agreements are substantially similar to the existing change-in-control agreements between the Company and the executives, but have been modified to (i) clarify the executives' entitlement to change-in-control benefits in the event the executive is terminated prior to, but in anticipation of, a change in control; and (ii) address certain issues concerning the benefits payable under the Company's Supplemental Executive Retirement Plan (“SERP”) for those executives participating in the SERP.

The agreements generally provide that, in the event of a change in control of the Company or the subsidiary that employs the executive, the executive will have the right to remain employed, at not less than his respective rate of compensation in effect as of the date of the change in control, for at least four years thereafter.

A change in control is generally defined in the agreements as (i) the direct or indirect acquisition by any person of a greater than fifty percent (50%) ownership interest in or voting power over the Company or the subsidiary of the Company that employs the executive, (ii) the direct or indirect acquisition by any person, within any twelve (12) month period, of a thirty percent (30%) or more ownership interest in or voting power over the Company or the subsidiary of the Company that employs the executive, (iii) a majority of the members of the Board are replaced during any twelve (12) month period by directors whose appointment or election is not endorsed by a majority of the members of the Board prior to the date of the appointment or election, or (iv) the acquisition by any person, within any twelve (12) month period, of assets from the Company or the subsidiary of the Company that employs the executive that have a total gross fair market value equal to or more than forty percent (40%) of the total gross fair market value of all of the assets of the Company or the subsidiary, as applicable.

The agreements generally provide that, if an executive is terminated without “cause” (defined as willful and continued failure to perform duties after demand from the Board, or willful or gross misconduct) within four years after a change in control, the Company must pay the executive, in addition to all accrued compensation, the equivalent of two years' (three years' in the case of the Chief Executive Officer) salary and bonus. In addition, the executive is entitled to the continuation of his group health insurance coverage and certain other benefits for the remainder of the term of the agreement, reimbursement for outplacement services and, if a participant, increased benefits under the SERP. The Company or subsidiary that employs the executive is required to provide the same additional compensation and benefits described above in the event an executive officer resigns due to a material reduction by his employer in his salary, authority, duties or responsibilities or a material change in the geographic location of his employment.

In the event of a change in control, the restrictions on any shares of restricted stock will lapse and the stock will be distributed. In addition, the performance objectives imposed on any performance-based stock units will be deemed to

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have been met at the threshold level or any higher level actually achieved as of the date of the change in control (“Accelerated Units”) and the executive will receive cash or stock (depending on the nature of the change in control) as if the performance period ended on the date of the change in control. The amount awarded with respect to performance-based stock units will be determined by multiplying the Accelerated Units by the number of whole months between the beginning of the performance period and the date of the change in control divided by the number of whole months in the performance period.

A copy of the form of change-in-control agreement is attached to this Form 10-Q as Exhibit 10.2. The foregoing description of the change-in-control agreements is qualified in its entirely by reference to such exhibit.

ITEM 6. EXHIBITS

The following exhibits are filed as part of, or are incorporated in, the Quarterly Report on Form 10-Q:

4	Second Amendment to Preferred Stock Rights Agreement, dated as of June 11, 2012. (1)
10.1	Amendment to Confidentiality and Standstill Agreement, dated as of June 11, 2012, between Air Transport Services Group, Inc. and Red Mountain Capital Partners LLC. (1)
10.2	Form of amended and restated change-in-control agreement adopted and authorized by the Board of Directors of Air Transport Services Group, Inc., to be offered to the Company's executive officers, including the named executive officers, that are currently a party to a change-in-control agreement, filed herewith.
31.1	Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, filed herewith.
31.2	Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, filed herewith.
32.1	Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, filed herewith.
32.2	Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, filed herewith.

101.INS	XBRL Instance Document
101.SCH	XBRL Taxonomy Extension Schema Document
101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF	XBRL Taxonomy Extension Definition Linkbase Document
101.LAB	XBRL Taxonomy Extension Labels Linkbase Document
101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document

(1) Incorporated by reference to the Company's Form 8-K filed with the Securities and Exchange Commission on June 18, 2012.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this Quarterly Report on Form 10-Q to be signed on its behalf by the undersigned, thereunto duly authorized.

		AIR TRANSPORT SERVICES GROUP, INC.,
		a Delaware Corporation
		Registrant
		/S/  JOSEPH C. HETE
		Joseph C. Hete
		Chief Executive Officer
Date:	August 2, 2012
		/S/  QUINT O. TURNER
		Quint O. Turner
		Chief Financial Officer
Date:	August 2, 2012

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EX-10.2

[____________]

[____________________]

c/o Air Transport Services Group, Inc.

145 Hunter Drive

Wilmington, Ohio 45177

Dear [____________]:

Air Transport Services Group, Inc., a Delaware corporation ("ATSG"), and the Board of Directors of ATSG (the "Board") are not necessarily opposed to any merger proposal or acquisition attempt by third parties. We recognize, and insist that our executives recognize, that in such matters our responsibility is to serve the best interests of our shareholders in maximizing the worth and potential of their investment. However, ATSG, as a publicly held corporation, must be aware that insofar as it or any of its subsidiaries may be the subject of acquisition attempts, such attempts do raise the possibility of a change in control of ATSG or your employer. It further recognizes that such a possibility can breed uncertainties as to the continued tenure and fair treatment of key executives regardless of their value to ATSG and/or its subsidiaries and their individual merit. ATSG is concerned that the possibility of acquisition attempts and a change in control can have an adverse effect on its retention of key management personnel, and that such acquisition attempts can make it difficult for such personnel to function most effectively in the best interests of ATSG, its subsidiaries and the shareholders of ATSG. In light of these concerns, the Board has determined that it is appropriate to offer additional security to certain key management personnel to better enable them to function effectively without distraction in the event that uncertainties as to the future control of ATSG and/or a Relevant Subsidiary (as defined below) should arise.

Therefore, to induce you to remain in the employ of the Company (as defined below) and to encourage a high level of effective management in the best interests of ATSG, its subsidiaries and the shareholders of ATSG, this letter agreement sets forth certain benefits which ATSG agrees will be provided to you if your employment with the Company should be terminated other than for cause, or by death, disability or normal retirement, subsequent to a "change in control" (as defined and set forth in this Agreement) of the Company. As the purpose of this Agreement is to provide you with stability of job tenure without being discriminated against because of activities on behalf of ATSG, its subsidiaries and the shareholders of ATSG in the face of a possible "change in control" or in the alternative to provide you with certain defined severance benefits in the face of termination without cause or upon discriminatory treatment after a "change in control," the provisions of this Agreement with regard to benefits shall not apply unless and until a "change in control" occurs. Further, the benefits set forth in Section 7 of this Agreement will not be provided if your employment with the Company terminates, even after a "change in control" and during the term of this Agreement, because of death, normal retirement, disability, "for cause" or because of voluntary termination by you without "good reason" as they are defined herein.

For all purposes under this Agreement: (a) any reference to a "termination of employment" (or any similar form of that term) shall mean a "separation from service," within

#PageNum#

the meaning of Section 409A of the Internal Revenue Code of 1986, as amended (the "Code"), and the regulations promulgated thereunder; (b) "Subsidiary" shall mean any entity with whom ATSG would be considered a single employer under Section 414(b) or 414(c) of the Code; and (c) "Company" shall mean ATSG and its Subsidiaries.

1.    Term. This Agreement will at all times have a four-year term. At such time as either you or ATSG give written notice to the other party that this Agreement is to be terminated (such notice on your part to have no force or effect unless given by you no later than four years after a "change in control"), then this Agreement will expire four years from receipt of the notice. In any event, this Agreement will terminate at your normal retirement date. For purposes of this Section 1 and for determining the term of this Agreement throughout this document, your normal retirement date shall be the first day of the month following the month in which you attain age 65.

2.    Change in Control. For the purposes of invoking your benefits under this Agreement, a "change in control" shall mean the occurrence of any one of the following actions or events:

(a)    The acquisition by any person, or more than one person acting as a group, of stock of ATSG or the Subsidiary by whom you are employed and for whom you are performing services at the time of the change in control (the "Relevant Subsidiary") that, together with stock held by such person or group, constitutes more than fifty percent (50%) of the total fair market value or total voting power of the stock of ATSG or the Relevant Subsidiary, as applicable;

(b)    The acquisition by any person, or more than one person acting as a group, within any 12-month period, of stock of ATSG or the Relevant Subsidiary possessing thirty percent (30%) or more of the total voting power of the stock of ATSG or the Relevant Subsidiary, as applicable;

(c)    A majority of members of the Board is replaced during any 12-month period by directors whose appointment or election is not endorsed by a majority of the members of the Board prior to the date of the appointment or election; or

(d)    The acquisition by any person, or more than one person acting as a group, within any 12-month period, of assets from ATSG or the Relevant Subsidiary that have a total gross fair market value equal to or more than forty percent (40%) of the total gross fair market value of all of the assets of ATSG or the Relevant Subsidiary, as applicable, immediately prior to such acquisition or acquisitions.

The definition of "change in control" contained herein shall be interpreted in a manner that is consistent with the definition of "change in control event" under Section 409A of the Code and the regulations promulgated thereunder.

3.    Death, Retirement, Disability and Voluntary without Good Reason. In the event of your termination of employment due to your death, normal retirement, disability or voluntary termination without good reason during the term hereof and following a "change in control," ATSG, or if you are not employed by ATSG, the Subsidiary by whom you are

#PageNum#

employed and for whom you are performing services at the time of the change in control (collectively, the "Employer") shall pay you, within ten (10) working days after such termination of employment, your then current full base salary plus vacation and any other compensation actually accrued through the date of termination, and the Employer shall have no further obligation to you except that you or your estate will be entitled to receive those applicable benefits under any plans, programs and policies in which you were participating prior to your termination of employment. For purposes of this Agreement, normal retirement and disability are defined as follows:

(a)    Normal Retirement: For all purposes of this Agreement except determining its term, termination by the Employer or you of your employment based on normal retirement shall mean termination at age 65 or such earlier or later age set in accordance with the retirement policy then generally in effect with regard to the Employer's salaried employees which is not discriminatory as to you. Normal retirement shall also include retirement in accordance with any early or deferred retirement age or date established with your consent.

(b)    Disability: Disability as grounds for termination shall mean physical or mental illness resulting in your absence from your duties with the Employer on a full time basis for 365 consecutive days following the exhaustion of all current and accrued sick leave and vacation (as provided by Employer policy to all salaried employees on a nondiscriminatory basis). If within thirty (30) days after written notice of proposed termination for disability is given by the Employer, you have not returned to the full time performance of your duties, the Employer may terminate your employment by giving written notice of termination for "disability."

4.    Other Terminations Following a Change in Control.

(a)    If a "change in control" occurs and you are subsequently terminated by the Employer during the term of this Agreement (except for death, normal retirement, disability or for cause as hereinafter defined) or if you terminate your employment for good reason, as hereinafter defined, you will be entitled to receive the benefits set forth in Section 7 hereof.

(b)    In addition, and notwithstanding any other provision of this Agreement to the contrary, the benefits set forth in Section 7 shall be payable to you if a "change in control" occurs and you were terminated without cause by the Employer prior to the date on which a change in control occurs, and it is reasonably demonstrated by you that such termination of employment (i) was at the request of a third party who was taking steps reasonably calculated to effect the change in control or (ii) otherwise arose in connection with, or in anticipation of, the change in control. Notwithstanding the foregoing, no benefits under Section 4 or 7 are payable if termination is due to death, normal retirement, disability or for cause, as hereinafter defined, or if you voluntarily terminate.

5.    Cause. After a "change in control," the Employer may terminate your employment for "cause" without liability under the benefit provisions hereof only upon:

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(a)    The willful and continued failure by you to substantially perform your duties with the Employer (other than any such failure resulting from your incapacity due to physical or mental illness), after a demand for substantial performance is delivered to you by the Employer which specifically identifies the manner in which the Employer believes that you have not substantially performed your duties, or

(b)    The willful engaging by you in gross misconduct demonstrably injurious to the Employer.

For the purpose of this Section 5, no act, or failure to act, on your part shall be considered "willful" if done, or omitted to be done, by you in good faith and in the reasonable belief that your act or omission was in the best interests of the Employer. You shall not be deemed to have been terminated for cause unless and until you receive a copy of a resolution duly adopted by the affirmative vote of not less than three-quarters of the entire membership of the Employer's Board of Directors at a meeting of such Board of Directors (after reasonable notice to you and an opportunity for you, together with your counsel, to be heard before such Board of Directors), finding that in the good faith opinion of such Board of Directors you were guilty of conduct set forth in clauses (a) or (b) of the first sentence of this Section 5 and specifying the particulars thereof.

If your employment is terminated for cause, the Employer shall pay you, within ten (10) working days after such termination of employment, your then current full base salary plus vacation and any other compensation actually accrued through the date of termination, and the Employer shall not have any further obligation to you except that you or your estate will be entitled to receive applicable benefits under any plans, programs or policies in which you were participating prior to your termination of employment.

6.    Good Reason. You may regard your employment as constructively terminated by the Employer, and terminate your employment for "good reason" following a "change in control" and during the term hereof, receiving the benefits set forth in Section 7. For purposes of this Agreement, "good reason" shall mean the happening of one or more of the following events without your express written consent:

(a)    A material diminution in your base salary;

(b)    A material diminution in your authority, duties or responsibilities;

(c)    A material diminution in the authority, duties or responsibilities of the supervisor to whom you are required to report;

(d)    A material diminution in the budget over which you retain authority;

(e)    A material change in the geographic location at which you must perform your services for the Employer; or

(f)    Any other action or inaction that constitutes a material breach of the terms of this Agreement.

#PageNum#

Notwithstanding the foregoing, the events described above shall constitute "good reason" only if (i) you deliver written notice to the Employer of the event which constitutes good reason, within ninety (90) days of the occurrence of such event, and (ii) the Employer does not remedy the "good reason" condition within thirty (30) days after receipt of such written notice.

7.    Compensation Upon Termination Without Cause or Termination for Good Reason. If (1) after a "change in control" and during the term hereof or prior to a "change in control" if the conditions set forth in Section 4(b) are met, you are terminated by the Employer other than by reason of death, normal retirement, disability or for cause under the definitions and procedures as set forth herein, or (2) after a "change in control" and during the term hereof, you choose to terminate your employment for "good reason" as set forth herein, then the Employer shall provide you with the following payments and benefits:

(a)     Your full base salary through the date of termination plus payment for all accrued vacation within ten (10) working days following the date of termination, and any incentive compensation to which you are entitled for the year most recently ended, to the extent not already paid, in accordance with the applicable incentive compensation arrangement.

(b)    Within ten (10) working days following the date of termination (or, the date of the change in control, if you are terminated as described in Section 4(b)), an amount equal to:

(i)     The sum of A and B, multiplied by the number set forth in paragraph (b)(ii) below, where

A is the highest of the following: (1) your annual base salary at the rate in effect as of your termination, and (2) your annual base salary at the highest rate in effect during the two-year period prior to the date of termination, and

B is the amount of any additional compensation, including any sums awarded under any incentive compensation plan or plans, awarded you for the year most recently ended, whether or not fully paid.

(ii)    The number [______]. If your normal retirement date is less than three (3) years from your termination date, then the multiplier shall be that fraction remaining until your normal retirement date rounded to the nearest tenth (i.e., 18 months equals 1.5, 8 months equals .7).

(c)    With regard to each of the qualified retirement plans in which you participated prior to your termination, the Employer shall pay a lump sum equal to the amount forfeited by you, if any, under such plan which would have vested if your employment had continued for the remaining term of this Agreement. Such payment shall be made within sixty (60) days following the date of termination (or, the date of the change in control, if you are terminated as described in Section 4(b)).

