Airline company Cargojet faces volatile tariffs but continues to record financial progress
Cargojet, a leading air cargo operator, has announced a significant extension of its long-term flying contract with DHL Express, securing the partnership until 2037 with potential extensions to 2039. This renewed agreement is projected to generate approximately $2.3 billion in revenue for Cargojet.
The extension guarantees a substantial revenue stream over the next decade, supporting Cargojet’s long-term financial planning. In exchange for renewing early, DHL lowered its potential ownership in Cargojet from 9.5% to 6.6%, reflecting a strategic restructuring of the partnership.
The agreement provides Cargojet with guaranteed minimum monthly flight hours, ensuring consistent business volume for the company while providing DHL with operational reliability. Cargojet will continue to provide a full range of air transportation services to DHL, including ACMI (Aircraft, Crew, Maintenance, and Insurance), CMI (Crew, Maintenance, and Insurance), charter, and dry lease services.
The renewed partnership also gives Cargojet priority to fly additional DHL routes as capacity demands fluctuate globally, facilitating business expansion. Cargojet’s fleet of over 40 Boeing 767 and 757 freighters will be leveraged to deliver these services.
In other news, Cargojet has posted a smaller net loss of $2.3 million as it used cash to invest in more freighter aircraft. The company has added two used 767-300 passenger aircraft to its fleet this year, which have been modified to carry cargo containers. A third 767-300 aircraft is currently under conversion and is expected to be delivered in the fourth quarter.
Cargojet is also expecting a spike in parcel volumes this month due to shippers rushing to beat the United States' Aug. 29 date for ending the de minimis exemption for all nations.
In terms of management changes, Aaron McKay, previously from Canadian passenger airline WestJet, has been hired as Cargojet's new chief financial officer, replacing Scott Calver who departed in March. Gord Johnston, who has served as executive president, strategic partnerships, since early 2024, has been promoted to chief commercial officer.
These changes are intended to strengthen Cargojet’s management team and improve capacity utilization in key lanes. Gord Johnston's new role will leverage spot market opportunities and interline relationships with other airlines to optimize capacity in key lanes.
Cargojet recently bought three converted Boeing 767-300s and one factory-built 767-300. The company also announced a long-term extension of its flying contract with DHL Express, which is expected to lead to more business for Cargojet, as DHL intends to grow volume and put Cargojet first in line for new business.
The promotion of Gord Johnston and the hiring of Aaron McKay, along with the new DHL agreement, aim to streamline sales processes, generate new revenues, and improve capacity utilization in key lanes.
Sources: [1] Cargojet Press Release, [Date] [2] DHL Press Release, [Date] [3] Cargojet Q2 2023 Earnings Call Transcript, [Date] [4] GlobeNewswire, [Date] [5] Air Cargo World, [Date]
- The long-term extension of Cargojet's flying contract with DHL Express, a leading player in the air cargo industry, not only secures a substantial revenue stream for Cargojet's financial planning but also lowers DHL's potential ownership in the business.
- The recent strategic management changes at Cargojet, including the promotion of Gord Johnston as chief commercial officer and the hiring of Aaron McKay as chief financial officer, are designed to streamline sales processes, generate new revenues, and improve capacity utilization in key business lanes, particularly in anticipation of growth in volume through the new DHL agreement.
