Revenue at Canadian freighter operator Cargojet grew 14.8% during the third quarter from the prior year behind a wave of demand for charter flights from Chinese e-commerce sellers as well as businesses that diverted ocean and commercial passenger shipments to avoid potential delays from supply chain disruptions.
Cargojet (TSX: CJT) said total revenue was $176.6 million, with international charter revenue from customers paying an all-inclusive fixed fee per flight jumping 60% to $29.8 million despite one fewer operating day than last year. Charter revenue, both nonroutine and scheduled, grew more in absolute ($11.2 million) and percentage terms than from the airline’s overnight domestic network or dedicated contract flying for customers such as DHL Express. Adjusted earnings before interest, taxes, depreciation and amortization increased 17.4% to $59.1 million.
Flight hours during the third quarter grew by nearly 15% with no change in fleet size. Cargojet operates 41 Boeing 757, 767-200 and 767-300 freighters converted from passenger configuration.
Co-CEO James Porteous said on Tuesday’s earnings call with analysts that increased charter business resulted from shippers seeking transport alternatives to ocean carriers and passenger aircraft because of capacity constraints caused by the Ukraine and Middle East conflicts, and fears of container backlogs from a port workers’ strike on the U.S. East Coast – which ultimately was short-lived. Cargojet has also increased the number of trans-Pacific flights operated on behalf of e-commerce logistics provider Greater Vision HK Express to five or six per week since service started in May. The number of frequencies will fall back to three again after the peak season.
Cargojet operates a domestic overnight network among 16 major Canadian cities, with space shared among a range of customers. The segment’s 5.2% revenue growth was attributed to increased e-commerce and B2B volumes, and inflation-adjusted rates for contractual customers.
“The improving interest rate environment and controlled inflation are fostering a more stable and optimistic economic outlook for Canada, which we believe bodes well for future domestic volumes,” Porteous added. The majority of customers have presented stronger volume forecasts for the current peak season leading up to the holidays.
Cargojet incurred one-time startup costs for spare aircraft, maintenance, crew and ground handling in support of the extra charter bookings. New management hires, higher labor rates for pilots, overtime payments for pilots and spare parts costs, offset by depreciation of aircraft, also contributed to a 1.5% increase in overall expenses during the quarter.
The all-cargo carrier continues to invest in its fleet to capitalize on growth opportunities, which are greater in the wake of decisions this year by Air Canada to park two 767-300 freighters and WestJet to shut down its scheduled network after less than a year because of insufficient customer interest. WestJet has switched to a new business model that involves renting two of its four Boeing 737-800 narrowbody freighters to airlines and logistics companies that need dedicated capacity. FreightWaves previously reported that Cargojet has hired WestJet to operate its daily service between Newark International Airport in New Jersey and Bermuda.
Two Boeing 767-300 freighters are currently undergoing conversion at an overhaul facility, with deliveries expected in the second and third quarters of 2025, Porteous said. One of the new aircraft will be used to replace a 767-200 on a lease that will expire in February. The other cargo jet likely will be reserved for new requests for e-commerce charters. Cargojet has also acquired two 767 passenger aircraft that could be sent for conversion as dictated by demand.
Executive Chairman Ajay Virmani said Cargojet’s dominant position in Canada gives it more pricing power for charter service, but on international routes it isn’t able to charge as much because U.S. carriers such as FedEx, UPS, Atlas Air and Kalitta are also marketing their excess capacity.
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Write to Eric Kulisch at ekulisch@freightwaves.com.