Document

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

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.

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 2016 Annual Report filed on Form 10-K with the Securities and Exchange Commission.



	Three Months Ended
	March 31
	2017			2016
REVENUES	$	237,917		$	177,385
OPERATING EXPENSES
Salaries, wages and benefits	72,663			52,419
Depreciation and amortization	36,442			32,534
Maintenance, materials and repairs	24,601			27,343
Fuel	34,841			16,631
Travel	7,366			4,808
Contracted ground and aviation services	20,687			10,868
Rent	3,286			2,627
Landing and ramp	5,299			3,651
Insurance	1,262			1,149
Other operating expenses	13,717			10,004
	220,164			162,034
OPERATING INCOME	17,753			15,351
OTHER INCOME (EXPENSE)
Interest income	32			24
Net gain (loss) on financial instruments	1,869			(528		)
Interest expense	(3,548		)	(2,699		)
	(1,647		)	(3,203		)

EARNINGS FROM CONTINUING OPERATIONS BEFORE INCOME TAXES	16,106			12,148
INCOME TAX EXPENSE	(6,310		)	(3,977		)
EARNINGS FROM CONTINUING OPERATIONS	9,796			8,171
EARNINGS FROM DISCONTINUED OPERATIONS, NET OF TAXES	192			47
NET EARNINGS	$	9,988		$	8,218

BASIC EARNINGS PER SHARE
Continuing operations	$	0.17		$	0.13
Discontinued operations	—			—
TOTAL BASIC EARNINGS PER SHARE	$	0.17		$	0.13

DILUTED EARNINGS PER SHARE
Continuing operations	$	0.13		$	0.13
Discontinued operations	—			—
TOTAL DILUTED EARNINGS PER SHARE	$	0.13		$	0.13

WEIGHTED AVERAGE SHARES
Basic	59,133			63,636
Diluted	64,949			65,057



	March 31,			December 31,
	2017			2016
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$	27,631		$	16,358
Accounts receivable, net of allowance of $1,273 in 2017 and $1,264 in 2016	83,981			77,247
Inventory	18,454			19,925
Prepaid supplies and other	24,481			19,123
TOTAL CURRENT ASSETS	154,547			132,653
Property and equipment, net	1,057,877			1,000,992
Other assets	82,799			80,099
Goodwill and acquired intangibles	45,588			45,586
TOTAL ASSETS	$	1,340,811		$	1,259,330
LIABILITIES AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES:
Accounts payable	$	76,269		$	60,704
Accrued salaries, wages and benefits	27,032			37,044
Accrued expenses	9,553			10,324
Current portion of debt obligations	26,531			29,306
Unearned revenue	25,233			18,407
TOTAL CURRENT LIABILITIES	164,618			155,785
Long term debt	481,886			429,415
Post-retirement obligations	74,674			77,713
Other liabilities	51,294			52,542
Stock warrants	97,831			89,441
Deferred income taxes	129,425			122,532
TOTAL LIABILITIES	999,728			927,428
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; 85,000,000 shares authorized; 59,563,749 and 59,461,291 shares issued and outstanding in 2017 and 2016, respectively	596			595
Additional paid-in capital	441,300			443,416
Accumulated deficit	(22,255		)	(32,243		)
Accumulated other comprehensive loss	(78,558		)	(79,866		)
TOTAL STOCKHOLDERS’ EQUITY	341,083			331,902
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	1,340,811		$	1,259,330

(In thousands)



	Three Months Ended
	March 31
	2017			2016
OPERATING ACTIVITIES:
Net earnings from continuing operations	$	9,796		$	8,171
Net earnings from discontinued operations	192			47
Adjustments to reconcile net earnings to net cash provided by operating activities:
Depreciation and amortization	39,033			32,534
Pension and post-retirement	1,995			3,382
Deferred income taxes	6,149			3,831
Amortization of stock-based compensation	784			654
Net (gain) loss on financial instruments	(1,869		)	528
Changes in assets and liabilities:
Accounts receivable	(6,487		)	219
Inventory and prepaid supplies	(4,413		)	1,341
Accounts payable	6,932			(1,995		)
Unearned revenue	4,765			(2,719		)
Accrued expenses, salaries, wages, benefits and other liabilities	(9,911		)	(920		)
Pension and post-retirement assets	(3,039		)	(2,196		)
Other	283			1,432
NET CASH PROVIDED BY OPERATING ACTIVITIES	44,210			44,309
INVESTING ACTIVITIES:
Capital expenditures	(83,786		)	(71,673		)
Acquisitions and investments in businesses	(640		)	—
Redemption of long term deposits	4,725			—
NET CASH (USED IN) INVESTING ACTIVITIES	(79,701		)	(71,673		)
FINANCING ACTIVITIES:
Principal payments on long term obligations	(10,337		)	(6,189		)
Proceeds from borrowings	60,000			60,000
Purchase of common stock	(1,463		)	(3,079		)
Withholding taxes paid for conversion of employee stock awards	(1,436		)	(1,231		)
NET CASH PROVIDED BY FINANCING ACTIVITIES	46,764			49,501

NET INCREASE IN CASH AND CASH EQUIVALENTS	11,273			22,137
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR	16,358			17,697
CASH AND CASH EQUIVALENTS AT END OF PERIOD	$	27,631		$	39,834

SUPPLEMENTAL CASH FLOW INFORMATION:
Interest paid, net of amount capitalized	$	3,406		$	2,587
Federal alternative minimum and state income taxes paid	$	113		$	—
SUPPLEMENTAL NON-CASH INFORMATION:
Accrued capital expenditures	$	18,251		$	7,084

Air Transport Services Group, Inc. is a holding company whose principal subsidiaries include an aircraft leasing company and two U.S. 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 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 airlines, ABX Air, Inc. (“ABX”) and Air Transport International, Inc. (“ATI”), each have the authority, through their separate U.S. Department of Transportation ("DOT") and Federal Aviation Administration ("FAA") certificates, to transport cargo worldwide. ATI provides passenger transportation, primarily to the U.S. Military, using "combi" aircraft, which are certified to carry passengers as well as cargo on the main deck.

The Company serves a base of concentrated customers who typically have a diverse line of international cargo traffic. 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. In addition to its airline operations and aircraft leasing services, the Company sells aircraft parts, provides aircraft maintenance and modification services, equipment maintenance services, and operates mail and package sorting facilities.

The accompanying unaudited condensed interim consolidated financial statements are prepared in conformity with accounting principles generally accepted in the United States of America and such principles are applied on a basis consistent with the financial statements reflected in our Annual Report on Form 10-K for the fiscal year ended December 31, 2016 filed with the Securities and Exchange Commission (“SEC”). Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted pursuant to the rules and regulations promulgated by the SEC related to interim financial statements. In the opinion of management, the accompanying financial statements contain all adjustments, including normal recurring adjustments, necessary for the fair presentation of the Company’s results of operations and financial position for the periods presented. Due to seasonal fluctuations, among other factors common to the airline industry, the results of operations for the periods presented are not necessarily indicative of the results of operations to be expected for the entire year or any interim period. The preparation of consolidated financial statements requires management to make estimates and assumptions that affect amounts reported in the consolidated financial statements. The accounting estimates reflect the best judgment of management, but actual results could differ materially from those estimates.

The accompanying condensed consolidated financial statements include the accounts of Air Transport Services Group, Inc. and its wholly-owned subsidiaries. Investments in an affiliate in which the Company has significant influence but does not exercise control are accounted for using the equity method of accounting. Using the equity method, the Company’s share of the nonconsolidated affiliate's income or loss is recognized in the consolidated statement of earnings and cumulative post-acquisition changes in the investment are adjusted against the carrying amount of the investment. Inter-company balances and transactions are eliminated.