(d)    For the duration of the applicable COBRA continuation coverage

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period, the Employer shall pay your health insurance premiums (necessary to cover both you and your dependants), and at the end of such COBRA continuation coverage period, the Employer shall arrange for you to receive health benefits substantially similar to those which you were receiving immediately prior to termination of such COBRA continuation coverage period for the Continuation Period described in Section 7(e). If your termination occurred prior to the change in control as described in Section 4(b), the Employer shall, within sixty (60) days following the date of the change in control: (i) reimburse you any health insurance premiums paid for continuing health coverage during the COBRA continuation coverage period; and (ii) arrange for you to receive health benefits substantially similar to those which you were receiving immediately prior to your termination for the Continuation Period described in Section 7(e). Any benefits or payments provided under this Section 7(d) after completion of the COBRA continuation coverage period shall be subject to the following limitations: (A) the amount of expenses eligible for reimbursement or the benefits or payments provided during any taxable year may not affect the expenses eligible for reimbursement or the benefits or payments to be provided to you in any other taxable year; (B) reimbursement of any eligible expense must be made on or before the last day of the taxable year following the taxable year in which the expense was incurred; and (C) the right to reimbursement or to such benefits or payments is not subject to liquidation or exchange for another benefit or payment.

(e)    For the period beginning upon your termination of employment and ending upon the last day of the term of this Agreement (or, in the event of your termination prior to a change in control as described in Section 4(b), upon the change in control and ending upon the last day of this Agreement) (the "Continuation Period"), the Employer will provide you with the following benefits (at substantially the level in effect for each benefit upon either your termination of employment or upon the change in control, whichever provides a higher level): life insurance, accidental death and dismemberment, short-term disability and long-term disability. Any benefits or payments provided pursuant to this Section 7(e) shall be subject to the following limitations: (i) the amount of expenses eligible for reimbursement or the benefits or payments provided during any taxable year may not affect the expenses eligible for reimbursement or the benefits or payments to be provided to you in any other taxable year; (ii) reimbursement of any eligible expense must be made on or before the last day of the taxable year following the taxable year in which the expense was incurred; and (iii) the right to reimbursement or to such benefits or payments is not subject to liquidation or exchange for another benefit or payment.

(f)    Reimbursement of the reasonable cost of outplacement services for you, to be provided in your discretion by Right Management Consultants or a firm of your choosing, up to a maximum of $10,000. Any such reimbursement shall be paid to you in a single lump sum payment no later than the last day of the calendar year following the calendar year in which your employment is terminated (or, the year in which the change in control occurs, if you are terminated as described in Section 4(b)).

(g)    In addition to the payment of any benefits to which you are entitled under the qualified retirement plans maintained by the Employer in which you are a participant on the date of your termination, within 60 days following the date of termination (or, the date of the change in control, if you are terminated as described in Section 4(b)), the Employer shall pay to you an amount equal to the difference between the actuarial equivalent of the amount which you

#PageNum#

are entitled to receive, if any, under the Retirement Income Plan or Capital Accumulation Plan (excluding voluntary deferrals and related matching amounts), as applicable, and the amount which you would have received from such plan if you had continued in the employ of the Employer for an additional three years (each amount to be determined as if paid at the end of such three year period). If your normal retirement date would occur during that three-year period, then the amount of such additional compensation shall be calculated on the basis that your employment continued to that date. For the purposes of the calculation of benefits under the Retirement Income Plan, the "actuarial equivalent" shall be determined by using the interest rate specified in such plan for lump sum calculations and assuming your survival to age 80.

For purposes of this Section 7(g), the benefit you would have received from the Retirement Income Plan or Capital Accumulation Plan (excluding amounts associated with voluntary deferrals), as applicable, if you continued to be employed for three years shall be calculated based on the terms of such plan at the time of the change in control, unless the plan has been amended to provide (or replaced with a new plan that provides) a larger benefit, in which case the new terms shall apply.

(h)    In addition to the foregoing:

(i)    On the date on which you become entitled to benefits pursuant to this Section 7, you shall be come fully vested in the benefit to which you would be entitled the Supplemental Executive Retirement Plan (the “SERP”), calculated under the terms and conditions of the SERP as in effect on April 14, 2009 (the “SERP Freeze Date”) or on the date of your termination, whichever provides a greater benefit, which shall be payable at the time(s) and in the form(s) described in the SERP. The benefit described in this Section 7(h)(i) shall be separate from and in lieu of any benefit to which you are entitled to receive under the SERP and, to the extent that you have commenced receiving a benefit from the SERP, the benefit payable to you pursuant to this Section 7(h)(i) shall be adjusted appropriately to reflect these payments using the same actuarial assumptions in the SERP.

(ii)    Within 60 days following the date of termination (or, the date of the change in control, if you are terminated as described in Section 4(b)), the Employer shall pay to you an amount equal to the difference between the actuarial equivalent of the amount which you are entitled to receive under the SERP and the amount which you would have received from the SERP if you had continued in the employ of the Employer for an additional three years. If your normal retirement date would occur during that three-year period, then the amount of such additional compensation shall be calculated on the basis that your employment continued to that date. For purposes of calculating the amount to which you are entitled under the SERP pursuant to this Section 7(h)(ii): (A) this amount shall be determined under the terms and conditions of, and based on the benefit accrued under, the SERP through the SERP Freeze Date; (B) the "actuarial equivalent" shall be determined using the annual interest rate that produces the greater benefits: (I) eight percent, or (II) the "applicable interest rate" for Retirement Income Plan or the Capital Accumulation Plan, as applicable, determined under Section 417(e) of the Code for the year in which payment is made and assuming your survival to age 80; and (C) if you are not entitled to a benefit under the SERP because you fail to satisfy the minimum age required in order to receive a SERP benefit, even after

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you are treated as continuing to be employed for the three additional years after the change in control, you shall be credited with additional years of service to, and be treated as have attained, age 55.

(i)    Notwithstanding any other provisions of this Agreement, if any severance benefits under Section 7 of this Agreement, together with any other Parachute Payments (as defined under Section 280(G)(b)(2) of the Code) made by the Company to you, if any, are characterized as Excess Parachute Payments (as defined in Section 280(G)(b)(1) of the Code), then the Employer shall pay to you, in addition to the payments to be received under this Agreement, an amount such that, after payment by you of all taxes, including federal and state income taxes and additional excise taxes imposed by Section 4999 of the Code on this additional payment, you retain an amount equal to the excise taxes imposed by Section 4999 of the Code on your Excess Parachute Payments. The payment required under this Section 7(h) shall be made to you in a single lump sum payment by the end of your taxable year next following the taxable year in which you remit the related taxes.

8.    Payments and Disputes. For purposes of this Agreement, your date of termination will be the date you incur a "separation from service," within the meaning of Section 409A of the Code and the regulations promulgated thereunder.

The Employer will pay all fees and expenses, including full attorneys' fees, incurred by you in good faith in contesting or disputing any termination after a "change in control" or in seeking to obtain or enforce any right or benefit provided by this Agreement. All amounts required to be paid under the preceding sentence shall be paid (a) with respect to fees and expenses incurred by you during the pendency of the dispute; and (b) to you on or before the last day of the taxable year following the taxable year in which you incurred the fees or expenses. In addition, the amount of fees and expenses eligible for reimbursement under this paragraph during any one of your taxable years may not affect the fees and expenses eligible for reimbursement in any other taxable year and the right to reimbursement is not subject to liquidation or exchange for another benefit or payment.

In the event that any payments due hereunder shall be delayed for any reason beyond the applicable date set forth in this Section 8, the amounts due shall bear simple interest at the rate of eighteen percent (18%) per annum until paid.

9.    Mitigation. You shall not be required to mitigate the amount of any payment due under Section 7 by seeking other employment. If you should accept a position with another employer after your date of termination (or after the change in control, if your termination is described in Section 4(b)) and during the period of provision of benefits under Section 7, then the Employer shall have no further liability for the provision of benefits or further payments under Sections 7(d), (e) and (f).

10.    Covenant for Confidentiality and Not to Compete. You agree that as an executive of the Employer, with important responsibilities for and knowledge of its operations, your services are a valuable asset to ATSG and each entity which is under common control with ATSG, within the meaning of Section 414 of the Code (the "Control Group"), and that you have access to business information of material importance to the Control Group. Therefore, to protect the Control Group's interest in you and in the integrity and success of its operations, you agree that during the

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term of this Agreement while employed by the Employer you will keep all Control Group information (excluding publicly available information) confidential and will not enter into the employment of, or invest in or contribute to, participate in the activities of, or act as consultant to or advise any enterprise in whatever form organized and carried on which is directly competitive with any business activity then conducted or planned by the Control Group, provided, however, that you may make investments in publicly traded securities of any issuer if the securities owned represent less than 1% of the class of such securities of such issuer then issued and outstanding. You further agree that for a period of one year following the termination of your employment with the Employer you will continue to keep all Control Group information (excluding publicly available information) confidential and that, unless you are entitled to, or received, the benefits set forth in Section 7, you will not enter into the employment in an executive or consultant capacity or serve on the board of directors of any enterprise in whatever form organized and carried on which is directly competitive with any business activity then conducted by the Control Group within the continental United States.

11.    Successors; Binding Agreement.

(a)    This Agreement shall be binding upon any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of the Employer. As used herein, "Employer" shall mean the Employer as hereinbefore defined and any successor to its business or assets as aforesaid.

(b)    This Agreement shall inure to the benefit of and be enforceable by your personal or legal representatives, executors, administrators, successors, heirs, distributees, devisees and legatees. If you should die while any amounts are still payable to you hereunder, all such amounts, unless otherwise provided herein, shall be paid in accordance with the terms of this Agreement to your devisee, legatee or other designee or, if there be not such designee, to your estate.

12.    Notice. For the purpose of this Agreement, notices and all other communications provided for in the Agreement shall be in writing and shall be deemed to have been duly given when delivered by United States certified mail, return receipt requested, postage prepaid, addressed to the respective addresses set forth on the first page of this Agreement, provided that all notices to the Employer shall be directed to the attention of the Chief Executive Officer of ATSG or to such other address as either party may have furnished to the other in writing in accordance herewith, except that notices of change of address shall be effective only upon receipt.

13.    Miscellaneous. No provisions of this Agreement may be modified, waived or discharged unless such waiver, modification or discharge is agreed to in writing signed by you and the Chief Executive Officer of ATSG or such officer as may be specifically designated by the Board. No waiver by either party hereto at any time of any breach of, or lack of compliance with, any conditions or provision of this Agreement shall be deemed a waiver of similar or dissimilar provisions or conditions at the same or at any prior or subsequent time.

No agreements or representations, oral or otherwise, express or implied, with respect to the subject matter hereof have been made by either party which are not set forth expressly in this Agreement.

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This Agreement supersedes any prior agreement between ATSG or any member of the Control Group and you with respect to the matters set forth herein. The preceding sentence shall specifically apply to, but not be limited to, any prior agreement between you and ATSG Air, Inc. regarding the effect of a change in control.

The validity, interpretation, construction and performance of this Agreement shall be governed by the laws of the State of Ohio.

14.    Validity. The invalidity or unenforceability of any provisions of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement, which shall remain in full force and effect.

15.    Counterparts. This Agreement is to be executed in counterparts, each of which shall be deemed to be an original.

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If this letter correctly sets forth our agreements, sign and return to the Company the enclosed copy of this letter, retaining your copy for your files.

AIR TRANSPORT SERVICES GROUP, INC.

By

Its

[____________________]

#PageNum#

EX-31.1

Exhibit 31.1

CERTIFICATION PURSUANT TO

SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Joseph C. Hete, certify that:

1. I have reviewed this report on Form 10-Q of Air Transport Services Group, 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 officers 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 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.

Date: August 2, 2012

/s/ JOSEPH C. HETE

Joseph C. Hete

Chief Executive Officer

EX-31.2

Exhibit 31.2

CERTIFICATION PURSUANT TO

SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Quint O. Turner, certify that:

1. I have reviewed this report on Form 10-Q of Air Transport Services Group, 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 officers 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 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.

Date: August 2, 2012

/s/ QUINT O. TURNER

Quint O. Turner

Chief Financial Officer

(Principal Financial and Accounting Officer)

EX-32.1

Exhibit 32.1

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Air Transport Services Group, Inc. (the “Company”) on Form 10-Q for the quarter ending June 30, 2012 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Joseph C. Hete, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. 1350, as enacted by § 906 of the Sarbanes-Oxley Act of 2002, that:

(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

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

A signed original of this written statement required by Section 906 has been provided to Air Transport Services Group, Inc. and will be retained by Air Transport Services Group, Inc. and furnished to the Securities and Exchange Commission or its staff upon request.

/S/ JOSEPH C. HETE

Joseph C. Hete

Chief Executive Officer

Date: August 2, 2012

EX-32.2

Exhibit 32.2

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Air Transport Services Group, Inc. (the “Company”) on Form 10-Q for the quarter ending June 30, 2012 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Quint O. Turner, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. 1350, as enacted by § 906 of the Sarbanes-Oxley Act of 2002, that:

(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

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

A signed original of this written statement required by Section 906 has been provided to Air Transport Services Group, Inc. and will be retained by Air Transport Services Group, Inc. and furnished to the Securities and Exchange Commission or its staff upon request.

/s/ QUINT O. TURNER

Quint O. Turner

Chief Financial Officer

Date: August 2, 2012

XML

Debt Obligations (Details) (USD $)	3 Months Ended			6 Months Ended
	Jun. 30, 2012	Jun. 30, 2011	Mar. 31, 2011	Jun. 30, 2012	Jun. 30, 2011	Dec. 31, 2011
Debt Instrument [Line Items]
Total long term obligations	$ 363,195,000			$ 363,195,000		$ 346,904,000
Less: current portion	(17,239,000)			(17,239,000)		(13,223,000)
Total long term obligations, net	345,956,000			345,956,000		333,681,000
Write-off of unamortized debt issuance costs	0	16,000	6,800,000	0	2,886,000
Unsubordinated term loan and Revolving credit facility [Member]
Debt Instrument [Line Items]
Collateral coverage percentage	150.00%
Unsubordinated term loan [Member]
Debt Instrument [Line Items]
Total long term obligations	148,125,000			148,125,000		150,000,000
Credit facility, term loan face amount	150,000,000			150,000,000
Variable interest rate	2.72%
Revolving credit facility [Member]
Debt Instrument [Line Items]
Total long term obligations	131,000,000			131,000,000		106,000,000
Credit facility, revolving credit loan, maximum borrowing capacity	175,000,000			175,000,000
Variable interest rate	2.50%
Credit facility, revolving credit loan, remaining borrowing capacity	24,800,000			24,800,000
Letters of credit outstanding	19,200,000			19,200,000
Accordion feature amount	50,000,000			50,000,000
Increased borrowing capacity	225,000,000			225,000,000
Aircraft loans [Member]
Debt Instrument [Line Items]
Total long term obligations	67,020,000			67,020,000		70,754,000
Collateralized property (in aircrafts)				6
Balloon payment percentage				20.00%
Variable interest rate, minimum	6.74%
Variable interest rate, maximum	7.36%
Promissory note due to DHL, unsecured [Member]
Debt Instrument [Line Items]
Total long term obligations	17,050,000			17,050,000		20,150,000
Promissory note interest rate	5.00%			5.00%
Prepayment of note per dollar of dividend distributed (in dollars per dividend)				0.20
Maximum [Member] | Unsubordinated term loan and Revolving credit facility [Member]
Debt Instrument [Line Items]
Maximum amount of common stock authorized for repurchase				$ 50,000,000

