ATSG REPORTS STRONG THIRD QUARTER REVENUE

WILMINGTON, Ohio - November 14, 2008 - Air Transport Services Group, Inc. (NASDAQ: ATSG), today reported a41 percent increase in revenues to $403.1 million, and a 107 percent increase in net earnings to $5.0 million, or $0.08per share, for the third quarter of 2008, compared with the third quarter of 2007.

ATSG's three largest business segments - DHL, ACMI Services and CAM (leasing) - achieved higher revenues andearnings for the third quarter, compared with a year earlier.

Results from DHL, ATSG's principal customer, were sharply improved. Third-quarter revenues grew 6 percent to$276.8 million and pretax earnings increased 16 percent to $3.7 million compared to the prior-year period. DHLrevenues benefited principally from reimbursements for fuel and related costs, as package volumes were significantlylower than a year ago. Excluding fuel reimbursements, DHL segment revenues were down 12 percent from the thirdquarter of 2007. Pretax earnings benefited from higher incremental markup awards during the quarter.

ACMI Services, which includes results from businesses of the former Cargo Holdings International, Inc. (CHI) thatATSG acquired at the end of 2007 and from the charter operations of ABX Air, continued to generate the majority ofATSG's revenues and earnings growth, compared with the third quarter a year ago. Revenues for that segmentincreased more than $100 million to $116.9 million, compared with a year earlier. Nearly all of that gain is attributableto the acquired CHI businesses. Pretax earnings increased to $890,000 from $191,000 a year earlier.

"I am pleased to report that our third quarter 2008 results show continued strong growth and improved profitabilitycompared with the third quarter last year, thanks to the continued dedication and focus of our employees," ATSGPresident and CEO Joe Hete said. "Our ACMI and CAM leasing businesses are solid platforms for the next stage ofdevelopment of our air cargo businesses, which we will accelerate next year. We are currently negotiating theredeployment of a significant number of our Boeing 767 aircraft on a more profitable basis, with both new and existingcustomers under dry lease or ACMI arrangements."

For the first nine months of 2008, ATSG's revenues were $1.18 billion, and net earnings were $8.2 million, or $0.13per share. For the first nine months of 2007, revenues were $855.3 million, and net earnings were $11.2 million, or$0.19 per share.

Third-quarter and nine-month results for 2008 include an allocation of corporate and other overhead expenses notreimbursed by DHL, consistent with an arbitration ruling in July establishing that ABX Air and ATSG are nowresponsible for a portion of those costs in relation to ATSG's business with customers other than DHL. ATSG andDHL have agreed to a fixed allocation of eligible overhead expenses at $800,000 per quarter through the first quarterof 2009. For the first nine months of 2008, allocated overhead expense was $2.4 million.

Also, the third-quarter 2008 provision for income taxes includes a $1.3 million benefit related to the closure of prioryearreturns. That reduced the provision for the third quarter to $1.0 million, compared with $2.3 million in tax expensein the third quarter a year ago. Income tax expense for ATSG is a deferred, non-cash item.

Interest expense, net of interest income and DHL-reimbursed interest expense, was $2.4 million in the third quarterthis year, compared with net interest income of $205,000 in the third quarter of 2007. Interest expense increasedprimarily because of debt assumed in connection with the CHI acquisition.

EBITDA (Earnings before Interest, Taxes, Depreciation and Amortization) increased 86 percent to $38.6 million in thethird quarter, compared with $20.8 million in the year-earlier period (see Reconciliation of EBITDA to GAAP NetEarnings at the end of this release). EBITDA is a non-GAAP measure of financial performance that managementbelieves better reflects the cash-generating performance of asset-intensive, financially leveraged businesses such asATSG.

ATSG's three certificated airlines and its leasing business added two Boeing 767 freighter aircraft into service duringthe third quarter this year. At September 30, 2008, ATSG's subsidiaries operated 112 aircraft, consisting of 40 Boeing767, 1 Boeing 757, 14 Boeing 727, 41 McDonnell Douglas DC-9 and 16 McDonnell Douglas DC-8 aircraft.

