ATSG REPORTS RESULTS FOR THIRD QUARTER 2012

WILMINGTON, Ohio – November 8, 2012 – Air Transport Services Group, Inc. (NASDAQ:ATSG) today reported financial results as follows for the third quarter of 2012.

Joe Hete, President and CEO of ATSG, said, “Our results for the third quarter of 2012 were in line with the outlook we provided in August. We continued to pursue further deployment of freighter aircraft and the reorganization of two of our airlines, which will result in meaningful savings in 2013. However, we continue to experience the effects of the soft air-freight market.”

Earnings for the nine months of 2011 included $6.8 million in net charges related to the 2011 refinancing of ATSG’s credit facilities, and $27.1 million in pre-tax impairment charges related primarily to the 2011 termination of the company’s business with D.B. Schenker (“Schenker”), a North American logistics company. Adjusted EBITDA from Continuing Operations excludes the effect of those items. Revenues also include reimbursement of certain expenses, particularly fuel, from some of ATSG’s customers, including $94.6 million in reimbursement revenues from Schenker for the first nine months of 2011. Excluding revenues from reimbursed expenses and from Schenker-related business, revenues for the third quarter and first nine months of 2012 increased 5 percent and 12 percent, respectively, from 2011 levels.

Operating Results

Aircraft Leasing

Pre-tax third-quarter earnings for Cargo Aircraft Management (CAM) were $17.3 million, up 7 percent from the year-earlier period. Revenues increased 6 percent to $39.2 million.

At the end of September, CAM owned 53 aircraft in service condition, including 21 leased to external customers and 32 leased to its ATSG airline affiliates. ATSG airline affiliates pay market rates on aircraft leased from CAM. ATSG’s airlines operate an additional six freighters (four Boeing 767-200s, and two 767-300s) under operating leases with third parties. ATSG’s aircraft fleet at year-end 2011, at Sept. 30, 2012, and its current outlook for aircraft in service at the end of 2012 are summarized in a table at the end of this release.

ACMI Services

Third quarter revenues for ATSG’s airline operations were $102.9 million, excluding fuel and other reimbursed expenses, down from $118.9 million in the third quarter of 2011. The third-quarter pre-tax loss of $1.7 million was down from a $2.8 million pre-tax profit in the third quarter of 2011, excluding third-quarter 2011 impairment charges.

Results for the third quarter of 2011 included $24.2 million in airline services revenues from Schenker, excluding reimbursed amounts. As previously reported, Schenker ended its North American air freight network agreements with ATSG at the end of 2011. Decreased segment results for the third quarter of 2012 primarily reflect the loss of the Schenker business, and upfront expenses incurred in anticipation of future freighter deployments.

ATSG is reorganizing its two airlines that served Schenker, Air Transport International (ATI) and Capital Cargo International Airlines (CCIA). CCIA’s operations will merge into ATI, generating significant savings in these operations beginning in 2013.

Delayed aircraft deployments also affected ACMI Services results. Two Boeing 767-300 freighters entered service on an ACMI basis in October on international routes. Those aircraft had been projected to enter service in August. ATSG’s latest two-year combi (combination passenger/freighter) service award from the U.S. Military also began in October, under terms that will allow ATSG to replace its four DC-8 combis with more modern, efficient 757-200s. The combi business has been a steady, reliable source of cash flow generation to ATI for several years.

Third-quarter ACMI block hours were down 16 percent overall from a year ago, but increased 6 percent excluding block hours operated for Schenker in the third quarter of 2011.

Other Activities

Third quarter revenues from ATSG’s other businesses increased 2 percent, to $26.8 million, before the elimination of inter-company results. Pre-tax profit from other activities was $3.4 million down 8 percent from the year-earlier quarter but up sequentially from the second quarter this year. During the third quarter, ATSG completed agreements with the U.S. Postal Service extending ATSG’s management of USPS sorting facilities in Indianapolis, Dallas, and Memphis for two more years.

Outlook for Fourth Quarter and 2013

Hete said that ATSG continues to project strong gains in its GAAP earnings for 2012 as a whole, improved results for the second half of 2012 versus the first half, and substantial growth in revenues, earnings and cash flow in 2013.

“But when setting our $170 million target for Adjusted EBITDA for 2012, we had assumed no further delays in our projections of aircraft deployments,” he said. “Unfortunately, those delays have continued beyond what we projected in August. We now expect our Adjusted EBITDA for 2012 to approximate $160 million, including approximately $40 million in the fourth quarter.”

Hete noted that some of ATSG’s customers are delaying commitments, which will impact the fourth quarter. In addition, he said that certain international customers have faced unexpected regulatory hurdles unrelated to market conditions, leading to new-service delays.

“Deployment of our modified freighter aircraft are occurring later than we had anticipated, due to both delays in the modification process and longer transition periods for aircraft returned from customers,” he said. “Given that there are meaningful fixed costs associated with each aircraft in service, having revenue lag for even one month can have a near-term negative impact on EBITDA and earnings.”

Hete concluded that while those delays will negatively affect this year’s Adjusted EBITDA and earnings, they do not affect the intrinsic earnings power of ATSG’s business model and its strong cash flow generation characteristics when deployments are completed.

“With reduced growth capital expenditure commitments for 2013, and the benefit of our significant investment in our fleet becoming more evident, we expect to reap substantial earnings, EBITDA, and free cash flow gains in 2013."