XML

Segment Information (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended			6 Months Ended
	Jun. 30, 2012	Jun. 30, 2011	Mar. 31, 2011	Jun. 30, 2012 segments	Jun. 30, 2011	Dec. 31, 2011
Segment Reporting Information [Line Items]
Number of reportable segments (in segments)				2
Total revenues	$ 153,554	$ 193,061		$ 299,060	$ 368,188
Customer revenues	153,554	193,061		299,060	368,188
Depreciation and amortization expense	21,514	23,878		41,814	46,249
Net unallocated interest expense	(3,671)	(3,537)		(7,218)	(7,640)
Net gain (loss) on derivative instruments	202	376		662	(3,556)
Write-off of unamortized debt issuance costs	0	(16)	(6,800)	0	(2,886)
Pre-tax earnings from continuing operations	18,171	19,657		28,914	24,247
Assets	1,017,259			1,017,259		993,719
CAM [Member]
Segment Reporting Information [Line Items]
Total revenues	38,067	32,762		75,918	64,890
Customer revenues	18,635	15,824		38,024	29,895
Depreciation and amortization expense	14,680	13,663		29,101	25,926
Segment earnings (loss)	16,667	13,634		33,485	27,100
Net unallocated interest expense	(3,100)	(2,600)		(6,000)	(5,100)
Assets	780,858			780,858		760,588
ACMI Services [Member]
Segment Reporting Information [Line Items]
Total revenues	121,630	164,709		234,825	311,414
Customer revenues	121,389	164,597		234,584	311,032
Depreciation and amortization expense	6,755	10,253		12,559	20,401
Segment earnings (loss)	(1,582)	4,560		(9,797)	2,050
Net unallocated interest expense	(200)	(300)		(500)	(600)
Assets	153,557			153,557		137,640
All other [Member]
Segment Reporting Information [Line Items]
Total revenues	26,682	25,469		55,103	50,907
Customer revenues	13,530	12,640		26,452	27,261
Depreciation and amortization expense	79	(38)		154	(78)
Segment earnings (loss)	3,228	1,675		5,229	3,329
Assets	82,844			82,844		95,491
Eliminate inter-segment revenues [Member]
Segment Reporting Information [Line Items]
Total revenues	(32,825)	(29,879)		(66,786)	(59,023)
Net unallocated interest expense [Member]
Segment Reporting Information [Line Items]
Net unallocated interest expense	$ (344)	$ (572)		$ (665)	$ (1,790)

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Stock-Based Compensation (Details) (USD $) In Millions, except Share data, unless otherwise specified	6 Months Ended
	Jun. 30, 2012	Jun. 30, 2011
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Nonvested, Number of Shares [Roll Forward]
Outstanding at beginning of period (in shares)	1,458,037	1,514,300
Granted (in shares)	601,647	555,237
Converted (in shares)	0	(291,500)
Expired (in shares)	0	0
Forfeited (in shares)	(17,400)	(41,600)
Outstanding at end of period (in shares)	2,042,284	1,736,437
Vested (in shares)	390,037	326,400
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Nonvested, Weighted Average Grant Date Fair Value [Roll Forward]
Oustanding at beginning of period, Weighted average grant-date fair value (in dollars per share)	$ 5.77	$ 3.55
Granted, Weighted average grant-date fair value (in dollars per share)	$ 5.93	$ 8.72
Converted, Weighted average grant-date fair value (in dollars per share)	$ 0.00	$ 3.14
Expired, Weighted average grant-date fair value (in dollars per share)	$ 0.00	$ 0.00
Forfeited, Weighted average grant-date fair value (in dollars per share)	$ 6.15	$ 4.97
Oustanding at end of period, Weighted average grant-date fair value (in dollars per share)	$ 5.81	$ 5.22
Vested, Weighted average grant-date fair value (in dollars per share)	$ 4.45	$ 3.71
Share-based Compensation Arrangement by Share-based Payment Award, Fair Value Assumptions and Methodology [Abstract]
Share-based compensation expense	$ 1.8	$ 1.3
Unrecognized share-based compensation expense	$ 4.6
Unrecognized share-based compensation, weighted average recognition period	1 year 6 months
Restricted Stock [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Requisite service period	3 years
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Nonvested, Weighted Average Grant Date Fair Value [Roll Forward]
Granted, Weighted average grant-date fair value (in dollars per share)	$ 5.63
Stock Units [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Requisite service period	3 years
Share-based Compensation Arrangement by Share-based Payment Award, Fair Value Assumptions and Methodology [Abstract]
Risk-free interest rate	0.44%
Expected term	36 months
Expected volatility rate	90.10%
Historical volatility period	3 years
Performance Condition Award [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Nonvested, Weighted Average Grant Date Fair Value [Roll Forward]
Granted, Weighted average grant-date fair value (in dollars per share)	$ 5.63
Market Condition Award [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Nonvested, Weighted Average Grant Date Fair Value [Roll Forward]
Granted, Weighted average grant-date fair value (in dollars per share)	$ 7.05
Time-Based Awards [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Nonvested, Weighted Average Grant Date Fair Value [Roll Forward]
Granted, Weighted average grant-date fair value (in dollars per share)	$ 5.63
Time-Based Awards [Member] | Maximum [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Fair Value Assumptions and Methodology [Abstract]
Number of additional outstanding shares issued (in shares)	2,406,684
Director [Member] | Time-Based Awards [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Requisite service period	6 months
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Nonvested, Number of Shares [Roll Forward]
Vested (in shares)	390,037

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Summary of Financial Statement Preperation and Significant Accounting Policies (Details) (USD $) In Millions, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2012	Jun. 30, 2011	Jun. 30, 2012 airlines	Jun. 30, 2011	Dec. 31, 2011
Organization, Consolidation and Presentation of Financial Statements Disclosure and Significant Accounting Policies [Line Items]
Number of independent cerificated airlines (in airlines)			3
Capitalized interest	$ 0.6	$ 0.6	$ 1.3	$ 0.9
Other liabilities for self-insured reserves	$ 31.2		$ 31.2		$ 31.2
Minimum [Member] | Support equipment [Member]
Organization, Consolidation and Presentation of Financial Statements Disclosure and Significant Accounting Policies [Line Items]
Property, plant and equipment, useful life	5 years
Minimum [Member] | Vehicles and other equipment [Member]
Organization, Consolidation and Presentation of Financial Statements Disclosure and Significant Accounting Policies [Line Items]
Property, plant and equipment, useful life	3 years
Maximum [Member] | Support equipment [Member]
Organization, Consolidation and Presentation of Financial Statements Disclosure and Significant Accounting Policies [Line Items]
Property, plant and equipment, useful life	10 years
Maximum [Member] | Vehicles and other equipment [Member]
Organization, Consolidation and Presentation of Financial Statements Disclosure and Significant Accounting Policies [Line Items]
Property, plant and equipment, useful life	8 years
Boeing 727 and DC-8 [Member] | Aircraft and Flight Equipment [Member]
Organization, Consolidation and Presentation of Financial Statements Disclosure and Significant Accounting Policies [Line Items]
Property, plant and equipment, useful life	1 year
Boeing 767 and 757 [Member] | Minimum [Member] | Aircraft and Flight Equipment [Member]
Organization, Consolidation and Presentation of Financial Statements Disclosure and Significant Accounting Policies [Line Items]
Property, plant and equipment, useful life	10 years
Boeing 767 and 757 [Member] | Maximum [Member] | Aircraft and Flight Equipment [Member]
Organization, Consolidation and Presentation of Financial Statements Disclosure and Significant Accounting Policies [Line Items]
Property, plant and equipment, useful life	20 years

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Property and Equipment (Tables)

6 Months Ended

Jun. 30, 2012

Property, Plant and Equipment [Abstract]

Property, Plant and Equipment

Depreciable lives are summarized as follows:

Boeing 727 and DC-8 aircraft and flight equipment	1 year
Boeing 767 and 757 aircraft and flight equipment	10 to 20 years
Support equipment	5 to 10 years
Vehicles and other equipment	3 to 8 years

Property and equipment, to be held and used, is summarized as follows (in thousands):

	June 30, 2012			December 31, 2011
Aircraft and flight equipment	$	1,073,054		$	1,012,000
Support equipment	51,499			51,297
Vehicles and other equipment	1,577			1,589
Leasehold improvements	754			714
	1,126,884			1,065,600
Accumulated depreciation	(348,771		)	(316,687		)
Property and equipment, net	$	778,113		$	748,913

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Commitments and Contingencies - Labor Unions (Details) (Workforce Subject to Collective Bargaining Arrangements [Member], Labor Unions [Member])	6 Months Ended
	Jun. 30, 2012
ABX [Member]
Concentration Risk [Line Items]
Percentage of the Company's Employees	14.90%
ATI [Member]
Concentration Risk [Line Items]
Percentage of the Company's Employees	8.60%
CCIA [Member]
Concentration Risk [Line Items]
Percentage of the Company's Employees	3.80%

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Fair Value Measurements (Details) (Fair Value, Measurements, Recurring [Member], USD $)	Jun. 30, 2012	Dec. 31, 2011
Level 1 [Member]
Assets, Fair Value Disclosure [Abstract]
Cash equivalents - money market	$ 30,013,000	$ 10,002,000
Total Assets	30,013,000	10,002,000
Liabilities, Fair Value Disclosure [Abstract]
Interest rate swap	0	0
Total Liabilities	0	0
Level 2 [Member]
Assets, Fair Value Disclosure [Abstract]
Cash equivalents - money market	9,563,000	11,541,000
Total Assets	9,563,000	11,541,000
Liabilities, Fair Value Disclosure [Abstract]
Interest rate swap	(4,362,000)	(5,024,000)
Total Liabilities	(4,362,000)	(5,024,000)
Difference between fair value and carrying value, debt	6,200,000
Level 3 [Member]
Assets, Fair Value Disclosure [Abstract]
Cash equivalents - money market	0	0
Total Assets	0	0
Liabilities, Fair Value Disclosure [Abstract]
Interest rate swap	0	0
Total Liabilities	0	0
Total [Member]
Assets, Fair Value Disclosure [Abstract]
Cash equivalents - money market	39,576,000	21,543,000
Total Assets	39,576,000	21,543,000
Liabilities, Fair Value Disclosure [Abstract]
Interest rate swap	(4,362,000)	(5,024,000)
Total Liabilities	(4,362,000)	(5,024,000)
Carrying (Reported) Amount, Fair Value Disclosure [Member]
Liabilities, Fair Value Disclosure [Abstract]
Carrying value, debt	$ 363,200,000

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Earnings Per Share (Details) (USD $) In Thousands, except Per Share data, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2012	Jun. 30, 2011	Jun. 30, 2012	Jun. 30, 2011
Earnings Per Share [Abstract]
Earnings from continuing operations	$ 11,219	$ 12,280	$ 17,881	$ 15,161
Weighted-average shares outstanding for basic earnings per share (in shares)	63,431	63,333	63,431	63,233
Common equivalent shares:
Effect of stock-based compensation awards (in shares)	962	839	952	822
Weighted-average shares outstanding assuming dilution (in shares)	64,393	64,172	64,383	64,055
Basic earnings per share from continuing operations (in dollars per share)	$ 0.18	$ 0.19	$ 0.28	$ 0.24
Diluted earnings per share from continuing operations (in dollars per share)	$ 0.17	$ 0.19	$ 0.28	$ 0.24
Anti-dilutive securities excluded from computation of earnings per share (in shares)			49	54

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Significant Customers

6 Months Ended

Jun. 30, 2012

Significant Customers [Abstract]

Significant Customers

SIGNIFICANT CUSTOMERS

DHL

Commencing March 31, 2010, the Company and DHL executed commercial agreements under which DHL leases 13 Boeing 767 freighter aircraft from CAM and contracts with ABX to operate those aircraft under a separate crew, maintenance and insurance (“CMI”) agreement. The CMI agreement pricing is based on pre-defined fees, scaled for the number of aircraft operated and the number of flight crews provided to DHL for its U.S. network. The initial term of the CMI agreement is five years and the terms of the aircraft leases are seven years, with early termination provisions. In addition to the 13 CAM-owned Boeing 767 aircraft, ABX also operates four DHL-owned Boeing 767 aircraft under the CMI agreement. Under the CMI agreement, ABX contracted with Airborne Maintenance and Engineering Services, Inc. (“AMES”), a wholly-owned subsidiary of the Company, to provide scheduled maintenance for the 13 Boeing 767 aircraft for at least the first three years of the CMI agreement. Under the terms of the lease agreements for the 13 CAM-owned Boeing 767 aircraft, DHL is responsible to reimburse ABX for its costs of scheduled airframe maintenance. AMES also provides scheduled maintenance for the four DHL-owned aircraft operated by ABX under the CMI agreement. Additionally, the Company's airlines are providing seven other Boeing 767 aircraft, four Boeing 727 aircraft and one Boeing 757 aircraft to DHL under other contracts having durations of one year or less and two Boeing 757 aircraft under multi-year contracts.

Continuing revenues from leases and contracted services for DHL were approximately 54% and 52% of the Company's consolidated revenues from continuing operations for the three and six month periods ended June 30, 2012, respectively, compared to 34% and 35% for the corresponding periods of 2011. The Company’s balance sheets include accounts receivable with DHL of $18.1 million and $9.8 million as of June 30, 2012 and December 31, 2011, respectively.

BAX/Schenker

A significant portion of the Company’s revenues, and cash flows have historically been derived from providing airlift to BAX Global, Inc.'s network in North America ("BAX/Schenker"). CCIA and ATI each had contracts to provide airlift to BAX/Schenker. BAX/Schenker provided freight transportation and supply chain management services, specializing in the heavy freight market for business-to-business shipping.

On July 22, 2011, BAX/Schenker announced its plan to adopt a new operating model that phased-out the dedicated air cargo network in North America supported by the Company. To execute that plan, on September 2, 2011, BAX/Schenker ceased air cargo operations at its air hub in Toledo, Ohio and began to conduct air operations from the Cincinnati/Northern Kentucky airport, utilizing DHL's U.S. air hub. The Company provided limited airlift directly to BAX/Schenker through the peak delivery season, until late December 2011. Beginning in January 2012, DHL contracted with the Company's airlines to supplement DHL's U.S. air network to service BAX/Schenker freight volumes on its expanded air network without the use of ATI's DC-8 aircraft and with only limited use of CCIA's Boeing 727 aircraft.

No services were performed for Bax/Schenker during 2012. Revenues from the services performed for BAX/Schenker were approximately 31% and 32% of the Company’s total revenues from continuing operations for the three and six month periods ended June 30, 2011, respectively. The Company’s balance sheets had no accounts receivable with BAX/Schenker as of June 30, 2012, and included accounts receivable with BAX/Schenker of $5.5 million as of December 31, 2011.

U.S. Military

A substantial portion of the Company's revenues are also derived from the U.S. Military. The U.S. Military awards flights to U.S. certificated airlines through annual contracts and through temporary "expansion" routes. Revenues from services performed for the U.S. Military were approximately 16% and 16% of the Company's total revenues from continuing operations for the three and six month periods ended June 30, 2012, respectively, compared to 12% and 11% for the corresponding periods of 2011. The Company's balance sheets included accounts receivable with the U.S. Military of $4.3 million and $5.2 million as of June 30, 2012 and December 31, 2011.

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Pension and Other Post-Retirement Benefit Plans (Details) (USD $)	3 Months Ended		6 Months Ended
	Jun. 30, 2012	Jun. 30, 2011	Jun. 30, 2012	Jun. 30, 2011
Pension Plans [Member]
Defined Benefit Plan, Net Periodic Benefit Cost [Abstract]
Service cost	$ 0	$ 0	$ 0	$ 0
Interest cost	9,272,000	9,290,000	18,544,000	18,581,000
Expected return on plan assets	(9,970,000)	(9,757,000)	(19,940,000)	(19,514,000)
Amortization of prior service cost	0	0	0	0
Amortization of net loss	2,670,000	675,000	5,340,000	1,350,000
Net periodic benefit cost	1,972,000	208,000	3,944,000	417,000
Employer contributions	2,800,000		3,600,000
Estimated future employer contributions in current fiscal year	21,400,000		21,400,000
Post-Retirement Healthcare Plan [Member]
Defined Benefit Plan, Net Periodic Benefit Cost [Abstract]
Service cost	67,000	62,000	134,000	124,000
Interest cost	95,000	97,000	190,000	194,000
Expected return on plan assets	0	0	0	0
Amortization of prior service cost	(1,388,000)	(1,388,000)	(2,776,000)	(2,776,000)
Amortization of net loss	108,000	132,000	216,000	264,000
Net periodic benefit cost	$ (1,118,000)	$ (1,097,000)	$ (2,236,000)	$ (2,194,000)

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Derivative Instruments (Tables)

6 Months Ended

Jun. 30, 2012

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Schedule of Interest Rate Derivatives

The table below provides information about the Company’s interest rate swaps (in thousands):

			June 30, 2012					December 31, 2011
Expiration Date	Stated Interest Rate		Notional Amount		Market Value (Liability)			Notional Amount		Market Value (Liability)
December 31, 2012	3.105	%	$	55,250	$	(732	)	$	59,500	$	(1,394	)
December 31, 2012	3.105	%	32,500		(430		)	35,000		(820		)
May 9, 2016	2.020	%	74,063		(3,200		)	75,000		(2,810		)

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Pension and Other Post-Retirement Benefit Plans (Tables)

6 Months Ended

Jun. 30, 2012

Compensation and Retirement Disclosure [Abstract]

Schedule of Net Benefit Costs

The Company's net periodic benefit costs for its qualified defined benefit pension and post-retirement healthcare plans for both continuing and discontinued operations are as follows (in thousands):

	Three Months Ended June 30,												Six Months Ended June 30,
	Pension Plans						Post-Retirement Healthcare Plan						Pension Plans						Post-Retirement Healthcare Plan
	2012			2011			2012			2011			2012			2011			2012			2011
Service cost	$	—		$	—		$	67		$	62		$	—		$	—		$	134		$	124
Interest cost	9,272			9,290			95			97			18,544			18,581			190			194
Expected return on plan assets	(9,970		)	(9,757		)	—			—			(19,940		)	(19,514		)	—			—
Amortization of prior service cost	—			—			(1,388		)	(1,388		)	—			—			(2,776		)	(2,776		)
Amortization of net loss	2,670			675			108			132			5,340			1,350			216			264
Net periodic benefit cost	$	1,972		$	208		$	(1,118	)	$	(1,097	)	$	3,944		$	417		$	(2,236	)	$	(2,194	)

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Income Taxes (Details) (USD $) In Millions, unless otherwise specified	6 Months Ended
	Jun. 30, 2012
Income Tax Disclosure [Abstract]
Estimated effective tax rate	38.20%
Reclassification of deferred tax assets to offset deferred tax liabilities	$ 14

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Stock-Based Compensation (Tables)

6 Months Ended

Jun. 30, 2012

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

Schedule of Share-based Compensation, Equity Instruments Other Than Options, Activity

The table below summarizes award activity.