Results Associated with the DHL Agreements

ABX Air's revenues from its two commercial agreements with DHL increased 6 percent to $276.8 million in the thirdquarter versus a year ago, due primarily to a large increase in reimbursed fuel expenses. Revenues from DHLexpenses subject to markup declined, stemming from the transfer of certain sort and logistics facilities to DHL, aircraftfleet reductions, and lower DHL package volumes in the United States. Package volumes handled by ABX Air in thethird quarter were 23 percent lower than in the third quarter last year, while block-hours flown by ABX Air in support ofDHL's network declined 10 percent.

Pre-tax earnings from those agreements were $3.7 million during the third quarter of 2008, up from $3.2 million in thethird quarter of 2007, attributable principally to larger incremental markup awards.

Incremental mark-up revenues are awarded for achieving certain cost-related targets under both commercialagreements. They were $865,000 for the third quarter, compared with $587,000 in the third quarter a year ago. Thisyear, $590,000 of the total incremental award was earned under the ACMI agreement and $275,000 was earnedunder the Hub Services Agreement. (See "Settlement and Amendments to ACMI and Hub Services Agreements,"below, concerning recent amendments that modify how ABX Air's mark-ups under the agreements are determined.)

During the second quarter of 2008, ABX Air had 55 DC-9 aircraft in service with DHL. In October, ABX sold DHLfourteen of the DC-9s for $3.7 million under put provisions in the ACMI Agreement. ABX expects to sell up to 40additional DC-9s to DHL for up to $11.0 million, as they are removed from the DHL network through the first half of2009.

In September, at ABX's request, DHL released one of ABX Air's Boeing 767s from its U.S. network. That aircraft isbeing converted to full freighter configuration for deployment with other customers next year. The release of 27remaining Boeing 767 aircraft currently under the DHL ACMI agreement has not been scheduled.

CAM/Leasing

Pretax earnings from Cargo Aircraft Management (CAM), ATSG's leasing business, were $4.0 million for the thirdquarter, based on market-rate leases for freighter aircraft, most of which are deployed with the three ATSG airlinebusinesses. CAM has now placed two 767s aircraft under dry lease arrangements with carriers not under the ATSGumbrella. Two Boeing 767S and one Boeing 757 owned by CAM are being modified to full freighter configurations andare expected to go into service starting later this year or early in 2009. A seven year ACMI agreement is in place forthe use of the 757.CAM is negotiating significant new business opportunities with external customers, principally for long-term leases ofBoeing 767 freighters. If completed, those agreements could generate substantial leasing revenue, plus additionalrevenues from associated aircraft maintenance services.

ACMI Services

Revenues in the third quarter for this segment were $116.9 million, of which $37.4 million stemmed from directreimbursement of fuel and related items by ACMI and charter customers. The gain from $16.7 million a year earlierreflects greater available freighter capacity and contributions from Air Transport International LLC (ATI) and CapitalCargo International Airlines, Inc. (CCIA), the two cargo airlines of the former CHI. Compared with the second quarterof 2008, third-quarter ACMI Services revenues increased 10 percent, driven by expanded flying for the military.

Pretax earnings from ACMI operations were $890,000 in the third quarter, up from $191,000 in the third quarter a yearago and from a loss of $773,000 in the second quarter this year. Contributions from ATI and CCIA were the principalfactors. Results for the third quarter 2008 were negatively impacted by the premature replacement of three aircraftengines for Boeing 727 aircraft operated by CCIA, resulting in a total charge of $585,000.

CCIA's first Boeing 757 went into ACMI revenue service in July and ATI began 767 service in September.Additionally, ATI's military business remains very strong. One key military contract that generates approximately $11million in quarterly revenue was to expire at the end of this year, but has been extended through September 30, 2009.

Other activities and overhead expenses

Revenues from ABX Air's other, non-DHL operations increased 74 percent to $15.1 million, including sharp increasesin aircraft parts and maintenance services, along with full-scale operations at sorting centers that ABX Air managesfor the U.S. Postal Service. The operating results of these business activities, combined with non-reimbursedadministrative expenses resulted in a pre-tax loss of $231,000 for the quarter, compared to pre-tax earnings of $1.1million for the corresponding 2007 period. The principal factor was the allocation of $800,000 in corporate overheadnot reimbursed by DHL.

The U.S. Postal Service has awarded ABX a holiday-season contract for management of sorting operations at itscenter near Dallas, Texas. It is expected to generate fourth-quarter revenues of approximately $1.9 million.

