Technically, the image doen’t have to be square - although ponyus is right, its a good idea to keep the image square as it makes it easy to scale the ship without resorting to weird decimal numbers.
For example, the image has a dimention of 564 x 512.
In order not to distort the image in the game the dimentions of the ship must maintain a ratio of 1.1015625:1
So if we were to use this image for a frigate the dimentions would be 110.15625 x 100
However in this case we the image is the Atlantis, so its going to be big.
Therefore we i would suggest that you use the dimentions:
width = 564
height = 512
On to the file at hand - When i placed it in the game it looks like this.
You cant see it here, but in the game there was a faint outline around this image. Looking at the alpha channel, if you zoomed into the boarder of the image you will notice that you have some grey pixles (well they are not grey, but they are not completly black) Therefore the game will draw the boarder with the appropriate level of transparency.
Speaking of transparency, the first image is transparent in places. Again, this is governend by the shades of grey in the alpha channel.
Afer a bit of tinkering:
All i have done is remove all the grey and replaced it with white and removed the grey on the boarders in the alpha channel
You can download the file from here