	Six Months Ended				Six Months Ended
	June 30, 2012				June 30, 2011
	Number of Awards		Weighted average grant-date fair value		Number of Awards		Weighted average grant-date fair value
Outstanding at beginning of period	1,458,037		$	5.77	1,514,300		$	3.55
Granted	601,647		5.93		555,237		8.72
Converted	—		—		(291,500	)	3.14
Expired	—		—		—		—
Forfeited	(17,400	)	6.15		(41,600	)	4.97
Outstanding at end of period	2,042,284		$	5.81	1,736,437		$	5.22
Vested	390,037		$	4.45	326,400		$	3.71

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Earnings Per Share (Tables)

6 Months Ended

Jun. 30, 2012

Earnings Per Share [Abstract]

Schedule of Earnings Per Share, Basic and Diluted

The calculation of basic and diluted earnings per common share follows (in thousands, except per share amounts):

	Three Months Ending				Six Months Ending
	June 30,				June 30,
	2012		2011		2012		2011
Earnings from continuing operations	$	11,219	$	12,280	$	17,881	$	15,161
Weighted-average shares outstanding for basic earnings per share	63,431		63,333		63,431		63,233
Common equivalent shares:
Effect of stock-based compensation awards	962		839		952		822
Weighted-average shares outstanding assuming dilution	64,393		64,172		64,383		64,055
Basic earnings per share from continuing operations	$	0.18	$	0.19	$	0.28	$	0.24
Diluted earnings per share from continuing operations	$	0.17	$	0.19	$	0.28	$	0.24

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Summary of Financial Statement Preparation and Significant Accounting Policies

6 Months Ended

Jun. 30, 2012

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Summary of Financial Statement Preparation and Significant Accounting Policies

SUMMARY OF FINANCIAL STATEMENT PREPARATION AND SIGNIFICANT ACCOUNTING POLICIES

Nature of Operations

Air Transport Services Group, Inc. is a holding company whose principal subsidiaries include an aircraft leasing company and three independently certificated airlines. The Company provides airline operations, aircraft leases, aircraft maintenance and other support services primarily to the cargo transportation and package delivery industries. Through the Company's subsidiaries, it offers a range of complementary services to delivery companies, freight forwarders, airlines and government customers.

The three airlines, ABX Air, Inc. (“ABX”), Capital Cargo International Airlines, Inc. (“CCIA”) and Air Transport International, LLC (“ATI”), each have the authority, through their separate U.S. Department of Transportation ("DOT") and Federal Aviation Administration ("FAA") certificates, to transport cargo worldwide. The Company's leasing subsidiary, Cargo Aircraft Management, Inc. (“CAM”), leases aircraft to each of the Company's airlines as well as to non-affiliated airlines and other lessees.

The Company provides aircraft and airline operations to its customers, typically under contracts providing for a combination of aircraft, crews, maintenance and insurance ("ACMI") services. DHL Network Operations (USA), Inc. and its affiliates, “DHL,” is the Company's largest customer. The Company's airlines serve a base of concentrated customers who have a diverse line of international cargo traffic. Additionally, ATI provides passenger transportation, primarily to the U.S. Military, using its McDonnell Douglas DC-8 "combi" aircraft, which are certified to carry passengers as well as cargo on the main deck.

In addition to its airline operations and aircraft leasing services, the Company sells aircraft parts, provides aircraft and equipment maintenance services, and operates mail sorting facilities for the U.S. Postal Service (“USPS”).

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect amounts reported in the consolidated financial statements. Estimates and assumptions are used to record allowances for uncollectible amounts, self-insurance reserves, spare parts inventory, depreciation and impairments of property, equipment, goodwill and intangibles, post-retirement obligations, income taxes, contingencies and litigation. Changes in estimates and assumptions may have a material impact on the consolidated financial statements.

Subsequent Events

The Company evaluated subsequent events through the date the financial statements were issued and filed with the Securities and Exchange Commission. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included.

Consolidation

The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. Intercompany balances and transactions have been eliminated.

Cash and Cash Equivalents

The Company classifies short-term, highly liquid investments with maturities of three months or less at the time of purchase as cash and cash equivalents. These investments, consisting of money market funds, are recorded at cost, which approximates fair value. Substantially all deposits of the Company’s cash are held in accounts that exceed federally insured limits. The Company deposits cash in common financial institutions which management believes are financially sound.

Accounts Receivable and Allowance for Uncollectible Accounts

The Company's accounts receivable is primarily due from its significant customers (see Note B), other airlines, the USPS and freight forwarders. The Company performs a quarterly evaluation of the accounts receivable and the allowance for uncollectible accounts by reviewing specific customers' recent payment history, growth prospects, financial condition and other factors that may impact a customer's ability to pay. The Company establishes an allowance for uncollectible accounts for probable losses due to a customer's potential inability or unwillingness to make contractual payments. Account balances are written off against the allowance when the Company ceases collection efforts.

Inventory

The Company’s inventory is comprised primarily of expendable aircraft parts and supplies used for aircraft maintenance. Inventory is generally charged to expense when issued for use on a Company aircraft. The Company values aircraft parts and supply inventory at weighted-average cost and maintains a related obsolescence reserve. The Company records an obsolescence reserve on a base stock of inventory for each fleet type. The amortization of base stock for the obsolescence reserve corresponds to the expected life of each fleet type. Additionally, the Company monitors the usage rates of inventory parts and segregates parts that are technologically outdated or no longer used in its fleet types. Slow moving and segregated items are actively marketed and written down to their estimated net realizable values based on market conditions.

Management analyzes the inventory reserve for reasonableness at the end of each quarter. That analysis includes consideration of the expected fleet life, amounts expected to be on hand at the end of a fleet life, and recent events and conditions that may impact the usability or value of inventory. Events or conditions that may impact the expected life, usability or net realizable value of inventory include additional aircraft maintenance directives from the FAA, changes in DOT regulations, new environmental laws and technological advances.

Goodwill and Intangible Assets

The Company assesses, during the fourth quarter of each year, the carrying value of goodwill and indefinite-lived intangible assets. Impairment assessments may be performed on an interim basis whenever events or changes in circumstance indicate an impairment may have occurred. Finite-lived intangible assets are amortized over their estimated useful economic lives and are periodically reviewed for impairment.

Property and Equipment

Property and equipment held for use is stated at cost, net of any impairment recorded. The cost and accumulated depreciation of disposed property and equipment are removed from the accounts with any related gain or loss reflected in earnings from operations.

Depreciation of property and equipment is provided on a straight-line basis over the lesser of the asset’s useful life or lease term. Depreciable lives are summarized as follows:

Boeing 727 and DC-8 aircraft and flight equipment	1 year
Boeing 767 and 757 aircraft and flight equipment	10 to 20 years
Support equipment	5 to 10 years
Vehicles and other equipment	3 to 8 years

The Company periodically evaluates the useful lives, salvage values and fair values of property and equipment. Acceleration of depreciation expense or the recording of significant impairment losses could result from changes in the estimated useful lives of assets due to a number of reasons, such as excess aircraft capacity or changes in regulations governing the use of aircraft.

Aircraft and other long-lived assets are tested for impairment when circumstances indicate the carrying value of the assets may not be recoverable. To conduct impairment testing, the Company groups assets and liabilities at the lowest level for which identifiable cash flows are largely independent of cash flows of other assets and liabilities. For assets that are to be held and used, impairment is recognized when the estimated undiscounted cash flows associated with the asset group is less than the carrying value. If impairment exists, an adjustment is made to write the assets down to fair value, and a loss is recorded as the difference between the carrying value and fair value. Fair values are determined considering quoted market values, discounted cash flows or internal and external appraisals, as applicable. For assets held for sale, impairment is recognized when the fair value less the cost to sell the asset is less than the carrying value.

The Company’s accounting policy for major airframe and engine maintenance varies by subsidiary and aircraft type. The costs for ABX's Boeing 767-200 airframe maintenance, which is the majority of the Company's aircraft fleet, are expensed as they are incurred. The costs of major airframe maintenance for the Company's other aircraft are capitalized and amortized over the useful life of the overhaul. The Company's General Electric CF6 engines that power the Boeing 767-200 aircraft are maintained under “power by the hour” agreements with an engine maintenance provider. Under the power by the hour agreements, the engines are maintained by the service provider for a fixed fee per flight hour; accordingly, the cost of engine maintenance is generally expensed as flight hours occur. Maintenance for the airlines’ other aircraft engines, including those on the Boeing 767-300 aircraft, are typically contracted to service providers on a time and material basis and the costs of those engine overhauls are capitalized and amortized over the useful life of the overhaul.

Under certain leases, the Company is required to make periodic payments to the lessor for future maintenance events such as engine overhauls and major airframe maintenance. These payments are recorded as deposits until drawn for qualifying maintenance costs. The maintenance costs are expensed or capitalized in accordance with the accounting policy for major airframe and engine maintenance. The Company evaluates at the balance sheet date, whether it is probable that an amount on deposit will be returned by the lessor to reimburse the costs of the maintenance activities. When an amount on deposit is less than probable of being returned, it is recognized as additional maintenance expense. 

Capitalized Interest

Interest costs incurred while aircraft are being modified are capitalized as an additional cost of the aircraft until the date the asset is placed in service. Capitalized interest was $0.6 million and $0.6 million for the quarters ended June 30, 2012 and 2011, respectively, and $1.3 million and $0.9 million for the six month periods ended June 30, 2012 and 2011, respectively.

Discontinued Operations

A business component whose operations are discontinued is reported as discontinued operations if the cash flows of the component have been eliminated from the ongoing operations of the Company, and the Company will no longer have any significant continuing involvement in the business component. The results of discontinued operations are aggregated and presented separately in the consolidated statements of operations. The Company reclassifies amounts presented in prior years that relate to discontinued business components to reflect the activities as discontinued operations.

The Company's results of discontinued operations consist primarily of pension expenses and other benefits for former employees previously associated with ABX's former freight sorting and aircraft fueling services provided to DHL. ABX is self insured for medical coverage and workers’ compensation, and may incur expenses and cash outlays in the future related to pension obligations, reserves for medical expenses and wage loss for former employees.

Exit Activities

The Company accounts for the costs associated with exit activities in accordance with FASB ASC Topic 420-10 Exit or Disposal Cost Obligations. One-time, involuntary employee termination benefits are generally expensed when the Company communicates the benefit arrangement to the employee that it will no longer require the services of the employee beyond a minimum retention period. Liabilities for contract termination costs associated with exit activities are recognized in the period incurred and measured initially at fair value.

Self-Insurance

The Company is self-insured for certain workers’ compensation, employee healthcare, automobile, aircraft, and general liability claims. The Company maintains excess claim coverage with common insurance carriers to mitigate its exposure to large claim losses. The Company records a liability for reported claims and an estimate for incurred claims that have not yet been reported. Accruals for these claims are estimated utilizing historical paid claims data and recent claims trends. Other liabilities included $31.2 million and $31.2 million at June 30, 2012 and December 31, 2011, respectively, for self-insured reserves. Changes in claim severity and frequency could result in actual claims being materially different than the costs accrued.

Income Taxes

Income taxes have been computed using the asset and liability method, under which deferred income taxes are provided for the temporary differences between the financial reporting basis and the tax basis of the Company’s assets and liabilities. Deferred taxes are measured using provisions of currently enacted tax laws. A valuation allowance against net deferred tax assets is recorded when it is more likely than not that such assets will not be fully realized. Tax credits are accounted for as a reduction of income taxes in the year in which the credit originates.

The Company recognizes the benefit of a tax position taken on a tax return, if that position is more likely than not of being sustained on audit, based on the technical merits of the position. An uncertain income tax benefit is not recognized if it has a less than a 50% likelihood of being sustained. The Company recognizes interest and penalties accrued related to uncertain tax positions in operating expense.

Comprehensive Income

Comprehensive income includes net earnings and other comprehensive income or loss. Other comprehensive income or loss results from certain changes in the Company’s liabilities for pension and other post retirement benefits and gains and losses associated with interest rate hedging instruments.

Fair Value Information

Assets or liabilities that are required to be measured at fair value are reported using the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. FASB ASC Topic 820-10 Fair Value Measurements and Disclosures establishes three levels of input that may be used to measure fair value:

• Level 1: Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities.

• Level 2: Observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

• Level 3: Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. Level 3 assets and liabilities include items where the determination of fair value requires significant management judgment or estimation.

Revenue Recognition

Revenues generated from airline service agreements are typically recognized based on hours flown or the amount of aircraft and crew resources provided during a reporting period. Certain agreements include provisions for incentive payments based upon on-time reliability. These incentives are typically measured on a monthly basis and recorded to revenue in the corresponding month earned. Revenues for operating expenses that are reimbursed through customer agreements, including consumption of aircraft fuel, are generally recognized as the costs are incurred. Revenues from charter service agreements are recognized on scheduled and non-scheduled flights when the specific flight has been completed. Aircraft lease revenues are recognized as operating lease revenues on a straight-line basis over the term of the applicable lease agreements. Revenues from the sale of aircraft parts are recognized when the parts are delivered. Revenues earned and expenses incurred in providing aircraft-related maintenance, repair or technical services are recognized in the period in which the services are completed and delivered to the customer. Revenues derived from sorting parcels are recognized upon completion of services.

