Rise in China e-commerce traffic lifts Cargojet to record revenue

Canada’s Cargojet squeezed 16% more flight hours out of its existing fleet in the fourth quarter to accommodate a surge in demand for charter service from e-commerce sellers in China, resulting in a 32% year-over-year revenue gain to US$207 million.  

Earnings were tempered by higher startup costs for charter flights, such as overtime pay for pilots, maintenance and ground handling, as adjusted pretax income came in 5% below analysts’ forecast.

Cargojet’s on-demand charter business increased 136%, while scheduled charter revenue from recurring flights grew 29.3%, according to financial results released Monday afternoon. Domestic revenue was essentially flat year over year, which the company partly attributed to the nearly monthlong Canada Post labor strike. Revenue inched up because of increased e-commerce and B2B volumes, along with the implementation of contractual inflation escalators.

Full-year revenue of $705 million, up 14% from the prior year, was the best in company history. The revenue increase is even more noteworthy considering that Cargojet (TSX: CJT) generated 20% less in fuel surcharges versus the prior year as the price of jet fuel declined.

Cargo airlines in 2023 were impacted by the global downturn in demand, which began to bounce back in the second half. The market fully recovered in 2024, with global volumes growing about 12%.

Cargojet operates a domestic overnight network covering 16 major Canadian cities, with space shared among a range of customers. Customers such as Amazon, DHL Express and Purolator pre-purchase a guaranteed space and weight allocation in the network and also pay a set daily fee. Remaining capacity is sold on an ad hoc basis to contract and noncontract customers. Several international airlines use Cargojet to move shipments between international gateways and other domestic locations. 

Cargojet also provides dedicated customers with 15 aircraft and everything needed to fly them under long-term contracts. The transportation service agreements include flying five routes out of Cincinnati/Northern Kentucky International Airport to Mexico each day for DHL, as well as multiple routes between Canada, the U.S., Central and South America.  

Management said it expects growth across its three main revenue streams to continue in 2025 but cautioned that slower revenue growth is possible because of the uncertainty surrounding potential trade wars between the United States and other countries as the Trump administration ramps up tariffs programs, which could dampen global air cargo demand. It said U.S. airlines are likely to be more exposed to tariff fallout than Cargojet.

“Cargojet is uniquely positioned to excel during tariffs, and may even benefit from direct shipments to Canada versus carriers going into the United States. So we’ll see how this plays out. But we’re hopeful that we see more freight coming into Canada,” co-CEO Pauline Dhillon said on a conference call with analysts on Tuesday.

The 16% productivity gain compared to the same prior-year period was a function of rebalancing resources to meet an influx of requests for charter flights from Chinese e-commerce marketplaces, which started early in 2024. In May, Cargojet began operating dedicated flights on behalf of e-commerce logistics provider Greater Vision HK Express. The contract initially called for three flights per week, but Cargojet increased the frequency to five or six per week during the fourth quarter.

The all-cargo operator said it expects startup costs for the flights will taper off and normalize this year as it gets better at streamlining processes, reallocating aircraft between domestic and international charter work, and adding staff.

The airline sees multiple opportunities for new business this year.

“We are methodically managing our freighter fleet to create capacity for new ad hoc charters while increasing the frequency of scheduled charters to China,” Dhillon said. Management also continues to focus on cost management and building new information technology capabilities this year to keep up with growth, she added. 

Dhillon said the company also has an existing customer that is looking for dedicated air cargo service to South America. Demand for immediate charters was so strong, “we had to turn a number of charters away last year because we didn’t have the lift,” she said.

Carojet operates 41 Boeing 767 medium-widebody and 757-200 narrowbody freighters. The fleet size is unchanged from 2023, but the company is adding capacity to meet customer needs for daily frequencies from China and to have flexibility to do needed maintenance without impacting service. It is the first year the company is adding aircraft to meet growth in the charter business. Historically, it has added assets to grow the domestic business and used aircraft during daytime and weekend off hours for secondary business.

Canada’s largest cargo airline said it has three used Boeing 767-300s that are currently being converted by an airframe overhaul specialist from passenger to cargo configuration. Two freighters are expected to be delivered by the end of the first quarter, and the third is scheduled for completion in the third quarter.  The company is also in the process of buying a used factory-built Boeing 767-300 for delivery at the end of the first quarter and will return a 767-200 to its lessor when the lease expires at the end of April. 

The company is budgeting about $57 million for acquisition of aircraft in 2025. An additional $113 million to $127 million is set aside for overhauling engines.

Amazon’s recent decision to quit seven fulfillment centers in Quebec also presents a growth opportunity for Cargojet, co-CEO Jamie Porteous said, because the retailer will need to bring product to the region from other warehouses across Canada. Amazon volumes are expected to continue growing, especially as it adds early morning deliveries across Canada.

Click here for more FreightWaves/American Shipper stories by Eric Kulisch.

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