ASU 2014-09 is a comprehensive new revenue recognition model that requires a company to recognize revenue to depict the transfer of goods or services to a customer at an amount that reflects the consideration it expects to receive in exchange for those goods or services. ASU 2014-09 also requires additional disclosure about the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts, including significant judgments and changes in judgments and assets recognized from costs incurred to obtain or fulfill a contract. ASU 2014-09 is effective for annual reporting periods beginning after December 15, 2017 with earlier adoption permitted for reporting periods beginning after December 15, 2016. ASU 2014-09 may be applied using either a full retrospective approach, under which all years included in the financial statements will be presented under the revised guidance, or a modified retrospective approach, under which financial statements will be prepared under the revised guidance for the year of adoption, but not for prior years. Under the latter method, entities would recognize a cumulative catch-up adjustment to the opening balance of retained earnings at the effective date for contracts that still require performance by the entity, and disclose all line items in the year of adoption as if they were prepared under the old revenue guidance.

The Company is currently evaluating the methods of adoption allowed by the new standard and the effect the standard is expected to have on the Company's consolidated financial position, results of operations or cash flows and related disclosures. The evaluation includes each of the five steps identified in the ASU 2014-09 revenue recognition model, which are as follows: 1) identify the contract with the customer; 2) identify the performance obligations in the contract; 3) determine the transaction price; 4) allocate the transaction price to the performance obligations; and 5) recognize revenue when (or as) performance obligations are satisfied. The Company's lease contracts within the scope of ASC 840, Leases, are specifically excluded from ASU 2014-09. As the Company completes its evaluation of this new standard, new information may arise that could change the Company's current understanding of the impact to revenue and expense recognized. Additionally, industry activities and other guidance provided by regulators, standards setters, and the accounting profession may affect the Company’s assessment and implementation plans.

In July 2015, FASB issued ASU "Inventory (Topic 330): Simplifying the Measurement of Inventory" ("ASU 2015-11"). ASU 2015-11 more closely aligns the measurement of inventory in GAAP with the measurement of inventory in International Financial Reporting Standards ("IFRS"). The amendment in ASU 2015-11 is for fiscal years beginning after December 15, 2016, and interim periods within fiscal years beginning after December 15, 2017. The amendment should be applied prospectively with earlier application permitted as of the beginning of an interim or annual reporting period. The Company does not expect the impact of adopting ASU 2015-11 to be material to the Company's financial statements and related disclosures.

In March 2017, the FASB issued ASU "Compensation - Retirement Benefits (Topic 715): Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost" (ASU 2017-07"). ASU 2017-07 requires an employer to report the service cost component of retiree benefits in the same line item or items as other compensation costs arising from services rendered by the pertinent employees during the period. The other components of net benefit cost would be presented in the income statement separately from the service cost component and outside a subtotal of income from operations, if one is presented. The standard is effective for annual periods beginning after December 15, 2017 and should be applied retrospectively. The Company anticipates the standard will impact the Operating Income subtotal as reported in the Company's Consolidated Statement of Operations by excluding interest expense, investment returns and other non service cost components of retiree benefit expenses. Information about interest expense, investment returns and other components of retiree benefit expenses can be found in Note H.

In February 2016, the FASB issued ASU "Leases (Topic 842)" ("ASU 2016-02"), which will require the recognition of right to-use-assets and lease liabilities for leases previously classified as operating leases by lessees. The standard will take effect for annual reporting periods beginning after December 15, 2018, including interim reporting periods. Early application will be permitted for all entities. In addition, the FASB has decided to require a lessee to apply a modified retrospective transition approach for capital and operating leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements (the date of initial application). The modified retrospective approach would not require any transition accounting for leases that expired before the date of initial application. The FASB decided to not permit a full retrospective transition approach. The Company is currently evaluating the impact of the standard on its financial statements and disclosures.

In August 2016, the FASB issued ASU 2016-15, "Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments" ("ASU 2016-15"). ASU 2016-15 clarifies how cash receipts and cash payments in certain transactions are presented and classified in the statement of cash flows. The effective date of this update is for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2017, with early adoption permitted. The update requires retrospective application to all periods presented but may be applied prospectively if retrospective application is impracticable. The Company is currently evaluating the impact of the adoption of the standard on the its financial statements and disclosures.

In November 2016, the FASB issued ASU "Statement of Cash Flows (Topic 230): Restricted Cash" ("ASU 2016-18"). ASU 2016-18 requires that the statement of cash flows explain the changes in the combined total of restricted and unrestricted cash balance. Amounts generally described as restricted cash or restricted cash equivalents will be combined with unrestricted cash and cash equivalents when reconciling the beginning and end of period balances on the statement of cash flows. Further, the ASU requires a reconciliation of balances from the statement of cash flows to the balance sheet in situations in which the balance sheet includes more than one line item of cash, cash equivalents, and restricted cash. Companies will also be disclosing the nature of the restrictions. ASU 2016-18 is effective for financial statements issued for fiscal years beginning after December 15, 2017. The Company is currently evaluating the impact of the standard on its financial statements and disclosures.

In January 2017, the FASB issued ASU "Intangibles - Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment" ("ASU 2017-04"). ASU 2017-04 will simplify the subsequent measurement of goodwill by eliminating the second step from the goodwill impairment test. ASU 2017-04 would require applying a one-step quantitative test and recording the amount of goodwill impairment as the excess of the reporting unit's carrying value over its fair value, not to exceed the total amount of goodwill allocated to the reporting unit. ASU 2017-04 does not amend the optional qualitative assessment of goodwill impairment. The amendments in ASU 2017-04 are effective for annual or any interim goodwill impairment tests for fiscal years beginning after December 15, 2019. Early adoption is permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017. The Company is currently evaluating the impact of the standard on its financial statements and disclosures.

The Company has had long term contracts with DHL Network Operations (USA), Inc. and its affiliates ("DHL") since August 2003. Revenues from aircraft leases and related services performed for DHL were approximately 26% and 36% of the Company's consolidated revenues from continuing operations for the three month periods ending March 31, 2017 and 2016, respectively. The Company’s balance sheets include accounts receivable with DHL of $6.1 million and $7.3 million as of March 31, 2017 and December 31, 2016, respectively.

The Company leases 16 Boeing 767 aircraft to DHL under both long-term and short-term lease agreements. Under a separate crew, maintenance and insurance (“CMI”) agreement, the Company operates Boeing 767 aircraft that DHL leases from the Company. Pricing for services provided through the CMI agreement 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 Company provides DHL with scheduled maintenance services for aircraft that DHL leases. The Company also provides Boeing 767 and Boeing 757 air cargo transportation services for DHL through additional ACMI agreements in which the Company provides the aircraft, crews, maintenance and insurance under a single contract. Revenues generated from the ACMI agreements are typically based on hours flown. The Company also provides ground equipment, such as power units, air starts and related maintenance services to DHL under separate agreements.

of hub and gateway services by the Company's subsidiary LGSTX Services Inc. ("LGSTX"). CAM owns all of the Boeing 767 aircraft that are or will be leased and operated under the ATSA. The ATSA became effective on April 1, 2016. As of March 31, 2017, the Company has leased 16 aircraft to AFS and is obligated to lease four more Boeing 767-300 aircraft to AFS during 2017 to meet its 20 aircraft commitment.

Revenues from aircraft leases and related services performed for AFS comprised approximately 41% and 19% of the Company's consolidated revenues from continuing operations for the three month periods ending March 31, 2017 and 2016, respectively. The Company’s balance sheets include accounts receivable with AFS of $32.9 million and $24.6 million as of March 31, 2017 and December 31, 2016, respectively.

