Cargojet Prioritizes Cost Management Amid E-commerce Volume Decline

Canada-based freighter operator Cargojet will focus on cost reduction initiatives as a slowdown in e-commerce and business-to-business demand hit its financial performance.

The airline saw second-quarter revenues decline by 15% year on year to C$209.7m, due primarily to decreases in domestic network revenues, all-in charter revenues, fuel surcharges and other pass-through revenues. ACMI revenues however increased by C$2.7m.

The revenue fall in its domestic and all-charter was down to a decrease in e-commerce and B2B volumes during the period, partially offset by contractual customers’ consumer price index increases.

Adjusted earnings before interest, tax, depreciation and ammortisation (ebitda) was down 8.4% at C$74.3m due to the decreases in domestic and all-in charter revenues.

Net income dropped 80.7% to C$31.1m but the company pointed out this was largely down to the change in the fair value adjustment of stock warrants, as well as the domestic and all-in performance.

Cargojet president and chief executive Ajay Virmani said: “To prepare Cargojet to ride the current economic cycle, we shifted our focus to cost management as well as right-sizing our network, while curtailing growth CapEx and focusing on generating free cash flow.

“Our ebitda margin of 35.4% in this quarter vs. 32.9% prior year clearly demonstrates that our cost management initiatives are yielding the desired results.

“While we expect economic conditions to remain difficult, the shift in consumer spending towards travel and leisure vs goods is expected to normalise towards the end of this 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.