(Mississauga) Armed conflicts in Ukraine and the Red Sea have boosted cargo shipments for Cargojet as the current geopolitical context pushes companies to seek alternative transit routes.
The air cargo and aircraft leasing company saw its net profit rise almost 7% year-on-year to 32.5 million in its latest quarter, supported in part by higher revenue from charter travel to transport goods internationally.
“A lot of the charter activity we are seeing now is related to supporting both relief missions and military supplies, either in the Middle East or in Poland and elsewhere, to support Ukraine,” explained co-CEO Jamie Porteous during a conference call with analysts Monday.
In the Red Sea, ongoing missile strikes in Yemen by Iran-backed Houthi militants have caused major container ships to avoid the Suez Canal. The crisis has prompted some shippers to opt for air transport, increasing global air freight volumes 11% year-on-year for the third consecutive month in March, according to cargo analytics firm Xeneta.
“Air freight growth was primarily driven by increased volumes from the Middle East and South Asia as shippers shifted their services from ocean to air to avoid delays in Red Sea,” said Niall van de Wouw, chief air cargo analyst at Xeneta.
“We also cannot underestimate the importance of the growth of e-commerce, which shows no signs of slowing down in its most important sectors,” he added.
Cargojet proposed a similar solution. E-commerce’s larger shipments explain the growth in its domestic volumes as well as so-called wet leases, in which the lessor provides the aircraft, crew, maintenance and insurance for another airline, Mr. Porteous said.
He took issue with the current global situation that has boosted the Mississauga, Ontario-based company’s profits, warning of the downside of conflict.
“Our cautious optimism is tempered by increasing geopolitical uncertainty and potential supply chain disruptions,” it said in a statement.
However, Porteous clarified during the call that he viewed the Red Sea conflict “more in terms of opportunity than impact.”
“The fact that supply chains have been disrupted as a result of this could lead to – and has led to – additional ad hoc chartering opportunities,” he said.
For her part, the co-head of management, Pauline Dhillon, mentioned that streamlined maintenance processes, optimized schedules and better team management also contributed to reducing costs.
Cargojet reported revenue of 231.2 million for the quarter ended March 31, about the same as 231.9 million in the same period last year.
On an adjusted basis, Cargojet says it earned $1.86 per share in its most recent quarter, up from adjusted earnings of 97 cents per share a year earlier. The result nearly tripled analysts’ expectations of 66 cents per share, according to LSEG Data & Analytics.
Cargojet provides air cargo services throughout North America with its own fleet of 41 aircraft.