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Segment Information (Tables)

6 Months Ended

Jun. 30, 2012

Segment Reporting [Abstract]

Schedule of Segment Reporting Information, by Segment

The Company's segment information from continuing operations is presented below (in thousands):

	Three Months Ending						Six Months Ending
	June 30,						June 30,
	2012			2011			2012			2011
Total revenues:
CAM	$	38,067		$	32,762		$	75,918		$	64,890
ACMI Services	121,630			164,709			234,825			311,414
All other	26,682			25,469			55,103			50,907
Eliminate inter-segment revenues	(32,825		)	(29,879		)	(66,786		)	(59,023		)
Total	$	153,554		$	193,061		$	299,060		$	368,188
Customer revenues:
CAM	$	18,635		$	15,824		$	38,024		$	29,895
ACMI Services	121,389			164,597			234,584			311,032
All other	13,530			12,640			26,452			27,261
Total	$	153,554		$	193,061		$	299,060		$	368,188
Depreciation and amortization expense:
CAM	$	14,680		$	13,663		$	29,101		$	25,926
ACMI Services	6,755			10,253			12,559			20,401
All other	79			(38		)	154			(78		)
Total	$	21,514		$	23,878		$	41,814		$	46,249
Segment earnings (loss):
CAM	$	16,667		$	13,634		$	33,485		$	27,100
ACMI Services	(1,582		)	4,560			(9,797		)	2,050
All other	3,228			1,675			5,229			3,329
Net unallocated interest expense	(344		)	(572		)	(665		)	(1,790		)
Net gain (loss) on derivative instruments	202			376			662			(3,556		)
Write-off of unamortized debt issuance costs	—			(16		)	—			(2,886		)
Pre-tax earnings from continuing operations	$	18,171		$	19,657		$	28,914		$	24,247

Reconciliation of Assets from Segment to Consolidated

The Company's assets are presented below by segment (in thousands):

	June 30,		December 31,
	2012		2011
Assets:
CAM	$	780,858	$	760,588
ACMI Services	153,557		137,640
All other	82,844		95,491
Total	$	1,017,259	$	993,719

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Commitments and Contingencies - Commitments (Details) (Capital Addition Purchase Commitments [Member], USD $) In Millions, unless otherwise specified	1 Months Ended		1 Months Ended		1 Months Ended
	Aug. 31, 2010 M&B Conversions Limited and Israel Areospace Industries Ltd. [Member] Boeing 767-300 [Member]	Jun. 30, 2012 M&B Conversions Limited and Israel Areospace Industries Ltd. [Member] Boeing 767-300 [Member] aircrafts	Oct. 31, 2010 Precision Conversions, LLC [Member] Boeing 757 [Member] passengers CargoPalletPositions	Jun. 30, 2012 Precision Conversions, LLC [Member] Boeing 757 [Member] aircrafts	Aug. 31, 2010 Maximum [Member] M&B Conversions Limited and Israel Areospace Industries Ltd. [Member] Boeing 767-300 [Member] aircrafts
Long-term Purchase Commitment [Line Items]
Number of aircrafts to be converted					10
Agreement time period	10 years
Number of completed aircraft conversions (in aircrafts)		4		1
Number of in progress aircraft conversions (in aircrafts)		2
Number of not started aircraft conversions (in aircrafts)		1
Agreement cancellation fee		$ 19		$ 10
Number of full cargo pallet positions (in cargo pallet positions)			10
Number of passenger seats (in passengers)			58

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Unaudited Condensed Consolidated Statements of Operations (USD $) In Thousands, except Per Share data, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2012	Jun. 30, 2011	Jun. 30, 2012	Jun. 30, 2011
REVENUES	$ 153,554	$ 193,061	$ 299,060	$ 368,188
OPERATING EXPENSES
Salaries, wages and benefits	44,570	45,326	91,674	91,674
Fuel	14,084	48,640	27,924	88,316
Maintenance, materials and repairs	25,270	22,380	48,384	43,686
Depreciation and amortization	21,514	23,878	41,814	46,249
Travel	5,566	6,918	11,544	13,228
Rent	6,244	5,434	11,974	11,074
Landing and ramp	3,880	6,032	7,946	12,437
Insurance	1,826	2,394	3,836	4,744
Other operating expenses	8,998	9,258	18,560	18,550
Operating Expenses	131,952	170,260	263,656	329,958
OPERATING INCOME	21,602	22,801	35,404	38,230
OTHER INCOME (EXPENSE)
Interest income	38	33	66	99
Interest expense	(3,671)	(3,537)	(7,218)	(7,640)
Net gain (loss) on derivative instruments	202	376	662	(3,556)
Write-off of unamortized debt issuance costs	0	(16)	0	(2,886)
Other Nonoperating Income (Expense)	(3,431)	(3,144)	(6,490)	(13,983)
EARNINGS FROM CONTINUING OPERATIONS BEFORE INCOME TAXES	18,171	19,657	28,914	24,247
INCOME TAX EXPENSE	(6,952)	(7,377)	(11,033)	(9,086)
EARNINGS FROM CONTINUING OPERATIONS	11,219	12,280	17,881	15,161
EARNINGS (LOSS) FROM DISCONTINUED OPERATIONS, NET OF TAXES	(160)	19	(390)	(98)
NET EARNINGS	$ 11,059	$ 12,299	$ 17,491	$ 15,063
BASIC EARNINGS PER SHARE
Continuing operations (in dollars per share)	$ 0.18	$ 0.19	$ 0.28	$ 0.24
Discontinued operations (in dollars per share)	$ (0.01)	$ 0.00	$ 0.00	$ 0.00
TOTAL BASIC EARNINGS PER SHARE (in dollars per share)	$ 0.17	$ 0.19	$ 0.28	$ 0.24
DILUTED EARNINGS PER SHARE
Continuing operations (in dollars per share)	$ 0.17	$ 0.19	$ 0.28	$ 0.24
Discontinued operations (in dollars per share)	$ 0.00	$ 0.00	$ (0.01)	$ 0.00
TOTAL DILUTED NET EARNINGS PER SHARE (in dollars per share)	$ 0.17	$ 0.19	$ 0.27	$ 0.24
WEIGHTED AVERAGE SHARES
Basic (in shares)	63,431	63,333	63,431	63,233
Diluted (in shares)	64,393	64,172	64,383	64,055

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Derivative Instruments (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended		3 Months Ended
	Jun. 30, 2012	Jun. 30, 2011	Jun. 30, 2012	Jun. 30, 2011	Mar. 31, 2011 December 31, 2012 Swap 1 and 2 [Member] Swap [Member]	Jun. 30, 2012 December 31, 2012 - Swap 1 [Member] Swap [Member]	Dec. 31, 2011 December 31, 2012 - Swap 1 [Member] Swap [Member]	Jun. 30, 2012 December 31, 2012 - Swap 2 [Member] Swap [Member]	Dec. 31, 2011 December 31, 2012 - Swap 2 [Member] Swap [Member]	Jun. 30, 2012 May 9, 2016 [Member] Swap [Member]	Dec. 31, 2011 May 9, 2016 [Member] Swap [Member]	Jul. 31, 2011 May 9, 2016 [Member] Swap [Member]
Derivative [Line Items]
Stated Interest Rate						3.105%	3.105%	3.105%	3.105%	2.02%	2.02%
Pre-tax charge on derivative instruments	$ 202	$ 376	$ 662	$ (3,556)	$ 3,900
Notional Amount						55,250	59,500	32,500	35,000	74,063	75,000	75,000
Market Value (Liability)						$ (732)	$ (1,394)	$ (430)	$ (820)	$ (3,200)	$ (2,810)

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Unaudited Condensed Consolidated Balance Sheets Parenthetical (USD $) In Thousands, except Share data, unless otherwise specified	Jun. 30, 2012	Dec. 31, 2011
Assets, Current [Abstract]
Allowance for doubtful accounts	$ 457	$ 434
Stockholders' Equity Attributable to Parent [Abstract]
Common stock, par value (in dollars per share)	$ 0.01	$ 0.01
Common stock, shares authorized (in shares)	75,000,000	75,000,000
Common stock, shares issued (in shares)	64,261,289	64,015,789
Common stock, shares outstanding (in shares)	64,261,289	64,015,789
Preferred Stock [Member]
Stockholders' Equity Attributable to Parent [Abstract]
Preferred stock, shares authorized (in shares)	20,000,000	20,000,000
Series A Junior Participating Preferred Stock [Member]
Stockholders' Equity Attributable to Parent [Abstract]
Preferred stock, shares authorized (in shares)	75,000	75,000

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Goodwill and Other Intangibles - Schedule of Goodwill (Details) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2012	Dec. 31, 2011
Goodwill [Roll Forward]
Carrying value as of December 31, 2011	$ 86,980	$ 86,980
Carrying value as of June 30, 2012	86,980	86,980
ACMI Services [Member]
Goodwill [Roll Forward]
Carrying value as of December 31, 2011	52,585	52,585
Carrying value as of June 30, 2012	52,585	52,585
CAM [Member]
Goodwill [Roll Forward]
Carrying value as of December 31, 2011	34,395	34,395
Carrying value as of June 30, 2012	$ 34,395	$ 34,395

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Summary of Financial Statement Preparation and Signficant Accounting Policies (Tables)

6 Months Ended

Jun. 30, 2012

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Property, Plant and Equipment

Depreciable lives are summarized as follows:

Boeing 727 and DC-8 aircraft and flight equipment	1 year
Boeing 767 and 757 aircraft and flight equipment	10 to 20 years
Support equipment	5 to 10 years
Vehicles and other equipment	3 to 8 years

Property and equipment, to be held and used, is summarized as follows (in thousands):

	June 30, 2012			December 31, 2011
Aircraft and flight equipment	$	1,073,054		$	1,012,000
Support equipment	51,499			51,297
Vehicles and other equipment	1,577			1,589
Leasehold improvements	754			714
	1,126,884			1,065,600
Accumulated depreciation	(348,771		)	(316,687		)
Property and equipment, net	$	778,113		$	748,913

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Goodwill and Other Intangibles - Schedule Intangible Assets (Details) (USD $) In Thousands, unless otherwise specified	6 Months Ended
	Jun. 30, 2012	Jun. 30, 2011
Finite and Indefinite-lived Intangible Assets by Major Class [Line Items]
Number of business units reporting goodwill (in reporting units)	2
Finite and Indefinite-lived Intangible Assets [Roll Forward]
Carrying value at beginning of period	$ 6,396
Carrying value at end of period	5,938
ACMI Services [Member]
Finite and Indefinite-lived Intangible Assets [Roll Forward]
Carrying value at beginning of period	6,396
Amortization expense	(458)
Carrying value at end of period	5,938
ACMI Services [Member] | Airline Certificates [Member]
Finite and Indefinite-lived Intangible Assets [Roll Forward]
Carrying value at beginning of period	4,000
Amortization expense	(333)
Carrying value at end of period	3,667
ACMI Services [Member] | Airline Certificates [Member] | Boeing 727 Aircraft [Member]
Finite and Indefinite-lived Intangible Assets [Roll Forward]
Carrying value at end of period	700
ACMI Services [Member] | Customer Relationships [Member]
Finite and Indefinite-lived Intangible Assets [Roll Forward]
Carrying value at beginning of period	2,396
Amortization expense	(125)	(409)
Carrying value at end of period	$ 2,271
Intangibles useful life	9 years

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Fair Value Measurements (Tables)

6 Months Ended

Jun. 30, 2012

Fair Value Disclosures [Abstract]

Schedule of Fair Value, Assets and Liabilities Measured on Recurring Basis

The following table reflects assets and liabilities that are measured at fair value on a recurring basis (in thousands):

As of June 30, 2012	Fair Value Measurement Using							Total
	Level 1		Level 2			Level 3
Assets
Cash equivalents—money market	$	30,013	$	9,563		$	—	$	39,576
Total Assets	$	30,013	$	9,563		$	—	$	39,576
Liabilities
Interest rate swap	$	—	$	(4,362	)	$	—	$	(4,362	)
Total Liabilities	$	—	$	(4,362	)	$	—	$	(4,362	)

As of December 31, 2011	Fair Value Measurement Using							Total
	Level 1		Level 2			Level 3
Assets
Cash equivalents—money market	$	10,002	$	11,541		$	—	$	21,543
Total Assets	$	10,002	$	11,541		$	—	$	21,543
Liabilities
Interest rate swap	$	—	$	(5,024	)	$	—	$	(5,024	)
Total Liabilities	$	—	$	(5,024	)	$	—	$	(5,024	)

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Unaudited Condensed Consolidated Statements of Cash Flows (USD $) In Thousands, unless otherwise specified	6 Months Ended
	Jun. 30, 2012	Jun. 30, 2011
OPERATING ACTIVITIES:
Net earnings from continuing operations	$ 17,881	$ 15,161
Net loss from discontinued operations	(390)	(98)
Adjustments to reconcile net earnings to net cash provided by operating activities:
Depreciation and amortization	41,814	46,249
Pension and post-retirement	2,781	(1,161)
Deferred income taxes	10,722	8,523
Amortization of stock-based compensation	1,816	1,301
Amortization of DHL promissory note	(3,100)	(3,100)
Net (gain) loss on derivative instruments	(662)	3,556
Write-off of unamortized debt issuance costs	0	2,886
Changes in assets and liabilities:
Accounts receivable	3,793	(7,545)
Inventory and prepaid supplies	501	(859)
Accounts payable	(10,625)	9,122
Unearned revenue	6,420	9,679
Accrued expenses, salaries, wages, benefits and other liabilities	(718)	(87)
Pension and post-retirement liabilities	(5,276)	(6,172)
Other	(343)	1,086
NET CASH PROVIDED BY OPERATING ACTIVITIES	64,614	78,541
INVESTING ACTIVITIES:
Capital expenditures	(69,463)	(102,724)
Proceeds from property and equipment	2,482	223
Proceeds from the redemption of interest-bearing investments	0	1,750
NET CASH (USED IN) INVESTING ACTIVITIES	(66,981)	(100,751)
FINANCING ACTIVITIES:
Principal payments on long-term obligations	(5,609)	(198,902)
Proceeds from borrowings	25,000	215,000
Financing fees	0	(2,536)
NET CASH PROVIDED BY FINANCING ACTIVITIES	19,391	13,562
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS	17,024	(8,648)
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR	30,503	46,543
CASH AND CASH EQUIVALENTS AT END OF PERIOD	47,527	37,895
SUPPLEMENTAL CASH FLOW INFORMATION:
Interest paid, net of amount capitalized	6,257	6,680
Federal alternative minimum and state income taxes paid	271	2,368
SUPPLEMENTAL NON-CASH INFORMATION:
Debt extinguished	3,100	3,100
Accrued capital expenditures	$ 10,351	$ 13,578

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Unaudited Condensed Consolidated Statements of Comprehensive Income (USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2012	Jun. 30, 2011	Jun. 30, 2012	Jun. 30, 2011
NET INCOME	$ 11,059	$ 12,299	$ 17,491	$ 15,063
OTHER COMPREHENSIVE INCOME:
Unrealized gain on derivative instruments, net of tax of $229 for the six month period in 2011	0	0	0	402
Reclassifications to net income:
Hedging gain realized, net of tax of $5 and $10 for the three and six month periods in 2012 and $61 and $70 for the three and six month periods in 2011.	(9)	(107)	(18)	(123)
Post-retirement negative prior service cost, net of tax of $513 and $1,026 for the three and six month periods in 2012 and $506 and $1,012 for the three and six month periods in 2011.	(874)	(882)	(1,748)	(1,764)
Unrealized loss on derivative instruments, net of tax of $1,427 for the six month period in 2011	0	0	0	2,505
TOTAL OTHER COMPREHENSIVE INCOME (LOSS)	867	(476)	1,734	2,046
TOTAL COMPREHENSIVE INCOME	11,926	11,823	19,225	17,109
Pension actuarial loss, net of tax of $988 and $1,976 for the three and six month periods in 2012 and $246 and $492 for the three and six month periods in 2011 [Member]
Reclassifications to net income:
Actuarial loss, net of tax	1,682	429	3,364	858
Post-retirement actuarial loss, net of tax of $40 and $80 for the three and six month periods in 2012 and $48 and $96 for the three and six month periods in 2011 [Member]
Reclassifications to net income:
Actuarial loss, net of tax	$ 68	$ 84	$ 136	$ 168

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Derivative Instruments

6 Months Ended

Jun. 30, 2012

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Derivative Instruments

DERIVATIVE INSTRUMENTS

In conjunction with the unsubordinated term loan under the former credit agreement, the Company entered into interest rate swaps in January 2008 to reduce the effects of fluctuating LIBOR-based interest rates on forecasted interest payments stemming from the scheduled repayment of the debt. Under the interest rate swap agreements, the Company pays a fixed rate of 3.105% and receives a floating rate that resets quarterly based on LIBOR. The notional value of the interest rate swaps step downward through December 31, 2012. In accordance with FASB ASC Topic 815-30 Derivatives and Hedging, the Company accounted for the interest rate swaps as hedges of the forecasted cash flows. Accordingly, losses caused by lower floating interest rates had been recorded to accumulated other comprehensive income for the effective portion. Effective March 31, 2011, in conjunction with its decision to refinance the unsubordinated term loan, the Company ceased hedge accounting after determining that the forecasted interest payments will not occur near the time originally expected. As a result, the Company recorded a pre-tax charge of $3.9 million in the first quarter of 2011 based on the fair market value of the derivatives on March 31, 2011, to recognize the losses previously recorded in accumulated other comprehensive income.