In conjunction with the execution of the ATSA, the Company and Amazon entered into an Investment Agreement and a Stockholders Agreement on March 8, 2016. The Investment Agreement calls for the Company to issue warrants in three tranches which will grant Amazon the right to acquire up to 19.9% of the Company’s outstanding common shares as described below. The first tranche of warrants, issued upon execution of the Investment Agreement, grants Amazon the right to purchase approximately 12.81 million ATSG common shares, with the right to purchase 7.69 million common shares which vested upon issuance on March 8, 2016 and the right to purchase the remaining 5.12 million common shares, vesting as the Company delivers additional aircraft leased under the ATSA, or as the Company achieves specified revenue targets in connection with the ATSA. The second tranche of warrants grants Amazon a right to purchase approximately 1.59 million ATSG common shares, and will be issued on March 8, 2018. The third tranche of warrants will be issued on September 8, 2020. The third tranche of warrants will grant Amazon the right to purchase such additional number of ATSG common shares as is necessary to bring Amazon’s ownership to 19.9% of the Company’s pre-transaction outstanding common shares measured on a GAAP-diluted basis, adjusted for share issuances and repurchases by the Company following the date of the Investment Agreement and after giving effect to the warrants granted. The exercise price of the warrants will be $9.73 per share, which represents the closing price of ATSG’s common shares on February 9, 2016. Each of the three tranches of warrants will be exercisable in accordance with its terms through March 8, 2021. The Company anticipates making available the common shares required for the underlying warrants through a combination of share repurchases and the issuance of additional shares.

The Company’s accounting for the warrants has been determined in accordance with the financial reporting guidance for equity-based payments to non-employees and for financial instruments. During the first quarter of 2017, 1.3 million additional warrants vested in conjunction with the execution of two aircraft leases. As of March 31, 2017, the Company's liabilities reflected 12.34 million warrants having a fair value of $7.93 per share. As of March 31, 2017, the re-measurements of the warrants to fair value resulted in a non-operating gain of $1.7 million before the effect of income taxes. As of March 31, 2017, an additional 2.6 million warrants are expected to vest as AFS leases four aircraft from the Company.

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 7% and 15% of the Company's total revenues from continuing operations for the three month periods ending March 31, 2017 and 2016, respectively. The Company's balance sheets included accounts receivable with the U.S. Military of $5.7 million and $7.0 million as of March 31, 2017 and December 31, 2016, respectively.

On December 30, 2016, the Company purchased 100% of the outstanding stock of Pemco World Air Inc., ("Pemco") for cash consideration in a debt-free acquisition. The purchase price has been allocated to tangible and identifiable intangible assets acquired and liabilities assumed based on their estimated fair values at the date of acquisition. The excess purchase price over the estimated fair value of net assets acquired was recorded as goodwill and reflects the strategic value of marketing Pemco's aircraft conversion capabilities and current aircraft hangar operations with the

Company's air transportation solutions. Identified intangible assets include Supplemental Type Certificates ("STCs") granting approval by FAA for Pemco to market and complete certain aircraft modifications. The Company is in process of refining its estimates of certain assets including goodwill and intangible assets, therefore the allocation of purchase price is preliminary at this time.

In January 2014, the Company acquired a 25 percent equity interest in West Atlantic AB of Gothenburg, Sweden ("West"). West, through its two airlines, Atlantic Airlines Ltd. and West Air Sweden AB, operates a fleet of aircraft on behalf of European regional mail carriers and express logistics providers. The airlines operate a combined fleet of British Aerospace ATPs, Bombardier CRJ-200-PFs, and Boeing 767 and 737 aircraft. West leases three Boeing 767 aircraft from the Company. The Company accounts for West using the equity method of accounting. The Company’s carrying value of West was $9.3 million and $9.9 million at March 31, 2017 and December 31, 2016, respectively, including $5.5 million of excess purchase price over the Company's fair value of West's net assets in January of 2014. The carrying value is reflected in “Other Assets” in the Company’s consolidated balance sheets.

The Company’s money market funds and interest rate swaps are reported on the Company’s consolidated balance sheets at fair values based on market values from identical or comparable transactions. The fair value of the Company’s money market funds, stock warrants and interest rate swaps are based on observable inputs (Level 2) from comparable market transactions. The fair value of the stock warrant obligation was determined using a Black-Scholes pricing model which considers the Company’s common stock price and various assumptions, such as the volatility of the Company’s common stock, the expected dividend yield, and the risk-free interest rate. The use of significant unobservable inputs (Level 3) was not necessary in determining the fair value of the Company’s financial assets and liabilities.



As of March 31, 2017	Fair Value Measurement Using							Total
	Level 1		Level 2			Level 3		Total
Assets
Cash equivalents—money market	$	—	$	6,482		$	—	$	6,482
Interest rate swap	—		697			—		697
Total Assets	$	—	$	7,179		$	—	$	7,179
Liabilities
Interest rate swap	$	—	$	(17	)	$	—	$	(17	)
Stock warrant obligation	—		(97,831		)	—		(97,831		)
Total Liabilities	$	—	$	(97,848	)	$	—	$	(97,848	)



As of December 31, 2016	Fair Value Measurement Using							Total
	Level 1		Level 2			Level 3		Total
Assets
Cash equivalents—money market	$	—	$	482		$	—	$	482
Interest rate swap	—		547			—		547
Total Assets	$	—	$	1,029		$	—	$	1,029
Liabilities
Interest rate swap	$	—	$	(77	)	$	—	$	(77	)
Stock warrant obligation	—		(89,441		)	—		(89,441		)
Total Liabilities	$	—	$	(89,518	)	$	—	$	(89,518	)

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 $4.9 million more than the carrying value, which was $508.4 million at March 31, 2017. As of December 31, 2016, the fair value of the Company’s debt obligations was approximately $0.2 million more than the carrying value, which was $458.7 million. The non-financial assets, including goodwill, intangible assets and property and equipment are measured at fair value on a non-recurring basis.

The Company executed a syndicated credit agreement ("Senior Credit Agreement") in May 2011 which includes an unsubordinated term loan and a revolving credit facility. Effective March 31, 2017, the Company executed an amendment to the Senior Credit Agreement (the "Seventh Credit Agreement"). The Seventh Credit Agreement extended the maturity of the term loan and revolving facility to May 30, 2022, increased the capacity of the Revolving credit facility by $120.0 million to $545.0 million and preserved the accordion feature such that the Company can still draw up to an additional $100.0 million subject to the lenders' consent. Each year, through May 6, 2019, the Company may request a one year extension of the final maturity date, subject to the lenders' consent. The revolving credit facility has permitted additional indebtedness of $150.0 million. Under the terms of the Senior Credit Agreement, the Company is required to maintain collateral coverage equal to 125% of the outstanding balances of the term loan and the maximum capacity of revolving credit facility or 150% of the outstanding balance of the term loan and the total funded revolving credit facility, whichever is less. The minimum collateral coverage which must be maintained is 50% of the outstanding balance of the term loan plus the revolving credit facility commitment which was $545.0 million.

The balances of the unsubordinated term loan are net of debt issuance costs of $0.7 million and $0.6 million for the periods ending March 31, 2017 and December 31, 2016, respectively. 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 2.99% and 2.99%, respectively. The Senior Credit Agreement provides for the issuance of letters of credit on the Company's behalf. As of March 31, 2017, the unused revolving credit facility totaled $121.1 million, net of draws of $415.0 million and outstanding letters of credit of $8.9 million.

The Senior Credit Agreement is collateralized by certain of the Company's Boeing 767 and 757 aircraft that are not collateralized under aircraft loans. 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 Senior Credit Agreement limits the amount of dividends the Company can pay and the amount of common stock it can repurchase to $75.0 million during any calendar year, provided the Company's total debt to EBITDA ratio is under 2.75 times, after giving effect to the dividend or repurchase.

The Company leases portions of the air park in Wilmington, Ohio, under lease agreements with a regional port authority, the terms of which expire in May of 2019 and June of 2036 with options to extend the leases. The leased facilities include corporate offices, 310,000 square feet of maintenance hangars and a 100,000 square foot component repair shop at the air park. ABX also has the non-exclusive right to use the airport, which includes one active runway, taxi ways and ramp space. The Company also leases and operates a 311,500 square foot, two hangar aircraft maintenance complex in Tampa, Florida. Additionally, the Company leases certain equipment and airport facilities, office space, maintenance facilities at locations outside of the airpark in Wilmington.

