Cargojet Inc. provides update on its business strategy

MISSISSAUGA — Cargojet Inc. provided an update on its ongoing efforts to streamline its fleet strategy and the associated impacts to capital expenditures and cashflows.

“Throughout 2023 we exercised caution in deploying growth capital given the softer economic conditions,” said Dr. Ajay Virmani, Executive Chairman, “Forecasts continue to indicate that the international air cargo market will remain soft in the short to medium term and deploying B-777s into the market would not be strategically prudent. We have decided to exit our commitments for the four remaining B-777 aircraft, while continuing to flex our B767 fleet to accommodate our organic growth strategy,” noted Dr. Virmani. “Cargojet has substantially completed the operational groundwork to be able to enter the B-777 market should economic conditions change. Cargojet has also retained the rights to provide the optionality for future conversion slots.”

As a further update to the above comment, the Corporation is providing the following estimated capital expenditures targets for the years ending December 31, 2024 and 2025 (see “Notice on Forward-Looking Statements” below):

Cargojet says they will continue with a disciplined approach to capital allocation, focusing on four key principles;

1. Maintain dividend growth;
2. Continue to identify growth opportunities to deploy capital that meet its margin requirements;
3. Maintain a share buyback program under its normal course issuer bid (“NCIB”). The Corporation will determine the ultimate size of the buyback program based on available growth opportunities and subject to market conditions; and
4. Target Net Debt to Adjusted EBITDA Leverage Ratio⁽¹⁾ of 1.5x to 2.5x (2022 Leverage Ratio of 2.1).

As previously disclosed, the Corporation has four surplus B757 freighters and is exploring options such as dry lease or ultimate sale of these aircraft. The potential sale of these four B757’s is not anticipated to have a material impact on Revenues and/or Adjusted EBITDA. In the event that the Corporation enters into a leasing agreement, the Revenue and Adjusted EBITDA would increase in accordance with typical market terms and conditions for similar aircraft. The fleet table above assumes two aircraft are dry leased and the remaining two B757’s are sold.

Cargojet currently owns the feedstock for two B767’s and plans to convert them as the demand begins to recover over the next couple of years. Management believes that the current fleet plan will be sufficient to meet its short to medium-term objectives and Cargojet is well positioned to scale up operations as the economic cycle returns to growth.