Question-and-Answer Session
Operator
(Operator Instructions) Our first question comes from Bob Labick - CJS Securities.
Bob Labick - CJS Securities
I wanted to focus on ACMI. You alluded to the drop in revenue per block hour in the quarter relating to some supplemental flying. Could you just expand on that and explain what the outlook for ACMI revenue per block hour would be in ?08 and if this fourth quarter reduction should influence that trend at all?
William J. Flynn
Bob, in prior years we have done short-term ACMI flying for FedEx and UPS; a good number of aircraft in 2006 and 2005. The aircraft that they contracted for over a two or three week period during the holiday peak to supplement their fleet.
What we experienced, we didn’t get that level of short-term flying with UPS and FedEx this year and that’s what affected the rate per block hour in a quarter-over-quarter comparison. Going forward we believe in our core ACMI business, the business where we have the aircraft contracted out for multi-year terms, those rates are strong and solid.
Bob Labick - CJS Securities
Then also you mentioned you’re procuring two additional 400s, I guess, in Q2 and Q3. Could you comment on pricing and supply out there? Is this going to be an issue for industry-wide? Is there a lot of 400s available or just the dynamics going on in that regard?
William J. Flynn
Well, let’s kind of take that in reverse order. There are not a lot of 747-400 pure factory freighters available. We’ve are acquiring one factory freighter and one 747 Boeing Converted Freighter (BCF).
Demand is still very strong for the aircraft. We were just in a position where we could take advantage of the opportunity where the aircraft that was available and we had several placement opportunities. And as we’ve announced we will place additional aircraft with DHL.
There is not a lot of aircraft available as I’ve said. There are some BCF aircraft coming into the market, but a BCF does not have the same performance characteristics as a pure factory freighter. We’ve not disclosed the price that we’ve paid for the freighters, however, Bob.
Bob Labick - CJS Securities
And then skipping to Scheduled Service, I know it’s short-lived on your P&L for the time being but you mentioned some hedging activity where you were able to mitigate some of the fuel price increase. Could you also just discuss the fuel surcharges and any ability to recapture some of the continued increase in fuel for the next eight or nine months, until it’s under the ACMI agreement with DHL Express?
- To read the full transcript on Seeking Alpha, click here »