Outlook/Other Items

Future of DHL Relationship

The ACMI Agreement may terminate at DHL's option on August 15, 2010, while the Hub Services agreement issubject to annual renewals on the same date each year. Both agreements grant DHL substantial flexibility to reducethe scope of services that ABX Air provides to DHL and to terminate them with specified notice.

"While we understand DHL's situation, we are saddened that its decision will cost the jobs of most of the 7,000remaining ABX Air employees who have loyally supported DHL in Wilmington and several other locations," Hete said.

Hete noted that several important transition issues related to the wind-down of services under the DHL agreements,including funding for ABX Air pension plans, remain unresolved. Also, the company must work with both creditors andlabor groups to gain the flexibility it needs to implement its post-DHL strategy. If those issues can be resolvedpromptly, he said, the outlook for ATSG is very positive.

"We are adjusting our business plans to conditions in financial markets and the soft economy. But we are not dialingback our commitment to achieve results in keeping with the high quality assets we control, and the talented peoplewho manage them. As our aircraft are released from DHL service, we will raise cash by selling a number of them backto DHL. Then we will apply those proceeds to convert the 767s we retain from DHL, and deploy them along with therest of our aircraft under dry lease or ACMI arrangements - whichever generates the greatest return to ourshareholders. That's how we will emerge from this transition as a strong, flexible, and highly competitive global aircargo service company."

Settlement and Amendments to ACMI and Hub Services Agreements

As previously disclosed, ABX Air and DHL have agreed to amend their ACMI and Hub Services agreements to set allmark-up amounts for the fourth quarter of 2008 and the first quarter of 2009 at levels comparable to those ABX Airearned in the same prior-year quarters. Additionally, a dispute with DHL arising from an arbitration panel's ruling hasbeen settled, such that ABX Air will retain DHL's reimbursement of $2.2 million in ABX Air's legal expenses. And, thecompanies have agreed to fix ABX Air's quarterly allocation of overhead expenses not subject to DHL reimbursementat $800,000 through the first quarter of 2009.

"Because a significant portion of our costs to administer DHL's air transport and package sorting operations are notvolume-sensitive, a fixed-dollar markup is essential for us to carry out those responsibilities effectively as the volumein DHL's domestic network declines," Hete said. "We believe that the new structure provides us with the opportunity toearn a reasonable return for our shareholders on our work for DHL through the current environment. As weannounced on Monday, November 10, DHL has agreed to fix the incremental mark-ups under its two commercialagreements with ABX at $11.4 million in the fourth quarter of 2008, and at $5.6 million for the first quarter of 2009."

Insurance Settlement

On June 28, 2008, one of ABX Air's Boeing 767 aircraft experienced a fire prior to engine start and was declared acomplete loss. It was insured for $30.3 million and has a net book value of $24.4 million as of September 30, 2008.ABX Air expects to record a gain in the fourth quarter of approximately $5.9 million from the receipt of the insuranceproceeds in excess of the net book value.

 

Except for historical information contained herein, the matters discussed in this release contain forward-looking statements that involve risks anduncertainties. There are a number of important factors that could cause Air Transport Services Group's ("ATSG's")actual results to differ materially fromthose indicated by such forward-looking statements. These factors include, but are not limited to, ABX Air's ability to maintain cost and service levelperformance under its ACMI and Hub Services Agreements with DHL, further reductions in the scope of services under those agreements and the rateat which those reductions are made, the extent to which DHL reimburses ABX Air for costs arising from the termination of services under the ACMI andHub Services agreements, ATSG's success in identifying new customers to replace revenues from services terminated by DHL, the continuingavailability of sufficient sources of liquidity, and other factors that are contained from time to time in ATSG's filings with the U.S. Securities and ExchangeCommission, including its Annual Report on Form 10-K and Quarterly Reports on Form 10-Q. Readers should carefully review this release and shouldnot place undue reliance on ATSG's forward-looking statements. These forward-looking statements were based on information, plans and estimates asof the date of this release. ATSG undertakes no obligation to update any forward-looking statements to reflect changes in underlying assumptions orfactors, new information, future events or other changes.

For more information, contact:
Quint Turner
Chief Financial Officer
Air Transport Services Group, Inc.
937-382-5591