The Company has agreements with Israel Aerospace Industries Ltd. ("IAI") for the conversion of Boeing 767 passenger aircraft into a standard configured freighter aircraft. The conversions primarily consist of the installation of a standard cargo door and loading system. At March 31, 2017, the Company was committed to acquire and modify additional Boeing 767-300 passenger aircraft into standard freighter aircraft. In addition to six Boeing 767-300 aircraft that were in the modification process at March 31, 2017, the Company is committed to induct eight more aircraft into the freighter modification process through 2018. As of March 31, 2017, the Company's commitments to complete the conversions of aircraft it owns or has the contracts to purchase totaled $163.7 million. Additionally, the Company could incur a cancellation fee for part kits for any aircraft that is not inducted into conversion at IAI.

Certain leases and agreements of the Company contain guarantees and 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.

In September 2015, the Company entered into a joint venture agreement to establish an express cargo airline serving multiple destinations within the People's Republic of China (including Hong Kong, Macau and Taiwan) and surrounding countries. The airline will be based in mainland China with registered capital of 400 million RMB (US$63 million). It will be established pending the receipt of required governmental approvals and plans to commence flight operations in 2017. The Company may offer the new airline aircraft leases to build its fleet. The Company expects to contribute $15 million to the joint venture over the next twelve months.

In addition to the foregoing matters, the Company is also currently a party to legal proceedings, including FAA enforcement actions, in various federal and state jurisdictions arising out of the operation of the Company's business. The amount of alleged liability, if any, from these proceedings cannot be determined with certainty; however, the Company believes that its ultimate liability, if any, arising from the pending legal proceedings, as well as from asserted

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. Benefits for covered individuals terminate upon reaching age 65 under the post-retirement healthcare plans.

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. Effective December 31, 2016, ABX modified its unfunded, non-pilot retiree medical plan to terminate benefits to all participants. Retired participants were directed to public healthcare exchanges for more flexible and lower cost alternatives. As a result, ABX settled all retiree medical obligations.



	Three Months Ended March 31,
	Pension Plans						Post-Retirement Healthcare Plan
	2017			2016			2017			2016
Service cost	$	—		$	—		$	39		$	31
Interest cost	8,775			8,968			36			42
Expected return on plan assets	(10,930		)	(10,264		)	—			—
Amortization of prior service cost	—			—			(13		)	(26		)
Amortization of net loss	1,937			3,368			71			40
Net periodic benefit (income) cost	$	(218	)	$	2,072		$	133		$	87

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 tax expense recorded through March 31, 2017 utilized a 38.7% rate based upon year-to-date income and projected results for the full year. Additionally, the Company recorded discrete tax items for the conversion of employee stock awards and the issuance of stock warrants during the first quarter of 2017, resulting in an effective tax rate of 39.2%. The final effective tax rate applied to 2017 will depend on the actual amount of pre-tax book earnings by the Company for the full year, the additional conversions of employee stock awards, issuance of stock warrants and other items.

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. Due to the Company's deferred tax assets, including its loss carryforwards, management does not expect to pay federal income taxes until 2019 or later. The Company may, however, be required to pay alternative minimum taxes and certain state and local income taxes before then.

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 the term loan. Accordingly, the Company entered into interest rate swaps. The Company entered into a new interest rate swap in February 2017 having an initial value of $39.4 million and a forward start date of June 30, 2017. Under this swap, the Company pays a fixed rate of 1.703% and receives a floating rate that resets monthly based on LIBOR. The table below provides information about the Company’s interest rate swaps (in thousands):

The outstanding interest rate swaps are not designated as hedges 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 Company recorded the net effects on derivatives of a $0.2 million gain and a $0.1 million loss for the three month periods ending March 31, 2017 and 2016, respectively. The liability for outstanding derivatives is recorded in other liabilities and in accrued expenses.



	Defined Benefit Pension		Defined Benefit Post-Retirement		Foreign Currency Translation		Total
Balance as of December 31, 2015	(97,302	)	(315	)	(1,395	)	(99,012	)
Other comprehensive income (loss) before reclassifications:
Foreign currency translation adjustment	—		—		392		392
Amounts reclassified from accumulated other comprehensive income:
Actuarial costs (reclassified to salaries, wages and benefits)	3,368		40		—		3,408
Negative prior service cost (reclassified to salaries, wages and benefits)	—		(26	)	—		(26	)
Income tax expense	(1,222	)	(5	)	(135	)	(1,362	)
Other comprehensive income, net of tax	2,146		9		257		2,412
Balance as of March 31, 2016	(95,156	)	(306	)	(1,138	)	(96,600	)



	Defined Benefit Pension		Defined Benefit Post-Retirement		Foreign Currency Translation		Total
Balance as of December 31, 2016	(77,088	)	(1,301	)	(1,477	)	(79,866	)
Other comprehensive income (loss) before reclassifications:
Foreign currency translation adjustment	—		—		58		58
Amounts reclassified from accumulated other comprehensive income:
Actuarial costs (reclassified to salaries, wages and benefits)	1,937		71		—		2,008
Negative prior service cost (reclassified to salaries, wages and benefits)	—		(13	)	—		(13	)
Income tax expense	(703	)	(21	)	(21	)	(745	)
Other comprehensive income, net of tax	1,234		37		37		1,308
Balance as of March 31, 2017	(75,854	)	(1,264	)	(1,440	)	(78,558	)

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 and in May 2015. 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 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 vesting periods of approximately six or twelve months. The Company expects to settle all of the stock unit awards by issuing new shares of stock. The table below summarizes award activity.



	Three Months Ended
	March 31, 2017				March 31, 2016
	Number of Awards		Weighted average grant-date fair value		Number of Awards		Weighted average grant-date fair value
Outstanding at beginning of period	1,040,569		$	9.97	1,157,659		$	7.52
Granted	243,940		17.52		294,060		15.43
Converted	(173,210	)	9.69		(160,500	)	7.20
Expired	—		—		—		—
Forfeited	(3,800	)	13.66		—		—
Outstanding at end of period	1,107,499		$	11.66	1,291,219		$	9.37
Vested	324,599		$	6.39	338,919		$	6.12

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 2017 was $16.72, 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 2017 was $20.18. The market condition awards were valued using a Monte Carlo simulation technique, a risk-free interest rate of 1.7% and a volatility of 34.7% based on volatility over three years using daily stock prices.

For the three month periods ending March 31, 2017 and 2016, the Company recorded expense of $0.8 million and $0.7 million, respectively, for stock incentive awards. At March 31, 2017, there was $6.5 million of unrecognized expense related to the stock incentive awards that is expected to be recognized over a weighted-average period of 1.8 years. As of March 31, 2017, none of the awards were convertible, 324,599 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 1,360,474 additional outstanding shares of the Company’s common stock depending on service, performance and market results through December 31, 2019.



	Three Months Ending March 31,
	2017			2016
Numerator:
Earnings from continuing operations - basic	$	9,796		$	8,171
Gain from stock warrant revaluation, net of tax	(1,539		)	—
Earnings from continuing operations - diluted	$	8,257		$	8,171

Denominator:
Weighted-average shares outstanding - basic	59,133			63,636
Common equivalent shares:
Effect of stock-based compensation awards	684			809
Effect of stock warrants	5,132			612
Weighted-average shares outstanding assuming dilution	64,949			65,057

Basic earnings per share from continuing operations	$	0.17		$	0.13
Diluted earnings per share from continuing operations	$	0.13		$	0.13

The determination of diluted earnings per share requires the exclusion of the fair value re-measurement of the stock warrants recorded as a liability (see Note B), if such warrants have a anti-dilutive effect on earnings per share. The dilutive effect of the weighted-average shares outstanding was calculated using the treasury method. Under this method, the number of diluted shares is determined by dividing the assumed proceeds of the warrants by the average stock price during the period and comparing that amount with the number of warrants outstanding. The underlying warrants as of March 31, 2017, could result in 12.3 million additional shares of the Company's common stock if the warrants are settled by tendering cash. 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 none and none during the three month periods ending March 31, 2017 and 2016, respectively.

