Canada’s Cargojet Adjusts Costs to Align with Weaker Market Conditions

Cargojet reported softer market conditions in the first quarter of the year as international flying was subdued and has taken steps to reduce short-term costs.

The Canada-based freighter operator reported a 0.7% decrease in first-quarter revenues to C$231.9m, while earnings before interest reached C$34.6m compared with a C$44.5m loss last year and net earnings stood at C$30.5m against a loss of C$56.4m last year.

The company said that the revenue decline reflected a drop off in all-in scheduled and adhoc cargo and passenger charter revenues for the three month period due to a decrease in all-in charter flights to Europe and a decrease in ad hoc scheduled charters.

Meanwhile, domestic revenues increased slightly thanks to an increase in e-commerce and B2B volumes during the period and by contractual customers’ consumer price index increases.

The firm’s profitability performance was affected by a change in the fair value adjustment of stock warrants as well as the decrease in all-in charter revenues.

On an adjusted basis, the company actually saw its operating profits (ebitda) fall 8% to C$75m.

To meet weaker market conditions, the company is also looking to reduce costs in the short term.

“In this time of uncertainty, the entire team is focused on managing costs for any fluctuations in volume,” the carrier said.

“Management has made progress in the first quarter to reduce costs related to training, overtime, and the use of temporary labour. Certain cost improvements impacted the run rate in the back half of the first quarter and further improvements are anticipated in the remainder of the year.”

Earlier this year the company announced it would reduce its freighter conversion plans to four B777s from a previous plan for eight of the aircraft, although it would maintain the slots.

In an update, the company said: “In February 2023, the Company signed agreements for the sale of two Boeing 777-300 aircraft, and is in the process of signing a Letter Of Intent for the sale of another Boeing 777-300 aircraft, for a total of $80.5m.”

There will also be a delay to the delivery of the first of the four remaining B777 conversions the company has lined up as “the industry continues to manage through supply chain issues and
regulatory approvals”.