In addition to the interest rate swaps noted above, the Company's Senior Credit Agreement requires the Company to maintain derivative instruments for protection from fluctuating interest rates, for at least fifty percent of the outstanding balance of term loan. As a result, the Company entered into an interest rate swap in July of 2011 having an initial notional value of $75.0 million and a forward start date of December 31, 2011. Under this swap, the Company pays a fixed rate of 2.02% and receives a floating rate that resets quarterly based on LIBOR. The Company did not designate the recent interest rate swap as a hedge for accounting purposes. The effects of future fluctuations in LIBOR interest rates on derivatives held by the Company will result in the recording of unrealized gains and losses into the statement of operations.

The liability for outstanding derivatives is recorded in other liabilities and in accrued expenses. The table below provides information about the Company’s interest rate swaps (in thousands):

			June 30, 2012					December 31, 2011
Expiration Date	Stated Interest Rate		Notional Amount		Market Value (Liability)			Notional Amount		Market Value (Liability)
December 31, 2012	3.105	%	$	55,250	$	(732	)	$	59,500	$	(1,394	)
December 31, 2012	3.105	%	32,500		(430		)	35,000		(820		)
May 9, 2016	2.020	%	74,063		(3,200		)	75,000		(2,810		)

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Document and Entity Information	6 Months Ended
	Jun. 30, 2012	Aug. 02, 2012
Document and Entity Information [Abstract]
Entity Registrant Name	Air Transport Services Group, Inc.
Entity Central Index Key	0000894081
Current Fiscal Year End Date	--12-31
Entity Filer Category	Accelerated Filer
Document Type	10-Q
Document Period End Date	Jun. 30, 2012
Document Fiscal Year Focus	2012
Document Fiscal Period Focus	Q2
Amendment Flag	false
Entity Common Stock, Shares Outstanding		64,235,586

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Stock-Based Compensation

6 Months Ended

Jun. 30, 2012

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

Stock-Based Compensation

STOCK-BASED COMPENSATION

The Company's Board of Directors has granted stock incentive awards to certain employees and board members pursuant to a long term incentive plan which was approved by the Company's stockholders in May 2005. Employees have been awarded non-vested stock units with performance conditions, non-vested stock units with market conditions and non-vested restricted stock. The restrictions on the non-vested restricted stock awards lapse at the end of a specified service period, which is typically approximately three years from the date of grant. Restrictions could lapse sooner upon a business combination, death, disability or after an employee qualifies for retirement. The non-vested stock units will be converted into a number of shares of Company stock depending on performance and market conditions at the end of a specified service period, lasting approximately three years. The performance condition awards will be converted into a number of shares of Company stock based on the Company's average return on invested capital, depending on the form of award, during the service period. Similarly, the market condition awards will be converted into a number of shares depending on the appreciation of the Company's stock compared to the NASDAQ Transportation Index. Board members were granted time-based awards with approximately a six-month vesting period, which will settle when the board member ceases to be a director of the Company. The Company expects to settle all of the stock unit awards by issuing new shares of stock. The table below summarizes award activity.

	Six Months Ended				Six Months Ended
	June 30, 2012				June 30, 2011
	Number of Awards		Weighted average grant-date fair value		Number of Awards		Weighted average grant-date fair value
Outstanding at beginning of period	1,458,037		$	5.77	1,514,300		$	3.55
Granted	601,647		5.93		555,237		8.72
Converted	—		—		(291,500	)	3.14
Expired	—		—		—		—
Forfeited	(17,400	)	6.15		(41,600	)	4.97
Outstanding at end of period	2,042,284		$	5.81	1,736,437		$	5.22
Vested	390,037		$	4.45	326,400		$	3.71

The average grant-date fair value of each performance condition award, non-vested restricted stock award and time-based award granted by the Company in 2012 was $5.63, the fair value of the Company’s stock on the date of grant. The average grant-date fair value of each market condition award granted in 2012 was $7.05. The market condition awards were valued using a Monte Carlo simulation technique, a risk-free interest rate of 0.44%, a term of 36 months, and a volatility of 90.1% based on historical volatility over three years using daily stock prices.

For the six month periods ended June 30, 2012 and 2011, the Company recorded expense of $1.8 million and $1.3 million, respectively, for stock incentive awards. At June 30, 2012, there was $4.6 million of unrecognized expense related to the stock incentive awards that is expected to be recognized over a weighted-average period of 1.5 years. As of June 30, 2012, none of the awards were convertible, 390,037 units of the Board members time-based awards had vested and none of the outstanding shares of the restricted stock had vested. These awards could result in a maximum number of 2,406,684 additional outstanding shares of the Company’s common stock depending on service, performance and market results through December 31, 2014.

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Unaudited Condensed Consolidated Statements of Comprehensive Income Parenthetical (USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2012	Jun. 30, 2011	Jun. 30, 2012	Jun. 30, 2011
Unrealized gain on derivative instruments, tax				$ 229
Reclassifications to net income:
Hedging gain realized, tax	5	61	10	70
Post-retirement negative prior service cost, tax	513	506	1,026	1,012
Unrealized loss on derivative instruments, tax				1,427
Pension actuarial loss, net of tax of $988 and $1,976 for the three and six month periods in 2012 and $246 and $492 for the three and six month periods in 2011 [Member]
Reclassifications to net income:
Actuarial loss, tax	988	246	1,976	492
Post-retirement actuarial loss, net of tax of $40 and $80 for the three and six month periods in 2012 and $48 and $96 for the three and six month periods in 2011 [Member]
Reclassifications to net income:
Actuarial loss, tax	$ 40	$ 48	$ 80	$ 96

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Property and Equipment

6 Months Ended

Jun. 30, 2012

Property, Plant and Equipment [Abstract]

Property and Equipment

PROPERTY AND EQUIPMENT

The Company's property and equipment consists primarily of cargo aircraft, aircraft engines and flight equipment. Property and equipment, to be held and used, is summarized as follows (in thousands):

	June 30, 2012			December 31, 2011
Aircraft and flight equipment	$	1,073,054		$	1,012,000
Support equipment	51,499			51,297
Vehicles and other equipment	1,577			1,589
Leasehold improvements	754			714
	1,126,884			1,065,600
Accumulated depreciation	(348,771		)	(316,687		)
Property and equipment, net	$	778,113		$	748,913

CAM owned aircraft with a carrying value of $303.0 million and $316.4 million that were under leases to external customers as of June 30, 2012 and December 31, 2011, respectively.

The carrying value of Boeing 727 and DC-8 freighter aircraft and engines available for sale totaled $5.5 million as of June 30, 2012. Cash flows generated from sales of aircraft and engines totaled $2.5 million for the six month period ended June 30, 2012.

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Fair Value Measurements

6 Months Ended

Jun. 30, 2012

Fair Value Disclosures [Abstract]

Fair Value Measurements

FAIR VALUE MEASUREMENTS

The Company’s money market funds and interest rate swaps are reported on the Company’s consolidated balance sheet at fair values based on market values from identical or comparable transactions. The fair value of the Company’s money market funds and interest rate swaps are based on observable inputs (Level 2) from comparable market transactions. The use of significant unobservable inputs (Level 3) was not necessary in determining the fair value of the Company’s financial assets and liabilities.

The following table reflects assets and liabilities that are measured at fair value on a recurring basis (in thousands):

As of June 30, 2012	Fair Value Measurement Using							Total
	Level 1		Level 2			Level 3
Assets
Cash equivalents—money market	$	30,013	$	9,563		$	—	$	39,576
Total Assets	$	30,013	$	9,563		$	—	$	39,576
Liabilities
Interest rate swap	$	—	$	(4,362	)	$	—	$	(4,362	)
Total Liabilities	$	—	$	(4,362	)	$	—	$	(4,362	)

As of December 31, 2011	Fair Value Measurement Using							Total
	Level 1		Level 2			Level 3
Assets
Cash equivalents—money market	$	10,002	$	11,541		$	—	$	21,543
Total Assets	$	10,002	$	11,541		$	—	$	21,543
Liabilities
Interest rate swap	$	—	$	(5,024	)	$	—	$	(5,024	)
Total Liabilities	$	—	$	(5,024	)	$	—	$	(5,024	)

As a result of lower market interest rates compared to the stated interest rates of the Company’s fixed and variable rate debt obligations, the fair value of the Company’s debt obligations, based on Level 2 observable inputs, was approximately $6.2 million more than the carrying value, which was $363.2 million at June 30, 2012. The non-financial assets, including goodwill, intangible assets and property and equipment are measured at fair value on a non-recurring basis.

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Goodwill and Other Intangibles (Tables)

6 Months Ended

Jun. 30, 2012

Goodwill and Intangible Assets Disclosure [Abstract]

Schedule of Goodwill

The carrying amounts of goodwill by reportable segment, are as follows (in thousands):

	ACMI Services		CAM		Total
Carrying value as of December 31, 2011	$	52,585	$	34,395	$	86,980
Carrying value as of June 30, 2012	$	52,585	$	34,395	$	86,980

Schedule Intangible Assets by Major Class

The Company's intangible assets relate to the ACMI Services segment and are as follows (in thousands):

	Customer			Airline
	Relationships			Certificates			Total
Carrying value as of December 31, 2011	$	2,396		$	4,000		$	6,396
Amortization	(125		)	(333		)	(458		)
Carrying value as of June 30, 2012	$	2,271		$	3,667		$	5,938

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Earnings Per Share

6 Months Ended

Jun. 30, 2012

Earnings Per Share [Abstract]

Earnings Per Share

EARNINGS PER SHARE

The calculation of basic and diluted earnings per common share follows (in thousands, except per share amounts):

	Three Months Ending				Six Months Ending
	June 30,				June 30,
	2012		2011		2012		2011
Earnings from continuing operations	$	11,219	$	12,280	$	17,881	$	15,161
Weighted-average shares outstanding for basic earnings per share	63,431		63,333		63,431		63,233
Common equivalent shares:
Effect of stock-based compensation awards	962		839		952		822
Weighted-average shares outstanding assuming dilution	64,393		64,172		64,383		64,055
Basic earnings per share from continuing operations	$	0.18	$	0.19	$	0.28	$	0.24
Diluted earnings per share from continuing operations	$	0.17	$	0.19	$	0.28	$	0.24

The number of equivalent shares that were not included in weighted average shares outstanding assuming dilution, because their effect would have been anti-dilutive, was 49,000 and 54,000 at June 30, 2012 and 2011, respectively.

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Pension and Other Post-Retirement Benefit Plans

6 Months Ended

Jun. 30, 2012

Compensation and Retirement Disclosure [Abstract]

Pension and Other Post-Retirement Benefit Plans

PENSION AND OTHER POST-RETIREMENT BENEFIT PLANS

Defined Benefit and Post-retirement Healthcare Plans

ABX sponsors a qualified defined benefit pension plan for ABX crewmembers and a qualified defined benefit pension plan for a major portion of its other ABX employees that meet minimum eligibility requirements. ABX also sponsors non-qualified defined benefit pension plans for certain employees. These non-qualified plans are unfunded. Employees are no longer accruing benefits under any of the defined benefit pension plans. ABX also sponsors a post-retirement healthcare plan for its ABX employees, which is unfunded.

The accounting and valuation for these post-retirement obligations are determined by prescribed accounting and actuarial methods that consider a number of assumptions and estimates. The selection of appropriate assumptions and estimates is significant due to the long time period over which benefits will be accrued and paid. The long term nature of these benefit payouts increases the sensitivity of certain estimates of our post-retirement costs. The assumptions considered most sensitive in actuarially valuing ABX’s pension obligations and determining related expense amounts are discount rates and expected long term investment returns on plan assets. Additionally, other assumptions concerning retirement ages, mortality and employee turnover also affect the valuations. Actual results and future changes in these assumptions could result in future costs significantly higher than those recorded in our results of operations. The Company's net periodic benefit costs for its qualified defined benefit pension and post-retirement healthcare plans for both continuing and discontinued operations are as follows (in thousands):

	Three Months Ended June 30,												Six Months Ended June 30,
	Pension Plans						Post-Retirement Healthcare Plan						Pension Plans						Post-Retirement Healthcare Plan
	2012			2011			2012			2011			2012			2011			2012			2011
Service cost	$	—		$	—		$	67		$	62		$	—		$	—		$	134		$	124
Interest cost	9,272			9,290			95			97			18,544			18,581			190			194
Expected return on plan assets	(9,970		)	(9,757		)	—			—			(19,940		)	(19,514		)	—			—
Amortization of prior service cost	—			—			(1,388		)	(1,388		)	—			—			(2,776		)	(2,776		)
Amortization of net loss	2,670			675			108			132			5,340			1,350			216			264
Net periodic benefit cost	$	1,972		$	208		$	(1,118	)	$	(1,097	)	$	3,944		$	417		$	(2,236	)	$	(2,194	)

During the three and six month periods ended June 30, 2012, the Company contributed $2.8 million and $3.6 million to the pension plans. The Company plans to contribute an additional $21.4 million in 2012.

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Debt Obligations

6 Months Ended

Jun. 30, 2012

Debt Disclosure [Abstract]

Debt Obligations

DEBT OBLIGATIONS

Long term obligations consisted of the following (in thousands):

	June 30,			December 31,
	2012			2011
Unsubordinated term loan	$	148,125		$	150,000
Revolving credit facility	131,000			106,000
Aircraft loans	67,020			70,754
Promissory note due to DHL, unsecured	17,050			20,150
Total long term obligations	363,195			346,904
Less: current portion	(17,239		)	(13,223		)
Total long term obligations, net	$	345,956		$	333,681

The Company executed a syndicated credit agreement ("Senior Credit Agreement") in May 2011 which includes a term loan of $150 million and a $175 million revolving credit loan, of which the Company has drawn $131.0 million, net of repayments as of June 30, 2012. On July 20, 2012, the Company executed the first amendment to the Senior Credit Agreement (“Credit Amendment”). The Credit Amendment increased the amount available under the revolving credit loan by $50 million to $225.0 million, extended the maturity of the term loan and revolving credit loan to July 20, 2017, and provided for an accordion feature whereby the Company may draw up to an additional $50.0 million, subject to the lenders' consent.

Under the terms of the Senior Credit Agreement, interest rates are adjusted quarterly based on the Company's earnings before interest, taxes, depreciation and amortization expenses ("EBITDA"), its outstanding debt level and prevailing LIBOR or prime rates. At the Company's current debt-to-EBITDA ratio, the LIBOR based financing for the unsubordinated term loan and revolving credit facility bear a variable interest rate of 2.72% and 2.5%, respectively. The Credit Amendment did not effect the EBITDA based pricing or covenants of the Senior Credit Agreement . The Senior Credit Agreement provides for the issuance of letters of credit on the Company's behalf. During the next twelve months, the Company expects to make further draws on the revolving credit loan to fund its fleet expansion plans. As of June 30, 2012, the unused revolving credit facility totaled $24.8 million, net of draws of $131.0 million and outstanding letters of credit of $19.2 million.

The aircraft loans are collateralized by six aircraft, and amortize monthly with a balloon payment of approximately 20% with maturities between 2016 and early 2018. Interest rates range from 6.74% to 7.36% per annum payable monthly.

The promissory note payable to DHL becomes due in August 2028 as a balloon payment, unless it is extinguished sooner under the terms of the CMI agreement. Beginning April 1, 2010 and extending through the term of the CMI agreement, the balance of the note is amortized ratably without cash payment, in exchange for services provided and thus is expected to be completely amortized by April 2015. The promissory note bears interest at a rate of 5% per annum, and DHL reimburses ABX the interest expense from the note through the term of the CMI agreement.

The Senior Credit Agreement is collateralized by certain of the Company's Boeing 767 and 757 aircraft that are not collateralized under aircraft loans. Under the terms of the Senior Credit Agreement, the Company is required to maintain collateral coverage equal to 150% of the outstanding balance of the term loan and total revolving credit facility. The Senior Credit Agreement contains covenants including, among other things, limitations on certain additional indebtedness, guarantees of indebtedness, as well as a total debt to EBITDA ratio and a fixed charge coverage ratio. The Senior Credit Agreement stipulates events of default, including unspecified events that may have material adverse effects on the Company. If an event of default occurs, the Company may be forced to repay, renegotiate or replace the Senior Credit Agreement. The Company is currently in compliance with the financial covenants specified in the Senior Credit Agreement . The Senior Credit Agreement limits the amount of dividends the Company can pay and the amount of common stock it can repurchase to $50.0 million during any calendar year. Under the provisions of its promissory note due to DHL, the Company is required to prepay the DHL note in the amount of $0.20 for each dollar of dividend distributed to its stockholders. The same prepayment stipulation applies to stock repurchases.