The Company operates in two reportable segments. 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 CMI agreements as well as ACMI and charter service agreements that the Company has with 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 mail and parcel handling services, as well as hub managements services for the USPS and AFS, the sale of aircraft parts, aircraft maintenance services, aircraft modifications, facility and ground equipment services, the sales of aviation fuel and other services, are not large enough to 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 and cash equivalents are reflected in Assets - All other below.



	Three Months Ending March 31,
	2017			2016
Total revenues:
CAM	$	47,978		$	51,726
ACMI Services	144,949			114,956
All other	89,206			55,011
Eliminate inter-segment revenues	(44,216		)	(44,308		)
Total	$	237,917		$	177,385
Customer revenues:
CAM	$	30,782		$	28,761
ACMI Services	144,949			114,956
All other	62,186			33,668
Total	$	237,917		$	177,385
Depreciation and amortization expense:
CAM	$	24,301		$	22,730
ACMI Services	11,072			9,544
All other	1,069			260
Total	$	36,442		$	32,534
Segment earnings (loss):
CAM	$	13,330		$	19,510
ACMI Services	(3,705		)	(10,356		)
All other	4,783			3,868
Net unallocated interest expense	(171		)	(346		)
Net gain (loss) on financial instruments	1,869			(528		)
Pre-tax earnings from continuing operations	$	16,106		$	12,148

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 condensed consolidated financial statements and the related notes prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP") contained in this report and our Annual Report on Form 10-K for the year ended December 31, 2016.

The Company leases aircraft, provides air cargo lift and performs aircraft maintenance and other support services primarily to the air cargo transportation and package delivery industries. Through the Company's subsidiaries, we offer a range of complementary services to delivery companies, freight forwarders, e-commerce operators, airlines and government customers. The Company's principal subsidiaries include two independently certificated airlines, ABX Air, Inc. (“ABX”) and Air Transport International, Inc. (“ATI”), and an aircraft leasing company, Cargo Aircraft Management, Inc. (“CAM”). CAM provides competitive aircraft lease rates by converting passenger aircraft into cargo freighters and offering them to customers under long-term leases.

The Company has two reportable segments: CAM, which leases Boeing 767 and Boeing 757 aircraft and aircraft engines, and ACMI Services, which primarily includes the cargo transportation operations of the Company's two airlines. The ACMI Services segment provides airline operations to its customers, typically under contracts providing for a combination of aircraft, crews, maintenance and insurance ("ACMI"). The Company's other business operations, which primarily provide support services to the transportation industry, include aircraft maintenance, aircraft parts sales, ground and material handling equipment maintenance and mail handling services. These operations do not constitute reportable segments due to their size.

The Company has had long-term contracts with DHL Network Operations (USA), Inc. and its affiliates ("DHL") since August 2003. DHL accounted for 26% of the Company's consolidated revenues for the first three months of 2017, compared with 36% of the Company's consolidated revenues in the corresponding period in 2016. As of March 31, 2017, the Company, through CAM, leased 16 Boeing 767 aircraft to DHL, 13 of which were being operated by the Company's airlines for DHL under a crew, maintenance and insurance ("CMI") agreement. Additionally, the airlines operated four CAM-owned Boeing aircraft under other operating arrangements with DHL.

The Company has been providing freighter aircraft and services for cargo handling and logistical support for Amazon Fulfillment Services, Inc. ("AFS"), a subsidiary of Amazon.com, Inc. ("Amazon") since September 2015. On March 8, 2016, the Company entered into an Air Transportation Services Agreement (the “ATSA”) with AFS pursuant to which CAM will lease 20 Boeing 767 freighter aircraft to AFS, including 12 Boeing 767-200 freighter aircraft for a term of five years and eight Boeing 767-300 freighter aircraft for a term of seven years. As of March 31, 2017, the Company, through CAM, leased 12 Boeing 767-200 freighter aircraft and four Boeing 767-300 freighter aircraft to AFS. The ATSA, which has a term of five years, also provides for the operation of those aircraft by the Company’s airline subsidiaries, and the performance of hub and gateway services by the Company's subsidiary, LGSTX Services, Inc. ("LGSTX"). CAM owns all of the Boeing 767 aircraft that will be leased and operated under the ATSA. The ATSA became effective on April 1, 2016.

common shares measured on a GAAP-diluted basis, adjusted for share issuances and repurchases by the Company following the date of the Investment Agreement and after giving effect to the warrants granted. The exercise price of the warrants is $9.73 per share, which represents the closing price of ATSG’s common shares on February 9, 2016. Warrants vest as AFS leases aircraft from us, up to 20 aircraft. Each of the three tranches of warrants will be exercisable in accordance with its terms through March 8, 2021.

The Company’s accounting for the warrants has been determined in accordance with the financial reporting guidance for equity-based payments to non-employees and for financial instruments. The fair value of the warrants issuable to Amazon is recorded as a lease incentive asset and is amortized against revenues over the duration of the aircraft leases. The warrants are accounted for as financial instruments, and accordingly, the fair value of the outstanding warrants are measured and classified in liabilities at the end of each reporting period. The Company's earnings in future periods will be impacted by the number of warrants granted, the fair value re-measurement of warrants at the end of each period, lease incentive amortizations and the related income tax effects. For income tax calculations, the value and timing of related tax deductions will likely differ from the guidance described above for financial reporting. For additional information about the accounting for the warrants, see Note B to the accompanying unaudited condensed consolidated financial statements.

As of March 31, 2017, the combined operating fleet of owned freighter aircraft consisted of 36 Boeing 767-200 aircraft, 17 Boeing 767-300 aircraft, four Boeing 757-200 aircraft and four Boeing 757 "combi" aircraft. The Boeing 757 combi aircraft are capable of simultaneously carrying passengers and cargo containers on the main flight deck. At March 31, 2017, the Company owned nine Boeing 767-300 aircraft and one Boeing 737-400 that were either already undergoing or awaiting induction into the freighter conversion process.



	March 31, 2017			December 31, 2016
	ACMI Services	CAM	Total	ACMI Services	CAM	Total
In-service aircraft
Aircraft owned
Boeing 767-200	6	29	35	6	29	35
Boeing 767-300	3	14	17	4	12	16
Boeing 757-200	4	—	4	4	—	4
Boeing 757-200 Combi	4	—	4	4	—	4
Total	17	43	60	18	41	59
Other aircraft
Owned Boeing 767-300 under modification	—	9	9	—	7	7
Owned Boeing 737-400 under modification	—	1	1	—	—	—
Owned Boeing 767 available or staging for lease	—	1	1	—	1	1

As of March 31, 2017, ABX and ATI were leasing 17 in-service aircraft internally from CAM for use in ACMI Services. As of March 31, 2017, seven of CAM's 29 Boeing 767-200 aircraft shown in the aircraft fleet table above and six of the 14 Boeing 767-300 aircraft were leased to DHL and operated by ABX. Additionally, twelve of CAM's 29 Boeing 767-200 aircraft and four of CAM's 14 Boeing 767-300 aircraft were leased to AFS and operated by ABX or ATI. CAM leased the other ten Boeing 767-200 aircraft and four Boeing 767-300 aircraft to external customers, including three Boeing 767-200 aircraft to DHL that are being operated by a DHL-owned airline. The carrying values of the total in-service fleet as of March 31, 2017 was $791.1 million compared to $793.9 million as of December 31, 2016. The table above does not reflect one Boeing 767-200 passenger aircraft owned by CAM.

