Cargojet’s co-chief executive Jamie Porteous discusses how the airline is expanding thanks to new charter business, alongside ACMI and fleet investment.With new business under its belt and good prospects for 2025, Cargojet continues to expand its fleet in the coming year. Two Boeing 767-300s that were recently acquired are going to be turned into all-cargo configuration and are expected to commence operations by April or May of next year, says Cargojet co-chief executive Jamie Porteous.
The airline also had two 767-200s lined up for conversions, but will probably only add one of these later next year, while cannibalising the second for spare parts.
Currently, Cargojet operates a fleet of 41 freighters consisting of a mix of 767Fs and 757Fs. One of them is a 767-200F whose lease expires next year. “We have flexibility with that,” remarks Porteous.
Last year the airline was set to shrink its fleet, when the air cargo market was in low gear. It had sold three 777Fs acquired for conversion to preserve cash and was looking for options to offload four 757Fs that were surplus at the time.
Today all of these 757Fs are running at full throttle, like the rest of Cargojet’s planes. For the second quarter of this year the company tabled revenues of C$230.8m ($170.66m), up from C$209.7m a year earlier, while EBITDA climbed from C$74.3m to C$79.1m.
“At the beginning of the year we expected mid-single-digit growth would be good,” recalls Porteous. In fact, revenues rose more than 6% in the first quarter, accelerating to an increase north of 10% in the second.
Charter opportunity
In hindsight, the trough in 2023 produced a shift that unleased growth in a previously virtually untapped segment. With spare capacity caused by a flagging domestic market, Cargojet revamped its network and entered the charter market, an area it could not really tackle earlier with its fleet tied up in daily scheduled business.
The airline had started out running a scheduled operation performing linehaul across Canada for the major parcel carriers and later branched out into ACMI operations.
“We never had the capacity to fly charters,” says Porteous. The shift came at the right time to catch a surge in demand in this segment, which has continued and appears set to carry into 2025.
“Charter has been very strong, even through the summer,” says Porteous, adding that demand for this has come from across the spectrum of industries.
The latest addition to the portfolio has been scheduled charters across the Pacific, courtesy of Great Vision HK Express, which serves Chinese e-commerce platforms. It has booked three weekly flights from Hangzhou to Vancouver. Some of that traffic continues on Cargojet’s domestic network to other Canadian destinations.
This three-year contract is adding an estimated C$116.2m to the airline’s revenues. During the peak season, the frequency is going up to six flights a week.
The peak season raises demand for the airline’s freighters across the board. In addition to its domestic linehaul network, which serves the likes of Canada Post and its courier offshoot Purolator as well as UPS and Amazon, the carrier’s ACMI operation is also facing increased demand, with DHL being the largest customer.
Still, Porteous expresses confidence that Cargojet can meet peak demand and still have room for ad hoc business during November and December.
Amazon has booked additional lift for this year’s peak season, calling for 767Fs where it had previously used 757Fs. Business has grown across all three major segments that Cargojet covers – linehaul, ACMI and charters. Not surprisingly, e-commerce has been the strongest, as the deal with Great Vision indicates.
Jamie Porteous. Photo: Cargojet
E-commerce growth
Porteous notes that Chinese e-commerce traffic moving on Cargojet flights is destined for the Canadian market. With ample freighter and bellyhold capacity to major US gateways available, routing US-bound traffic over Canada with a dedicated freighter flight does not appeal to Chinese merchants, he remarks.
He adds that Amazon is still growing at an accelerated pace in Canada. The percentage of online sales of the Canadian retail scene is still relatively low, and signals of lower interest rates should boost consumers’ readiness to spend, he reflects.
Cargojet’s ACMI business kicked off with a flight for DHL between Montreal and the integrator’s North American hub in Cincinnati. Over the years this has grown to 15 planes under contract, with a major spurt caused by the pandemic, which prompted DHL management to decide to rely less on bellyhold lift than before, Porteous notes.
In the final quarter of 2023, the carrier was flying altogether 18 aircraft for DHL, and two of these extra planes continued in 2024, bringing the present tally flying for the integrator to 17 aircraft.
Some freighter operators have broadened their scope to offer CMI service as well as leasing cargo planes. Cargojet management looked at the leasing option when it had surplus planes on its hands last year, and it already flies two 767s freighters for Amazon on a CMI basis. Leasing is not really an avenue that management is eager to pursue, Porteous says.
One sector that the airline retreated from is scheduled transatlantic operations. It used to run a weekly freighter to Cologne, but this was scrapped earlier this year – after more than 12 years of operation.
“We needed the aircraft to support ACMI,” says Porteous, adding that it was hard to compete in the market with one weekly flight, particularly during the summer, when passenger flights across the Atlantic abound. “I don’t see us get back into Europe scheduled flying. It was marginal at best,” he comments.
Photo: Cargojet
Steady growth approach
Cargojet’s rapid growth in recent years belies a rather steady approach that permeates the company’s culture. While management has taken decisive decisions, it has pursued a rather measured approach overall and eschewed jumping at emerging opportunities.
This consistency also shows in the change at the top last year, when company founder and chief executive Ajay Virmani stepped back into the chairman position and handed over the reins to chief commercial officer Porteous and Pauline Dhillon, who looks chiefly after marketing, administration and human resources. The co-chief executives have worked together for 22 years, and little has changed since their elevation, according to Porteous.
Management showed its readiness to take decisive steps when necessary when it decided to sell the 777s it had acquired as feedstock for conversion. While this certainly preserved cash in a market where passenger carriers have been scrambling for large widebodies, it met an unexpected twist when Great Vision approached Cargojet about a transpacific operation this year.
“We couldn’t help thinking: ‘where were you one and a half years ago?’” recalls Porteous. He agrees that the 767 is not the ideal aircraft to fly across the Pacific, but points out that the rise in e-commerce has changed the equation somewhat, given the relatively low density of typical e-commerce traffic.”
Cargojet’s transpac flights stop en route in Narita, which has worked out well, according to him. It has the additional benefit of being a good market for Canadian seafood, he remarks.
“We have not completely eliminated the possibility of adding 777s,” he says, noting that the company still holds four conversion slots with Israel Aerospace Industries (IAI) and that it has completed most of the paperwork related to the 777 with Transport Canada.
Still, there are no plans to revive this quest at the moment. The slow process of certification of the conversion programmes and the shortage of available feedstock make this a long-term scenario, he says, adding that Cargojet would go for a substantial number of 777s, not a contingent of a couple of freighters.
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