A Cargojet shipping facility is shown at the John C. Munro Hamilton International Airport in Hamilton on Friday, Feb. 23, 2024. Cargojet Inc. reported a first-quarter profit of $32.5 million, up from $30.5 million a year earlier.THE CANADIAN PRESS/Nick Iwanyshyn
Armed conflict in Ukraine and the Red Sea has ramped up freight shipments for Cargojet Inc., as global discord pushes companies to seek alternate transit routes.
The air freight and plane leasing company saw net earnings rise nearly seven per cent year-over-year to $32.5 million in its latest quarter, buoyed in part by higher revenue from trips chartered to haul cargo internationally.
“A lot of the charter activity that we’re seeing now is related to supporting both relief missions and military supplies either into the Middle East or into Poland and other places to support Ukraine,” said co-CEO Jamie Porteous on a conference call with analysts Monday.
In the Red Sea, ongoing missile strikes by Iran-backed Houthi militants in Yemen have pushed major container carriers to steer clear of the Suez Canal. The crisis has prompted some shippers to opt for air transport, bumping global air cargo volumes by 11 per cent year-over-year for the third month in a row in March, according to freight analytics firm Xeneta.
“Air freight growth was primarily driven by increased volumes from the Middle East and South Asia as shippers shifted services from ocean to air to avoid Red Sea delays,” said Niall van de Wouw, Xeneta’s chief airfreight officer.
“We also cannot underestimate the importance of e-commerce growth, which shows no sign of abating on its most prominent lanes.”
Cargojet offered a similar take. Stronger e-commerce shipments accounted for growth in its domestic volumes as well as so-called wet leases – where the lessor furnishes the aircraft, crew, maintenance and insurance for another airline – said Porteous.
He laid down a qualifier on the discord that has bolstered the Mississauga, Ont.-based company’s profits, warning of a flip side to the conflict coin.
“Our cautious optimism is tempered by the increasing geo-political uncertainty and potential supply chain disruptions,” he said in a release.
But on the call, Porteous clarified that he saw the Red Sea strife “more in terms of opportunity than impact.”
“The fact that supply chains have been disrupted because of that could lead – and have led to – additional ad hoc charter opportunities.”
Co-chief executive Pauline Dhillon added that streamlined maintenance processes and more efficient schedules and shift management also helped bring down costs.
Cargojet said revenue totalled $231.2 million for the quarter ended March 31, roughly on par with $231.9 million in the same period last year.
On an adjusted basis, Cargojet earned $1.86 per share in its first quarter, up from an adjusted profit of 97 cents per share a year earlier. The result nearly tripled analysts’ expectations of 66 cents per share, according to LSEG Data & Analytics.
This report by The Canadian Press was first published April 29, 2024.
Companies in this story: (TSX:CJT)