External customer revenues from continuing operations increased by $60.5 million to $237.9 million during the first quarter of 2017 compared to 2016. Excluding directly reimbursed revenues, customer revenues increased $37.0 million, or 23% during the first quarter of 2017 compared with 2016. External customer revenues increased for the first quarter of 2017 compared to 2016 due to additional aircraft leases, expanded ACMI services for AFS, additional aircraft maintenance services and additional logistics services, also for AFS.

The consolidated net earnings from continuing operations were $9.8 million for the first quarter of 2017 compared to $8.2 million for 2016. The pre-tax earnings from continuing operations were $16.1 million for the first quarter of 2017 compared to $12.1 million, for 2016. Earnings were affected by specific events and certain adjustments that do not directly reflect our underlying operations among the years presented. On a pre-tax basis, earnings included net gains of $1.9 million and net losses of $0.5 million for the first quarters of 2017 and 2016, respectively, for the re-measurement of financial instruments, including warrant obligations granted to Amazon, to fair value. Pre-tax earnings for the first quarter of 2017 were also reduced by $2.6 million for the amortization of lease incentives given to AFS in the form of warrants. Additionally, pre-tax earnings from continuing operations included $0.2 million and $2.2 million for the first quarters of 2017 and 2016, respectively, for the non-service component of retiree benefit plan costs. Pre-tax earnings for the first quarter of 2016 also included a $1.2 million charge for the Company's share of capitalized debt issuance costs that were charged off when West Atlantic AB, a non-consolidated affiliate, restructured its debt. After removing the effects of these items, adjusted pre-tax earnings from continuing operations, a non-GAAP measure (a definition and reconciliation of adjusted pre-tax earnings from continuing operations follows) were $17.0 million for the first quarter of 2017 compared to $16.1 million for 2016.



	Three Months Ending March 31,
	2017			2016
Revenues from Continuing Operations:
CAM
Aircraft leasing and related revenues	$	50,569		$	51,726
Lease amortization against revenue	(2,591		)	—
Total CAM	47,978			51,726
ACMI Services
Airline services	108,066			101,653
Reimbursable	36,883			13,303
Total ACMI Services	144,949			114,956
Other Activities	89,206			55,011
Total Revenues	282,133			221,693
Eliminate internal revenues	(44,216		)	(44,308		)
Customer Revenues	$	237,917		$	177,385


Pre-Tax Earnings from Continuing Operations:
CAM, inclusive of interest expense	$	13,330		$	19,510
ACMI Services	(3,705		)	(10,356		)
Other Activities	4,783			3,868
Net unallocated interest expense	(171		)	(346		)
Net financial instrument re-measurement (loss) gain	1,869			(528		)
Pre-Tax Earnings from Continuing Operations	16,106			12,148
Add other non-service components of retiree benefit costs, net	177			2,203
Add debt issuance costs from non-consolidating affiliate	—			1,229
Add lease incentive amortization	2,591			—
Add net loss (gain) on financial instruments	(1,869		)	528
Adjusted Pre-Tax Earnings from Continuing Operations	$	17,005		$	16,108

Adjusted pre-tax earnings from continuing operations, a non-GAAP measure, is pre-tax earnings excluding non-service components of retiree benefit costs, gains and losses for the fair value re-measurement of financial instruments, lease incentive amortizations and the charge off of debt issuance costs from a non-consolidated affiliate during the first quarter of 2016. We exclude these items from adjusted pre-tax earnings because they are distinctly different in their predictability or not closely related to our on-going operating activities. Management uses adjusted pre-tax earnings to compare the performance of core operating results between periods. Presenting this measure provides investors with a comparative metric of fundamental operations while highlighting changes to certain items among 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 offers aircraft leasing and related services to external customers and also leases aircraft internally to the Company's airlines. CAM acquires passenger aircraft and manages the modification of the aircraft into freighters. The follow-on aircraft leases normally cover a term of five to eight years. In a typical leasing agreement, customers pay rent and maintenance deposits on a monthly basis.

As of March 31, 2017, CAM had a fleet of 61 cargo aircraft in service condition, 17 of them leased internally to the Company's airlines, 43 leased to external customers and one that was being prepared for operations. One Boeing 767-300 passenger aircraft previously purchased, completed its modification to a freighter configuration and was leased to an external customer in March under a long-term contract. CAM has added five aircraft to its operating fleet since April 1, 2016.

CAM's revenues decreased $3.7 million during the first quarter of 2017 compared to 2016, primarily as a result of the amortization of the value of warrants issued to Amazon as a lease incentive. Revenues from external customers increased $2.0 to $30.8 million for the first quarter of 2017 compared to 2016, driven by additional aircraft leases. As of March 31, 2017 and 2016, CAM had 43 and 29 aircraft under lease to external customers, respectively. CAM's revenues from the Company's airlines declined to $17.2 million during the first quarter of 2017, compared to $23.0 million for 2016, reflecting the transition of CAM owned aircraft to long-term leases with external customers. Revenue levels for the first quarter of 2017 also included reductions in maintenance revenues, spare engine leasing, parts sales, and temporary revenue interruptions while transitioning aircraft between customers, compared to 2016.

CAM's pre-tax earnings, inclusive of an interest expense allocation, were $13.3 million and $19.5 million during the first quarters of 2017 and 2016, respectively. Decreased earnings reflect higher depreciation expense for additional Boeing 767-300 aircraft, increased interest allocation due to the higher debt levels and the amortization of the value of warrants issued to Amazon as a lease incentive.

During the first quarter of 2017, CAM purchased three 767-300 passenger aircraft for freighter conversion. As of March 31, 2017, all three of these Boeing 767-300 passenger aircraft and six Boeing 767-300 passenger aircraft purchased in 2016 were being modified from passenger to freighter configuration. The Company also purchased one Boeing 737-400 during the first quarter of 2017, and that aircraft was being modified from passenger to freighter configuration.

CAM's agreement to lease 20 Boeing 767 freighter aircraft to AFS includes 12 Boeing 767-200 freighter aircraft for a term of five years and eight Boeing 767-300 freighter aircraft for a term of seven years. Leases for six of these aircraft began in April 2016 and twelve more were executed as of May 1, 2017. To fulfill the 20 aircraft requirement for AFS, CAM plans to lease the last two Boeing 767-300 freighter aircraft to AFS by mid-2017, each for a seven year term.

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, certain aircraft maintenance expenses and fuel procured directly by the airline. 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 March 31, 2017, ACMI Services included 46 in-service aircraft, including 17 leased internally from CAM, 13 CAM-owned freighter aircraft which are under lease to DHL and operated by ABX under a CMI agreement, and 16 CAM-owned freighter aircraft which are under lease to AFS and operated by ATI and ABX under the ATSA.

Revenues from ACMI Services increased $30.0 million during the first quarter of 2017 compared with 2016 to $144.9 million. Airline services revenues from external customers, which do not include revenues for the reimbursement of fuel and certain operating expenses, increased $6.4 million. Improved revenues were driven by additional aircraft operations for AFS and reflect an 29% increase in billable block hours. As of March 31, 2017, ACMI Services were operating six more CAM-owned aircraft compared to March 31, 2016. Beginning in April 2016, in conjunction with the long-term leases executed between AFS and CAM, the related aircraft rent revenues for five aircraft operated for AFS during the first quarter of 2016 are reflected under CAM instead of ACMI Services.

fewer scheduled airframe maintenance events during the first quarter of 2017 and decreased pension expenses. Scheduled airframe maintenance expense decreased $2.2 million during the first quarter of 2017 compared to 2016. Airframe maintenance expense varies depending upon the number of C-checks and the scope of the checks required for those airframes scheduled for maintenance. Pension expense for ACMI Services, including the non-service components of retiree benefit costs, decreased $2.0 million as actuarially determined for the first quarter of 2017, compared to 2016. Operating results for ACMI Services were negatively impacted by increased depreciation expense for four additional Boeing 767-300 aircraft in operation and reductions in CMI operations for DHL compared to 2016.