In conjunction with the execution of the Senior Credit Agreement in 2011, the Company terminated its previous credit agreement, which resulted in the write-off of unamortized debt issuance costs associated with that credit agreement and losses for certain interest rate swaps which had previously been designated as cash flow hedges of interest payments required by the former debt. These charges, which totaled $6.8 million before income taxes, were recorded in March 2011.

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Commitments and Contingencies

6 Months Ended

Jun. 30, 2012

Commitments and Contingencies Disclosure [Abstract]

Commitments and Contingencies

COMMITMENTS AND CONTINGENCIES

Leases

The Company leases airport facilities and certain operating equipment under operating lease agreements. ABX leases portions of the air park in Wilmington, Ohio under a lease agreement with a regional port authority, the term of which expires in May of 2019.

Commitments

In August 2010, the Company entered into an agreement with M&B Conversions Limited and Israel Aerospace Industries Ltd. ("IAI"), for the conversion by IAI of up to ten Boeing 767-300 series passenger aircraft to a standard freighter configuration during the 10-year term of the agreement. As of June 30, 2012, four such aircraft have completed the modification process, two Boeing 767-300 aircraft were undergoing modification to a standard freighter configuration and one Boeing 767-300 aircraft was awaiting modification. If the Company were to cancel the conversion program as of June 30, 2012, it would owe IAI approximately $18.9 million associated with non-recurring engineering efforts, conversion part kits and to complete the modification.

In October 2010, the Company entered into an agreement with Precision Conversions, LLC (“Precision”) for the design, engineering and certification of a Boeing 757 "combi" aircraft variant. The Boeing 757 combi variant to be developed by Precision will incorporate 10 full cargo pallet positions along with seating for up to 58 passengers. As of June 30, 2012, one Boeing 757 had completed the modification process for standard freighter configuration while one Boeing 757 aircraft was in the freighter conversion process and another was in the combi conversion process. If the Company were to cancel the conversion program as of June 30, 2012, it would owe Precision approximately $10.2 million associated with engineering efforts, conversion part kits which have been ordered and to complete the modifications.

Guarantees and Indemnifications

Certain operating leases and agreements of the Company contain indemnification obligations to the lessor, or one or more other parties that are considered reasonable and customary (e.g. use, tax and environmental indemnifications), the terms of which range in duration and are often limited. Such indemnification obligations may continue after expiration of the respective lease or agreement.

Civil Action Alleging Violations of Immigration Laws

On December 31, 2008, a former ABX employee filed a complaint against ABX, a total of four current and former executives and managers of ABX, Garcia Labor Company of Ohio, and three former executives of the Garcia Labor companies, in the U.S. District Court for the Southern District of Ohio. The case was filed as a putative class action against the defendants, and asserts violations of the Racketeer Influenced and Corrupt Practices Act (RICO). The complaint, which was later amended to include a second former employee plaintiff, seeks damages in an unspecified amount and alleges that the defendants engaged in a scheme to hire illegal immigrant workers to depress the wages paid to hourly wage employees during the period from December 1999 to January 2005.

The complaint is similar to a prior complaint filed by another former employee in April 2007. The prior complaint was subsequently dismissed without prejudice at the plaintiff’s request on November 3, 2008.

On March 18, 2010, the Court issued a decision in response to a motion filed by ABX and the other ABX defendants, dismissing three of the five claims constituting the basis of Plaintiffs' complaint. Thereafter, on October 7, 2010, the Court issued a decision permitting the plaintiffs’ to amend their complaint for the purpose of reinstating one of their dismissed claims. On October 26, 2010, ABX and the other ABX defendants filed an answer denying the allegations contained in plaintiffs’ second amended complaint.

On December 2, 2011, the parties attended a settlement conference presided over by the Court and agreed to settle this matter. The settlement calls for ABX to pay to the plaintiffs a monetary amount, which management believes to be less than it would have cost for ABX to defend the case at trial. Once the plaintiffs have provided notice to the putative class members of the settlement, the Court will hold a hearing to consider any objections and seek final confirmation of the settlement.

Brussels Noise Ordinance

The Brussels Instituut voor Milieubeheer ("BIM"), a governmental authority in the Brussels-Capital Region of Belgium that oversees the enforcement of environmental matters, brought an administrative action against ABX alleging numerous violations of an ordinance limiting the noise caused by aircraft overflying the Brussels-Capital Region, which is located near the Brussels Airport. In May and November 2011, the BIM levied separate administrative penalties on ABX in the approximate amount of €0.1 million ($0.1 million) each, for numerous alleged violations of the ordinance during the period from May 2009 through November 2009 and December 2009 through May 2010; respectively. ABX appealed both of these matters to the Environmental College in Brussels, which affirmed the administrative penalties. ABX has subsequently appealed both of these matters to the Council of State, which appeals are currently pending.

In June 2012, the BIM levied an additional administrative penalty on ABX in the approximate amount of €0.1 million ($0.2 million) for numerous alleged violations of the ordinance during the period from June 2010 through October 2010, and has also commenced administrative action for numerous alleged violations of the ordinance during the period from November 2010 through December 2010.

The ordinance in question is controversial for the reason that it was adopted by the Brussels-Capital Region and is more restrictive than the noise limitations in effect in the Flemish Region, which is where the Brussels Airport is located. The ordinance is the subject of several court cases currently pending in the Belgian courts and numerous airlines have been levied fines thereunder.

Other

In addition to the foregoing matters, we are also currently a party to legal proceedings, including FAA enforcement actions, in various federal and state jurisdictions arising out of the operation of our business. The amount of alleged liability, if any, from these proceedings cannot be determined with certainty; however, we believe that our ultimate liability, if any, arising from the pending legal proceedings, as well as from asserted legal claims and known potential legal claims which are probable of assertion, taking into account established accruals for estimated liabilities, should not be material to our financial condition or results of operations.

Employees Under Collective Bargaining Agreements

As of June 30, 2012, the flight crewmember employees of ABX, ATI and CCIA were represented by the labor unions listed below:

Airline	Labor Agreement Unit	Percentage of the Company’s Employees
ABX	International Brotherhood of Teamsters	14.9%
ATI	Airline Pilots Association	8.6%
CCIA	Airline Pilots Association	3.8%

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Income Taxes

6 Months Ended

Jun. 30, 2012

Income Tax Disclosure [Abstract]

Income Taxes

INCOME TAXES

The provision for income taxes for interim periods is based on management's best estimate of the effective income tax rate expected to be applicable for the current year, plus any adjustments arising from changes in the estimated amount of taxable income related to prior periods. Income taxes recorded through June 30, 2012 have been estimated utilizing a 38.2% rate based on year-to-date income and projected results for the full year. The final effective tax rate to be applied to 2012 will depend on the actual amount of pre-tax book income generated by the Company for the full year.

The Company has operating loss carryforwards for U.S. federal income tax purposes. Management expects to utilize the loss carryforwards to offset federal income tax liabilities in the future. During 2012, management revised the projection of qualified tax deductions for 2012. As a result of anticipated additional tax deductions, management does not expect to utilize the existing loss carryforward assets to offset the federal income tax liability during the next 12 months. Accordingly, as of June 30, 2012, the Company's balance sheet reflects the reclassification of approximately $14 million of deferred tax assets to offset deferred tax liabilities. Due to the Company's deferred tax assets, including its loss carryforwards, management does not expect to pay federal income taxes through 2014 or later. The Company may, however, be required to pay alternative minimum taxes and certain state and local income taxes before then.

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Significant Customers (Details) (USD $) In Thousands, unless otherwise specified				6 Months Ended					6 Months Ended		3 Months Ended		6 Months Ended		3 Months Ended		6 Months Ended		3 Months Ended		6 Months Ended
	Jun. 30, 2012	Dec. 31, 2011	Jun. 30, 2012 CAM [Member] Boeing 767 Freighter Aircraft [Member] Aircraft and Flight Equipment [Member] DHL [Member] aircrafts	Jun. 30, 2012 CMI Agreement [Member] CAM [Member] Boeing 767 Freighter Aircraft [Member] Aircraft and Flight Equipment [Member] DHL [Member] aircrafts	Jun. 30, 2012 Aircraft Leases [Member] CAM [Member] Boeing 767 Freighter Aircraft [Member] Aircraft and Flight Equipment [Member] DHL [Member]	Jun. 30, 2012 Other Contracts [Member] Boeing 767 Freighter Aircraft [Member] Aircraft and Flight Equipment [Member] DHL [Member] aircrafts	Jun. 30, 2012 Other Contracts [Member] Boeing 727 Aircraft [Member] Aircraft and Flight Equipment [Member] DHL [Member] aircrafts	Jun. 30, 2012 Other Contracts [Member] Boeing 757 Aircraft [Member] Aircraft and Flight Equipment [Member] DHL [Member] aircrafts	Jun. 30, 2012 Maximum [Member] Other Contracts [Member] Aircraft and Flight Equipment [Member] DHL [Member]	Jun. 30, 2012 Minimum [Member] CMI Agreement [Member] CAM [Member] Boeing 767 Freighter Aircraft [Member] Aircraft and Flight Equipment [Member] DHL [Member]	Jun. 30, 2012 Revenues from Leases and Contracted Services [Member] DHL [Member] Customer Concentration Risk [Member]	Jun. 30, 2011 Revenues from Leases and Contracted Services [Member] DHL [Member] Customer Concentration Risk [Member]	Jun. 30, 2012 Revenues from Leases and Contracted Services [Member] DHL [Member] Customer Concentration Risk [Member]	Jun. 30, 2011 Revenues from Leases and Contracted Services [Member] DHL [Member] Customer Concentration Risk [Member]	Jun. 30, 2012 Revenues from Services Performed [Member] BAX/Schenker [Member] Customer Concentration Risk [Member]	Jun. 30, 2011 Revenues from Services Performed [Member] BAX/Schenker [Member] Customer Concentration Risk [Member]	Jun. 30, 2012 Revenues from Services Performed [Member] BAX/Schenker [Member] Customer Concentration Risk [Member]	Jun. 30, 2011 Revenues from Services Performed [Member] BAX/Schenker [Member] Customer Concentration Risk [Member]	Jun. 30, 2012 Revenues from Services Performed [Member] US Military [Member] Customer Concentration Risk [Member]	Jun. 30, 2011 Revenues from Services Performed [Member] US Military [Member] Customer Concentration Risk [Member]	Jun. 30, 2012 Revenues from Services Performed [Member] US Military [Member] Customer Concentration Risk [Member]	Jun. 30, 2011 Revenues from Services Performed [Member] US Military [Member] Customer Concentration Risk [Member]	Jun. 30, 2012 Accounts Receivable [Member] DHL [Member]	Dec. 31, 2011 Accounts Receivable [Member] DHL [Member]	Jun. 30, 2012 Accounts Receivable [Member] BAX/Schenker [Member]	Dec. 31, 2011 Accounts Receivable [Member] BAX/Schenker [Member]	Jun. 30, 2012 Accounts Receivable [Member] US Military [Member]	Dec. 31, 2011 Accounts Receivable [Member] US Military [Member]	Jun. 30, 2012 Multi Year Contract [Member] Other Contracts [Member] Boeing 757 Aircraft [Member] Aircraft and Flight Equipment [Member] DHL [Member] aircrafts
Concentration Risk [Line Items]
Number of leased aircrafts (in aircrafts)			13	4		7	4	1																					2
Lease term				5 years	7 years				1 year
Lease maintenance term										3 years
Percentage of consolidated revenues											54.00%	34.00%	52.00%	35.00%	0.00%	31.00%	0.00%	32.00%	16.00%	12.00%	16.00%	11.00%
Accounts receivable	$ 39,817	$ 42,278																					$ 18,100	$ 9,800	$ 0	$ 5,500	$ 4,300	$ 5,200

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Summary of Financial Statement Preparation and Signficant Accounting Policies (Policies)

6 Months Ended

Jun. 30, 2012

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Use of Estimates

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect amounts reported in the consolidated financial statements. Estimates and assumptions are used to record allowances for uncollectible amounts, self-insurance reserves, spare parts inventory, depreciation and impairments of property, equipment, goodwill and intangibles, post-retirement obligations, income taxes, contingencies and litigation. Changes in estimates and assumptions may have a material impact on the consolidated financial statements.

Subsequent Events

Subsequent Events

The Company evaluated subsequent events through the date the financial statements were issued and filed with the Securities and Exchange Commission. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included.

Consolidation

Consolidation

The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. Intercompany balances and transactions have been eliminated.

Cash and Cash Equivalents

Cash and Cash Equivalents

The Company classifies short-term, highly liquid investments with maturities of three months or less at the time of purchase as cash and cash equivalents. These investments, consisting of money market funds, are recorded at cost, which approximates fair value. Substantially all deposits of the Company’s cash are held in accounts that exceed federally insured limits. The Company deposits cash in common financial institutions which management believes are financially sound.

Accounts Receivable and Allowance for Uncollectible Accounts

Accounts Receivable and Allowance for Uncollectible Accounts

The Company's accounts receivable is primarily due from its significant customers (see Note B), other airlines, the USPS and freight forwarders. The Company performs a quarterly evaluation of the accounts receivable and the allowance for uncollectible accounts by reviewing specific customers' recent payment history, growth prospects, financial condition and other factors that may impact a customer's ability to pay. The Company establishes an allowance for uncollectible accounts for probable losses due to a customer's potential inability or unwillingness to make contractual payments. Account balances are written off against the allowance when the Company ceases collection efforts.

Inventory

Inventory

The Company’s inventory is comprised primarily of expendable aircraft parts and supplies used for aircraft maintenance. Inventory is generally charged to expense when issued for use on a Company aircraft. The Company values aircraft parts and supply inventory at weighted-average cost and maintains a related obsolescence reserve. The Company records an obsolescence reserve on a base stock of inventory for each fleet type. The amortization of base stock for the obsolescence reserve corresponds to the expected life of each fleet type. Additionally, the Company monitors the usage rates of inventory parts and segregates parts that are technologically outdated or no longer used in its fleet types. Slow moving and segregated items are actively marketed and written down to their estimated net realizable values based on market conditions.

Management analyzes the inventory reserve for reasonableness at the end of each quarter. That analysis includes consideration of the expected fleet life, amounts expected to be on hand at the end of a fleet life, and recent events and conditions that may impact the usability or value of inventory. Events or conditions that may impact the expected life, usability or net realizable value of inventory include additional aircraft maintenance directives from the FAA, changes in DOT regulations, new environmental laws and technological advances.

Goodwill and Intangible Assets

Goodwill and Intangible Assets

The Company assesses, during the fourth quarter of each year, the carrying value of goodwill and indefinite-lived intangible assets. Impairment assessments may be performed on an interim basis whenever events or changes in circumstance indicate an impairment may have occurred. Finite-lived intangible assets are amortized over their estimated useful economic lives and are periodically reviewed for impairment.

Property and Equipment

Property and Equipment

Property and equipment held for use is stated at cost, net of any impairment recorded. The cost and accumulated depreciation of disposed property and equipment are removed from the accounts with any related gain or loss reflected in earnings from operations.

Depreciation of property and equipment is provided on a straight-line basis over the lesser of the asset’s useful life or lease term. Depreciable lives are summarized as follows:

Boeing 727 and DC-8 aircraft and flight equipment	1 year
Boeing 767 and 757 aircraft and flight equipment	10 to 20 years
Support equipment	5 to 10 years
Vehicles and other equipment	3 to 8 years

The Company periodically evaluates the useful lives, salvage values and fair values of property and equipment. Acceleration of depreciation expense or the recording of significant impairment losses could result from changes in the estimated useful lives of assets due to a number of reasons, such as excess aircraft capacity or changes in regulations governing the use of aircraft.

