Canada’s Cargojet closes $273mn offering to buy freighters

Cargojet Airways (W8, Hamilton, ON) confirmed in a news release dated February 1 that it raised CAD350,156,500 Canadian dollars (USD273 million) through a share offering with the aim of funding an aggressive fleet expansion. The company intends to apply the net proceeds of the offering, in which 1.642 million shares were sold at CAD213.25 (USD166.38) per share, with three “strategic priorities” in mind – to expand domestic capacity and facilities, to pursue a growth strategy in the United States and internationally, and to repay indebtedness. The Covid-19 pandemic has increased demand for Cargojet’s domestic air cargo services due to the dramatic increase in e-commerce activity, it said, and so it intends to use part of the proceeds, along with cash on hand and drawing on a revolving credit facility, to fund the acquisition of five B767 dedicated freighters for delivery between 2021 and 2023, costing about CAD200 million (USD156 million). These aircraft will expand domestic capacity, alongside investments in a new hanger and additional land-based infrastructure in Canada. Explaining its US and international growth strategy, Cargojet said that air cargo capacity in general had been severely constrained due to the reduction of passenger aircraft operating on international routes and it remains uncertain when such capacity will return to pre-pandemic levels. So another part of the proceeds will go towards the acquisition of two long-range B777 freighters for international routes, for delivery in late 2023 and the first half of 2024. The company estimated the cost of each of these at about CAD75 million (USD58.6 million). Cargojet Airways also intends to deploy CAD89.3 million (USD69.8 million) of the new funds to pay off loans for six aircraft maturing in the next 12 months and CAD98.9 million (USD77.3 million) to retire the outstanding balance on its credit facility. Even before the pandemic struck, Cargojet had been experiencing strong growth in e-commerce shipments as Amazon.com and other retailers compete with faster delivery standards and direct-to-consumer business models. As previously reported, in late December 2020, Cargojet and DHL Express expanded their long-time ACMI partnership with the addition of international routes between Hamilton, ON and Cincinnati Int’l, Monterrey General Mariano Escobedo, and the United Kingdom. In an interview with the Toronto Star newspaper published on January 30, Cargojet Airways founder and CEO Ajay Virmani confirmed that “we have committed to buy two superjumbo jets” for 2023 and “we’ve picked up five passenger aircraft that will enter our fleet in 2021 and 2022.” “After 9/11, every airline was parking planes and in two to three years the passenger business was back close to what it had been. This time, many airlines are divesting planes because they don’t anticipate demand coming back for up to five years and they can’t afford to sit on those assets,” he said.