In May 2017, we added two CAM-owned Boeing 767-300 aircraft into ACMI Service for AFS and we expect to add two more by mid-2017, as the aircraft freighter modifications are completed. Additionally, we expect the level of cost related to new crew training and ramp-up, which was $4.1 million during the first quarter of 2017, to decline in the second quarter of 2017. Achieving profitability in ACMI Services will depend on a number of factors, including revenue levels for airline services, crewmember training costs, crewmember productivity, the level of pilot premium pay, employee benefits, aircraft maintenance schedules and the number of aircraft we operate.

We provide related support services to our ACMI Services customers and other airlines by leveraging our knowledge and capabilities developed for our own operations over the years. The Company's aircraft maintenance, engineering and repair businesses, Airborne Maintenance and Engineering Services, Inc. ("AMES") and Pemco World Air Services, Inc. ("Pemco"), sell aircraft parts and provide aircraft maintenance and modification services. We also provide mail sorting, parcel handling and logistical support to the U.S. Postal Service (“USPS”) at five USPS facilities and similar services to certain AFS hubs and gateway locations in the U.S. We provide other ground services for our own airlines and external customers, including the sale of aviation fuel, the lease of ground equipment such as ground power units and cargo loaders, as well as facility and equipment maintenance services.

External customer revenues from all other activities were $62.2 million and $33.7 million for the first quarter of 2017 and 2016, respectively. Revenues from our mail sorting, parcel handling and logistical support services increased $13.0 million during the first quarter of 2017 compared to 2016, reflecting higher contractual costs and additional AFS locations. Additionally, airframe maintenance revenues from external customers increased by $15.6 million during the first quarter of 2017 compared to 2016, primarily due to the addition of Pemco which was acquired at the end of 2016. Revenues from aircraft maintenance can vary among periods due to the timing of scheduled maintenance events and the completion level of work during a period.

The pre-tax earnings from other activities increased by $0.9 million to $4.8 million in the first quarter of 2017, reflecting increased revenues We expect earnings from parcel handling, logistical services, aviation fuel and other ground service to decline in 2017 as AFS transfers its hub operation from the airport in Wilmington, Ohio, which we operate, to the Cincinnati/Northern Kentucky International Airport.

Salaries, wages and benefits expense increased $20.2 million during the quarter ended March 31, 2017, compared to the corresponding period of 2016 and reflect a 25% increase for the number of employees since March 31, 2016. Increased expenses were driven by higher headcount for flight operations, maintenance services, package handling services and additional pilot premium pay while new crewmembers were being trained for our customers' expanding networks. Expenses for 2017 increased $9.4 million due to the addition of Pemco which was acquired at the end of 2016. Pension expense, including the non-service components of retiree benefit costs decreased $2.0 million due to higher investment returns during the previous year.

Maintenance, materials and repairs expense decreased by $2.7 million during the quarter ended March 31, 2017, compared to the corresponding period of 2016. The decrease is primarily due to fewer airframe checks and related component repairs during the first quarter of 2017 compared to 2016. Aircraft maintenance expenses can vary among periods due to the number of scheduled airframe maintenance checks and the scope of the checks that are performed.

Fuel expense increased by $18.2 million during the quarter ended March 31, 2017, compared to the corresponding period of 2016. Fuel expense includes the cost of fuel to operate U.S. Military charters, reimbursable fuel billed to DHL, AFS and other ACMI customers, as well as fuel used to position aircraft for service and for maintenance purposes. The increase in fuel expense was driven by a higher level of customer-reimbursed fuel which increased $21.3 million for the first quarter of 2017 compared to 2016. This increase reflects a 3% decrease in the average price per gallon of aviation fuel during the first quarter of 2017 compared to 2016.

Other operating expenses increased by $3.7 million during the quarter ended March 31, 2017, compared to the corresponding period of 2016. Other operating expenses include professional fees, employee training, utilities and the cost of parts sold to customers. Other operating expenses increased during the first quarter of 2017 by $2.9 million for the addition of Pemco, acquired at the end of 2016. Other operating expenses also increased due to pilot training costs for the expanded air networks.

Interest expense increased by $0.8 million during the quarter ended March 31, 2017, compared to the corresponding period of 2016. Interest expense increased due to a higher average debt level and interest rates on the Company's outstanding loans, offset by more capitalized interest related to our fleet expansion. Capitalized interest increased $0.3 million during the first quarter of 2017 to $0.5 million.

The Company recorded pre-tax net gains on financial instruments of $1.9 million during the quarter ended March 31, 2017, compared to losses of $0.5 million during the corresponding period of 2016. The 2017 gains are primarily a result of remeasuring, as of March 31, 2017, the fair value of the stock warrants granted to Amazon. An decrease in the fair value of the warrants since December 31, 2016, resulted in the non-cash, pre-tax gain of $1.7 million for the first quarter of 2017. The non-cash gains and losses resulting from quarterly re-measurements of the warrants may vary widely among quarters.

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 March 31, 2017 have been estimated utilizing a 38.7% rate based upon year-to-date income and projected results for the full year. The recognition of discrete tax items, such as the conversion of employee stock awards, the issuance of stock warrants and other items have an impact on the effective tax rate during a period.

The effective tax rate from continuing operations for the quarter ended March 31, 2017 was 39.2% and includes deferred tax expense related to the vesting of additional warrants for Amazon and the warrant re-measurement gain at the end of the period. The effective tax rate before including the effects of the warrants was 34.1% and 32.7% for the first quarters of 2017 and 2016, respectively. The effective tax rate increased for the first quarter of 2017 due to a larger

As of December 31, 2016, the Company had operating loss carryforwards for U.S. federal income tax purposes of approximately $40.2 million, which will begin to expire in 2031 if not utilized before then. We expect to utilize the loss carryforwards to offset federal income tax liabilities in the future. As a result, we do not expect to pay federal income taxes until 2019 or later. However, the Company may be required to pay alternative minimum taxes and certain state and local income taxes before then. The Company's taxable income earned from international flights are primarily sourced to the United States under international aviation agreements and treaties. When we operate in countries without such agreements, the Company could incur additional foreign income taxes.

Net cash generated from operating activities totaled $44.2 million and $44.3 million for the first three months of 2017 and 2016, respectively. Cash flows generated from operating activities remained flat during the first quarter of 2017 compared to 2016. The cash flows reflect improved operating results partially offset by a buildup in billable costs and customer receivables. Cash outlays for pension contributions were for the first three months of 2017 were $0.8 million compared to $0.7 million for the corresponding period of 2016.

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 $83.8 million and $71.7 million for the first three months of 2017 and 2016, respectively. Capital expenditures in 2017 included $54.3 million for the acquisition of three Boeing 767-300 aircraft and one Boeing 737-400 aircraft and freighter modification costs; $21.0 million for required heavy maintenance; and $8.5 million for other equipment, including purchases of aircraft engines and rotables. Our capital expenditures in the first quarter of 2016 included $52.8 million for the acquisition of four Boeing 767-300 aircraft, freighter modification costs and next generation navigation modifications; $4.5 million for required heavy maintenance; and $14.4 million for other equipment, including purchases of aircraft engines and rotables.

Net cash provided by financing activities was $46.8 million for the first three months of 2017 compared to $49.5 million in 2016. During the first three months of 2017, we drew $60.0 million from the revolving credit facility under the Senior Credit Agreement to fund capital spending. We made scheduled debt principal payments of $10.3 million. Our borrowing activities were necessary to acquire and modify aircraft for deployment into air cargo markets. During the first quarter of 2017, we spent $1.5 million to buy 90,000 shares of the Company's common stock pursuant to a share repurchase plan authorized in 2014 and amended in May 2016 by the Board of Directors to repurchase up to $100 million of the Company's common stock.