Aircraft and other long-lived assets are tested for impairment when circumstances indicate the carrying value of the assets may not be recoverable. To conduct impairment testing, the Company groups assets and liabilities at the lowest level for which identifiable cash flows are largely independent of cash flows of other assets and liabilities. For assets that are to be held and used, impairment is recognized when the estimated undiscounted cash flows associated with the asset group is less than the carrying value. If impairment exists, an adjustment is made to write the assets down to fair value, and a loss is recorded as the difference between the carrying value and fair value. Fair values are determined considering quoted market values, discounted cash flows or internal and external appraisals, as applicable. For assets held for sale, impairment is recognized when the fair value less the cost to sell the asset is less than the carrying value.

The Company’s accounting policy for major airframe and engine maintenance varies by subsidiary and aircraft type. The costs for ABX's Boeing 767-200 airframe maintenance, which is the majority of the Company's aircraft fleet, are expensed as they are incurred. The costs of major airframe maintenance for the Company's other aircraft are capitalized and amortized over the useful life of the overhaul. The Company's General Electric CF6 engines that power the Boeing 767-200 aircraft are maintained under “power by the hour” agreements with an engine maintenance provider. Under the power by the hour agreements, the engines are maintained by the service provider for a fixed fee per flight hour; accordingly, the cost of engine maintenance is generally expensed as flight hours occur. Maintenance for the airlines’ other aircraft engines, including those on the Boeing 767-300 aircraft, are typically contracted to service providers on a time and material basis and the costs of those engine overhauls are capitalized and amortized over the useful life of the overhaul.

Under certain leases, the Company is required to make periodic payments to the lessor for future maintenance events such as engine overhauls and major airframe maintenance. These payments are recorded as deposits until drawn for qualifying maintenance costs. The maintenance costs are expensed or capitalized in accordance with the accounting policy for major airframe and engine maintenance. The Company evaluates at the balance sheet date, whether it is probable that an amount on deposit will be returned by the lessor to reimburse the costs of the maintenance activities. When an amount on deposit is less than probable of being returned, it is recognized as additional maintenance expense.

Capitalized Interest

Capitalized Interest

Interest costs incurred while aircraft are being modified are capitalized as an additional cost of the aircraft until the date the asset is placed in service.

Discontinued Operations

Discontinued Operations

A business component whose operations are discontinued is reported as discontinued operations if the cash flows of the component have been eliminated from the ongoing operations of the Company, and the Company will no longer have any significant continuing involvement in the business component. The results of discontinued operations are aggregated and presented separately in the consolidated statements of operations. The Company reclassifies amounts presented in prior years that relate to discontinued business components to reflect the activities as discontinued operations.

The Company's results of discontinued operations consist primarily of pension expenses and other benefits for former employees previously associated with ABX's former freight sorting and aircraft fueling services provided to DHL. ABX is self insured for medical coverage and workers’ compensation, and may incur expenses and cash outlays in the future related to pension obligations, reserves for medical expenses and wage loss for former employees.

Exit Activities

Exit Activities

The Company accounts for the costs associated with exit activities in accordance with FASB ASC Topic 420-10 Exit or Disposal Cost Obligations. One-time, involuntary employee termination benefits are generally expensed when the Company communicates the benefit arrangement to the employee that it will no longer require the services of the employee beyond a minimum retention period. Liabilities for contract termination costs associated with exit activities are recognized in the period incurred and measured initially at fair value.

Self-Insurance

Self-Insurance

The Company is self-insured for certain workers’ compensation, employee healthcare, automobile, aircraft, and general liability claims. The Company maintains excess claim coverage with common insurance carriers to mitigate its exposure to large claim losses. The Company records a liability for reported claims and an estimate for incurred claims that have not yet been reported. Accruals for these claims are estimated utilizing historical paid claims data and recent claims trends.

Income Taxes

Income Taxes

Income taxes have been computed using the asset and liability method, under which deferred income taxes are provided for the temporary differences between the financial reporting basis and the tax basis of the Company’s assets and liabilities. Deferred taxes are measured using provisions of currently enacted tax laws. A valuation allowance against net deferred tax assets is recorded when it is more likely than not that such assets will not be fully realized. Tax credits are accounted for as a reduction of income taxes in the year in which the credit originates.

The Company recognizes the benefit of a tax position taken on a tax return, if that position is more likely than not of being sustained on audit, based on the technical merits of the position. An uncertain income tax benefit is not recognized if it has a less than a 50% likelihood of being sustained. The Company recognizes interest and penalties accrued related to uncertain tax positions in operating expense.

Comprehensive Income

Comprehensive Income

Comprehensive income includes net earnings and other comprehensive income or loss. Other comprehensive income or loss results from certain changes in the Company’s liabilities for pension and other post retirement benefits and gains and losses associated with interest rate hedging instruments.

Fair Value Information

Fair Value Information

Assets or liabilities that are required to be measured at fair value are reported using the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. FASB ASC Topic 820-10 Fair Value Measurements and Disclosures establishes three levels of input that may be used to measure fair value:

• Level 1: Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities.

• Level 2: Observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

• Level 3: Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. Level 3 assets and liabilities include items where the determination of fair value requires significant management judgment or estimation.

Revenue Recognition

Revenue Recognition

Revenues generated from airline service agreements are typically recognized based on hours flown or the amount of aircraft and crew resources provided during a reporting period. Certain agreements include provisions for incentive payments based upon on-time reliability. These incentives are typically measured on a monthly basis and recorded to revenue in the corresponding month earned. Revenues for operating expenses that are reimbursed through customer agreements, including consumption of aircraft fuel, are generally recognized as the costs are incurred. Revenues from charter service agreements are recognized on scheduled and non-scheduled flights when the specific flight has been completed. Aircraft lease revenues are recognized as operating lease revenues on a straight-line basis over the term of the applicable lease agreements. Revenues from the sale of aircraft parts are recognized when the parts are delivered. Revenues earned and expenses incurred in providing aircraft-related maintenance, repair or technical services are recognized in the period in which the services are completed and delivered to the customer. Revenues derived from sorting parcels are recognized upon completion of services.

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Debt Obligations (Tables)

6 Months Ended

Jun. 30, 2012

Debt Disclosure [Abstract]

Schedule of Long-term Debt Instruments

Long term obligations consisted of the following (in thousands):

	June 30,			December 31,
	2012			2011
Unsubordinated term loan	$	148,125		$	150,000
Revolving credit facility	131,000			106,000
Aircraft loans	67,020			70,754
Promissory note due to DHL, unsecured	17,050			20,150
Total long term obligations	363,195			346,904
Less: current portion	(17,239		)	(13,223		)
Total long term obligations, net	$	345,956		$	333,681

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Commitments and Contingencies - Litigation (Details) In Millions, unless otherwise specified	0 Months Ended			1 Months Ended				3 Months Ended		1 Months Ended
	Mar. 19, 2010 Immigration Law [Member] claims	Oct. 07, 2010 Immigration Law [Member] claims	Mar. 18, 2010 Immigration Law [Member] claims	Nov. 30, 2011 Brussels Instituut voor Milieubeheer [Member] USD ($)	Nov. 30, 2011 Brussels Instituut voor Milieubeheer [Member] EUR (€)	May 31, 2011 Brussels Instituut voor Milieubeheer [Member] USD ($)	May 31, 2011 Brussels Instituut voor Milieubeheer [Member] EUR (€)	Jun. 30, 2012 Brussels Instituut voor Milieubeheer [Member] USD ($)	Jun. 30, 2012 Brussels Instituut voor Milieubeheer [Member] EUR (€)	Dec. 31, 2008 ABX, Garcia Labor Company of Ohio [Member] Immigration Law [Member] executives	Dec. 31, 2008 Garcia Labor Companies [Member] Immigration Law [Member] executives
Loss Contingencies [Line Items]
Number of defendants (in executives)										4	3
Number of dismissed claims	3
Number of pending claims			5
Number of reinstated claims		1
Administrative penalty amount				$ 0.1	€ 0.1	$ 0.1	€ 0.1	$ 0.2	€ 0.1

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Unaudited Condensed Consolidated Balance Sheets (USD $) In Thousands, unless otherwise specified	Jun. 30, 2012	Dec. 31, 2011
CURRENT ASSETS:
Cash and cash equivalents	$ 47,527	$ 30,503
Accounts receivable, net of allowance of $457 in 2012 and $434 in 2011	39,817	42,278
Inventory	8,657	8,906
Prepaid supplies and other	7,777	9,785
Deferred income taxes	17,418	31,548
Aircraft and engines held for sale	5,474	9,831
TOTAL CURRENT ASSETS	126,670	132,851
Property and equipment, net	778,113	748,913
Other assets	19,558	18,579
Intangibles	5,938	6,396
Goodwill	86,980	86,980
TOTAL ASSETS	1,017,259	993,719
CURRENT LIABILITIES:
Accounts payable	37,165	48,360
Accrued salaries, wages and benefits	20,645	23,226
Accrued expenses	10,287	10,291
Current portion of debt obligations	17,239	13,223
Unearned revenue	11,071	12,487
TOTAL CURRENT LIABILITIES	96,407	107,587
Long-term debt obligations	345,956	333,681
Post-retirement liabilities	180,286	185,562
Other liabilities	63,281	54,212
Deferred income taxes	40,140	42,530
TOTAL LIABILITIES	726,070	723,572
Commitments and contingencies (Note G)
STOCKHOLDERS’ EQUITY:
Preferred stock, 20,000,000 shares authorized, including 75,000 Series A Junior Participating Preferred Stock	0	0
Common stock, par value $0.01 per share; 75,000,000 shares authorized; 64,261,289 and 64,015,789 shares issued and outstanding in 2012 and 2011, respectively	643	640
Additional paid-in capital	522,427	520,613
Accumulated deficit	(130,568)	(148,059)
Accumulated other comprehensive loss	(101,313)	(103,047)
TOTAL STOCKHOLDERS’ EQUITY	291,189	270,147
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$ 1,017,259	$ 993,719

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Goodwill and Other Intangibles

6 Months Ended

Jun. 30, 2012

Goodwill and Intangible Assets Disclosure [Abstract]

Goodwill and Other Intangibles

GOODWILL AND OTHER INTANGIBLES

The Company has two reporting units, ATI (a component of the ACMI Services segment) and CAM, that have goodwill. The carrying amounts of goodwill by reportable segment, are as follows (in thousands):

	ACMI Services		CAM		Total
Carrying value as of December 31, 2011	$	52,585	$	34,395	$	86,980
Carrying value as of June 30, 2012	$	52,585	$	34,395	$	86,980

The Company's intangible assets relate to the ACMI Services segment and are as follows (in thousands):

	Customer			Airline
	Relationships			Certificates			Total
Carrying value as of December 31, 2011	$	2,396		$	4,000		$	6,396
Amortization	(125		)	(333		)	(458		)
Carrying value as of June 30, 2012	$	2,271		$	3,667		$	5,938

The customer relationship intangible amortizes over nine more years. The Company recorded amortization expense for the customer relationships intangible asset of $0.4 million for the six month period ending June 30, 2011. The airline certificate related to CCIA' s Boeing 727 aircraft operations, having a carrying value of $0.7 million at June 30, 2012, amortizes through December 31, 2012, the expected remaining life of those operations. The remaining airline certificates have an indefinite life and therefore are not amortized.

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Commitments and Contingencies (Tables)

6 Months Ended

Jun. 30, 2012

Commitments and Contingencies Disclosure [Abstract]

Schedules of Concentration of Risk, by Risk Factor

As of June 30, 2012, the flight crewmember employees of ABX, ATI and CCIA were represented by the labor unions listed below:

Airline	Labor Agreement Unit	Percentage of the Company’s Employees
ABX	International Brotherhood of Teamsters	14.9%
ATI	Airline Pilots Association	8.6%
CCIA	Airline Pilots Association	3.8%

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Schedule of Property and Equipment (Details) (USD $)	6 Months Ended
	Jun. 30, 2012	Jun. 30, 2011	Dec. 31, 2011
Property, Plant and Equipment, Net, by Type [Abstract]
Property and equipment, gross	$ 1,126,884,000		$ 1,065,600,000
Accumulated depreciation	(348,771,000)		(316,687,000)
Property and equipment, net	778,113,000		748,913,000
Aircraft and engines held for sale	5,474,000		9,831,000
Proceeds from the disposal of aircraft and engines	2,482,000	223,000
Aircraft and flight equipment [Member]
Property, Plant and Equipment, Net, by Type [Abstract]
Property and equipment, gross	1,073,054,000		1,012,000,000
Support equipment [Member]
Property, Plant and Equipment, Net, by Type [Abstract]
Property and equipment, gross	51,499,000		51,297,000
Vehicles and other equipment [Member]
Property, Plant and Equipment, Net, by Type [Abstract]
Property and equipment, gross	1,577,000		1,589,000
Leasehold improvements [Member]
Property, Plant and Equipment, Net, by Type [Abstract]
Property and equipment, gross	754,000		714,000
CAM [Member] | Aircraft and flight equipment [Member]
Property, Plant and Equipment, Net, by Type [Abstract]
Leased aircraft, carrying value	$ 303,000,000		$ 316,400,000

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Segment Information

6 Months Ended

Jun. 30, 2012

Segment Reporting [Abstract]

Segment Information

SEGMENT INFORMATION

The Company operates in two reportable segments, as described below. The CAM segment consists of the Company's aircraft leasing operations and its segment earnings includes an allocation of interest expense. The ACMI Services segment consists of the Company's airline operations including the CMI agreement with DHL, as well as ACMI and charter service agreements that the Company provides to other customers. Due to the similarities among

the Company's airline operations, the airline operations are aggregated into a single reportable segment, ACMI Services. The Company's other activities, which include contracts with the USPS, the sale of aircraft parts and maintenance services, management services for workers' compensation and logistics services, do not constitute reportable segments and are combined in “All other” with inter-segment profit eliminations. Inter-segment revenues are valued at arms-length, market rates. Cash, cash equivalents and deferred tax assets are reflected in Assets - All other below. The Company's segment information from continuing operations is presented below (in thousands):

	Three Months Ending						Six Months Ending
	June 30,						June 30,
	2012			2011			2012			2011
Total revenues:
CAM	$	38,067		$	32,762		$	75,918		$	64,890
ACMI Services	121,630			164,709			234,825			311,414
All other	26,682			25,469			55,103			50,907
Eliminate inter-segment revenues	(32,825		)	(29,879		)	(66,786		)	(59,023		)
Total	$	153,554		$	193,061		$	299,060		$	368,188
Customer revenues:
CAM	$	18,635		$	15,824		$	38,024		$	29,895
ACMI Services	121,389			164,597			234,584			311,032
All other	13,530			12,640			26,452			27,261
Total	$	153,554		$	193,061		$	299,060		$	368,188
Depreciation and amortization expense:
CAM	$	14,680		$	13,663		$	29,101		$	25,926
ACMI Services	6,755			10,253			12,559			20,401
All other	79			(38		)	154			(78		)
Total	$	21,514		$	23,878		$	41,814		$	46,249
Segment earnings (loss):
CAM	$	16,667		$	13,634		$	33,485		$	27,100
ACMI Services	(1,582		)	4,560			(9,797		)	2,050
All other	3,228			1,675			5,229			3,329
Net unallocated interest expense	(344		)	(572		)	(665		)	(1,790		)
Net gain (loss) on derivative instruments	202			376			662			(3,556		)
Write-off of unamortized debt issuance costs	—			(16		)	—			(2,886		)
Pre-tax earnings from continuing operations	$	18,171		$	19,657		$	28,914		$	24,247

The Company's assets are presented below by segment (in thousands):

	June 30,		December 31,
	2012		2011
Assets:
CAM	$	780,858	$	760,588
ACMI Services	153,557		137,640
All other	82,844		95,491
Total	$	1,017,259	$	993,719

Interest expense of $0.2 million and $0.5 million for the three and six month periods ending June 30, 2012, respectively, compared to $0.3 million and $0.6 million for the corresponding periods in 2011, respectively, was included in the ACMI Services segment earnings above. Interest expense allocated to CAM was $3.1 million and $6.0 million for the three and six month periods ending June 30, 2012, respectively, compared to $2.6 million and $5.1 million for the corresponding periods of 2011.