We estimate that capital expenditures for 2017 will total $355 million of which $285 million will be related to aircraft purchases and freighter modifications. Actual capital spending for any future period will be impacted by aircraft acquisitions, maintenance and modification processes. We expect to finance the capital expenditures from current cash balances, future operating cash flow and the Senior Credit Agreement. The Company outsources a significant portion of the aircraft freighter modification process to a non-affiliated third party. The modification primarily consists of the installation of a standard cargo door and loading system. For additional information about the Company's aircraft modification obligations, see Note G of the accompanying financial statements.

In September 2015, we entered into a joint venture agreement to establish an express cargo airline serving multiple destinations within the Peoples Republic of China (including Hong Kong, Macau and Taiwan) and surrounding countries. The airline will be based in mainland China with registered capital of 400 million RMB (US$63 million). It will be established pending the receipt of required governmental approvals and plans to commence flight operations in 2017. We expect to contribute $15 million to the joint venture during the next twelve months. We plan to offer the new airline aircraft leases to build its fleet.

The Company has a Senior Credit Agreement with a consortium of banks that includes an unsubordinated term loan of $81.8 million, net of debt issuance costs, and a revolving credit facility from which the Company has drawn $415.0 million, net of repayments, as of March 31, 2017. The revolving credit facility has a capacity of $545.0 million, permitted additional indebtedness of $150.0 million, and an accordion feature whereby the Company can draw up to an additional $100.0 million subject to the lenders' consent. The Senior Credit Agreement is collateralized by the Company's fleet of Boeing 767 and 757 aircraft that are not collateralized under aircraft loans. Under the amended terms of the Senior Credit Agreement, the Company is required to maintain collateral coverage equal to 125% of the outstanding balances of the term loan and the maximum capacity of revolving credit facility or 150% of the outstanding balance of the term loan and the total funded revolving credit facility, whichever is less. The minimum collateral coverage which must be maintained is 50% of the outstanding balance of the term loan plus the revolving credit facility commitment which was $545.0 million. Each year, through May 6, 2019, the Company may request a one year extension of the final maturity date, subject to the lenders' consent.

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.

Additional debt or lower EBITDA 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 EBITDA (earnings before interest, taxes, depreciation and amortization expenses). At the Company's current debt-to-EBITDA ratio, the unsubordinated term loan and the revolving credit facility both bear a variable interest rate of 2.99%.

At March 31, 2017, the Company had $27.6 million of cash balances. The Company had $121.1 million available under the revolving credit facility, net of outstanding letters of credit, which totaled $8.9 million. We believe that the Company's current cash balances and forecasted cash flows provided from its operating agreements, combined with its Senior Credit Agreement, will be sufficient to fund operations, capital spending, scheduled debt payments and required pension funding for at least the next 12 months.

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 March 31, 2017 and 2016, 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.

“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. The Company bases its

estimates on historical experience, current conditions and on various other assumptions that are believed to be reasonable under the circumstances. Those factors 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.

As of March 31, 2017, 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.

The Company is currently a party to legal proceedings, including FAA enforcement actions, in various federal and state jurisdictions arising out of the operation of the Company's business. The amount of alleged liability, if any, from these proceedings cannot be determined with certainty; however, the Company believes that it's 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.

The Company faces risks that could adversely affect its condition or results of operations. Many of these risks are disclosed in Item 1A of the Company's 2016 Annual Report on form 10-K, filed with the Securities and Exchange Commission on March 8, 2017. Other risks that are currently unknown to management or are currently considered immaterial or unlikely, could also adversely affect the Company.

On August 5, 2014, the Board of Directors authorized the Company to repurchase up to $50.0 million of outstanding common stock. In May 2016, the Board amended the Company's common stock repurchase program increasing the amount that management may repurchase from $50.0 million to $100.0 million of outstanding common stock. The Board's authorization does not require the Company to repurchase a specific number of shares and the Board may terminate the repurchase program at any time. Repurchases may be made from time to time in the open market or in privately negotiated transactions. All of the repurchases done by the Company during the first quarter of 2017 were in the open market. There is no expiration date for the repurchase program. The following table summarizes the Company's repurchases of its common stock during the first quarter of 2017:



Period	Total Number of Shares Purchased	Average Price paid Per Share		Total Number of Shares Purchased as Part of Publicly Announced Program	Maximum Dollar Value of Shares That May Yet Be Purchased Under the Program
January 1, 2017 through January 31, 2017	30,000	$	15.63	30,000	$	25,616,016
February 1, 2017 through February 28, 2017	30,000	$	16.99	30,000	$	25,106,319
March 1, 2017 through March 31, 2017	30,000	$	16.13	30,000	$	24,622,407
Total for the quarter	90,000	$	16.25	90,000	$	24,622,407



Exhibit No.	Description of Exhibit

10.1	First Amendment to the Amended and Restated Credit Agreement, dated as of March 31, 2017, among Cargo Aircraft Management, Inc., as Borrower, Air Transport Services Group, Inc., the Lenders from time to time party hereto, SunTrust Bank, as Administrative Agent, Regions Bank and JPMorgan Chase Bank, N.A., as Syndication Agents and Bank of America, N.A., as Documentation Agent, 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.



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

145 Hunter Drive, Wilmington, OH		45177
(Address of Principal Executive Offices)		(Zip Code)



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




		Page
PART I. FINANCIAL INFORMATION
Item 1.	Financial Statements	4
	Unaudited Condensed Consolidated Statements of Operations	4
	Unaudited Condensed Consolidated Statements of Comprehensive Income	5
	Unaudited Condensed Consolidated Balance Sheets	6
	Unaudited Condensed Consolidated Statements of Cash Flows	7
	Notes to Unaudited Condensed Consolidated Financial Statements	8
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	22
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	31
Item 4.	Controls and Procedures	31

PART II. OTHER INFORMATION
Item 1.	Legal Proceedings	32
Item 1A.	Risk Factors	32
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	32
Item 6.	Exhibits	33
SIGNATURES		34



	CAM		All Other		Total
Carrying value as of December 31, 2016	$	34,395	$	2,738	$	37,133
Purchase price adjustment	—		140		140
Carrying value as of March 31, 2017	$	34,395	$	2,878	$	37,273



	Airline		Amortizing
	Certificates		Intangibles			Total
Carrying value as of December 31, 2016	$	3,000	$	5,453		$	8,453
Amortization	—		(138		)	(138		)
Carrying value as of March 31, 2017	$	3,000	$	5,315		$	8,315



	Lease
	Incentive
Carrying value as of December 31, 2016	$	54,730
Warrants granted	10,050
Amortization	(2,591		)
Carrying value as of March 31, 2017	$	62,189



	March 31, 2017			December 31, 2016
Flight equipment	$	1,546,545		$	1,541,872
Ground equipment	49,348			49,229
Leasehold improvements, facilities and office equipment	28,081			27,364
Aircraft modifications and projects in progress	188,392			113,518
	1,812,366			1,731,983
Accumulated depreciation	(754,489		)	(730,991		)
Property and equipment, net	$	1,057,877		$	1,000,992



Airline	Labor Agreement Unit	Percentage of the Company’s Employees
ABX	International Brotherhood of Teamsters	8.8%
ATI	Air Line Pilots Association	6.7%



			March 31, 2017			December 31, 2016
Expiration Date	Stated Interest Rate		Notional Amount	Market Value (Liability)		Notional Amount	Market Value (Liability)
June 30, 2017	1.183	%	41,250	(17	)	43,125	(77	)
May 5, 2021	1.090	%	41,250	643		43,125	547
May 30, 2021	1.703	%	39,375	54		—	—



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



		AIR TRANSPORT SERVICES GROUP, INC.,
		a Delaware Corporation
		Registrant

		/S/ JOSEPH C. HETE
		Joseph C. Hete
		Chief Executive Officer (Principal Executive Officer)
Date:	May 8, 2017

		/S/ QUINT O. TURNER
		Quint O. Turner
		Chief Financial Officer (Principal Financial Officer
Date:	May 8, 2017	and Principal Accounting Officer)