Cargojet Q2 2026 Earnings Call: Complete Transcript

On Tuesday, Cargojet (TSX: CJT ) discussed second-quarter financial results during its earnings call. The full transcript is provided below. This transcript is brought to you APIs. For real-time access to our entire catalog, please visit for a consultation.

Access the full call at Summary Cargojet Inc. 3 million, marking improvements both sequentially and year over year. 2% and emphasized its one-fleet strategy, which enhances flexibility and fleet utilization. Despite headwinds from higher fuel prices and geopolitical uncertainty, Cargojet's business model and disciplined execution allowed it to perform well.

The newly completed five-year pilot agreement includes a 26% wage increase and productivity improvements, helping align with market standards. Cargojet's domestic overnight network and charter business segments performed strongly, with significant contributions from the Liege and Tel Aviv routes. 6 times. Future guidance remains cautious due to global economic uncertainties, but the company is optimistic about growth opportunities, particularly in international markets.

Full Transcript OPERATOR Good day and welcome to the Cargojet Canada conference call. Today's conference is being recorded. At this time, I would like to turn the call over to David Tomljenovic. Please go ahead.

David Tomljenovic, Vice President, Investor Relations Good morning, everyone, and thank you for joining us today. With me on the call today are Ajay Virmani, CEO; Pauline Dhillon, Co-CEO; Aaron McKay, Chief Financial Officer; Sanjeev Maini, VP Finance; and Remy Tromble, General Counsel and Corporate Secretary. After opening remarks about the quarter, we'll open the call for questions. I'd like to point out that certain statements made on this call, such as those relating to our forecasted revenues, costs, and strategic plans, are forward-looking within the meaning of applicable securities laws.

This call also includes references to non-GAAP measures like adjusted EBITDA, adjusted earnings per share, and return on invested capital. Please refer to our most recent press release and MD&A for important assumptions and cautionary statements relating to our forward-looking information and for reconciliation of non-GAAP measures to GAAP income. I'll now turn the call over to Pauline. Pauline Dhillon, Co-CEO Thank you, David.

Good morning, everyone, and thank you for joining us. Today we delivered another strong quarter, demonstrating once again the resilience of Cargojet's business model and the strength of our long-term customer relationships despite continued market uncertainty. These results would not have been possible without the dedication of our team members. I would like to take a moment and sincerely thank every member of the Cargojet team for their continued commitment and outstanding efforts, as well as thank our customers for continuing to trust Cargojet with their time-sensitive shipments each day.

Our premium service, built on reliability and consistency, continues to differentiate Cargojet. 2%, reflecting the operational excellence our customers have come to expect. Throughout the quarter we remained focused on what we can control: delivering exceptional service, operating safely and efficiently, and deploying our fleet where it creates the greatest long-term value. Our one-fleet approach continues to be a significant competitive advantage.

It gives us the flexibility to dynamically deploy aircraft across our network, improve utilization, and pursue the highest-return opportunities. As market conditions evolve, higher fuel prices and ongoing geopolitical uncertainty remained headwinds during the quarter. Despite those challenges, our resilient business model, disciplined execution, and focus on our customers enabled us to deliver another strong quarter. Aaron will provide additional detail on our financial performance in a few moments.

Before turning to our business segments, I'd like to briefly comment on our recently completed pilot agreement. We are pleased to have reached a well-balanced five-year collective agreement that recognizes and competitively compensates our pilots while preserving the flexibility and productivity that support Cargojet's long-term competitiveness. The agreement also continues our long-standing no-strike, no-lockout provision, providing stability and operational certainty for our customers, our pilots, and our valued team members. I would like to sincerely thank our pilots, ALPA, and everyone involved for their professionalism throughout this process.

As customer agreements come due, we will look to pass these costs through. Many of these conversations have begun, but we anticipate a lag in timing. We look forward to building on this partnership over the next years. Turning to our business segments, our Domestic Overnight continued to perform well and remains the foundation of Cargojet's business.

Supported by strong customer demand and exceptional service, it continues to play an essential role in Canada's supply chain. Charter flying delivered another strong quarter, including continued support flying for UPS. This business segment continues to enhance fleet utilization, strengthen customer relationships, and create long-term value. This year we were proud to celebrate 25 years of partnership with UPS.

We are pleased to continue to fly their charters for the remainder of the year to the end of Q4. We look forward to supporting their continued growth for years to come. One of Cargojet's greatest strengths is our diversified portfolio of long-term customer relationships across our Domestic Overnight network, charter business, hybrid, ACMI, interline, and international operations. That diversification provides resilience, creates flexibility, and positions us well to navigate changing market conditions while continuing to create long-term value for our shareholders.

Our European hub in Liege continues to exceed our expectations. Strong demand, including our recently launched Liege-Tel Aviv service, demonstrates the opportunities to grow our international network by leveraging existing assets while improving fleet utilization. We believe this model can be replicated in other regions as we continue expanding our global footprint. Our interline business also delivered another excellent quarter while growing volumes from our airline partners, further strengthening our domestic network and improving fleet utilization.

Our ACMI business remained stable during the quarter and continues to provide an important source of diversified revenue. As opportunities emerge, we will continue allocating aircraft where they generate the strongest long-term returns. Overall, we are very pleased with our performance for the quarter. Looking ahead, we expect the global economic and geopolitical environment to remain uncertain.

However, Cargojet has successfully navigated changing market conditions for more than two decades by staying focused on what matters: our customers, our people, and disciplined execution. We remain confident in our strategy and in the strength of our business. We have exceptional people, long-standing customer relationships, and a resilient operating model that has consistently performed through changing market conditions. Together, these strengths position Cargojet to continue creating long-term value for our customers, our team members, and our shareholders.

With that, I'll turn the call over to Aaron. Aaron McKay (Chief Financial Officer) Thank you, Pauline, and thank you to everyone for joining us today. 3 million of adjusted EBITDA, improvements in each metric both sequentially and year over year. As Pauline mentioned, the rising price of fuel had an impact on our results this quarter and I think it's worth taking a moment to walk through how, like other industry players, Cargojet generally passes on fuel cost to customers through a surcharging mechanism.

Because fuel surcharges increase revenue in direct proportion to changes in fuel costs, we do not expect them to have a material long-term impact on profitability. As a result, when fuel surcharges increase significantly, reported adjusted EBITDA margins can become temporarily diluted. In the second quarter of 2026, that dilution amounted to approximately 260 basis points of margin with no material impact on adjusted EBITDA itself. 9 million or 5% year over year.

9 million, an improvement of 3% year over year and a slight improvement sequentially. 7 million, representing a slight sequential improvement from the first quarter of 2026, but a 12% decline year over year as the transition from East—West transoceanic flying to North—South intra-Americas flying had not been fully completed in Q2 of 2025. 7 million of net revenue, representing 37% year over year growth, as we continue to see success with our Liège service, Central and South American charter partner and support flying for a previous MD-11 operator.

While long-term visibility remains somewhat limited, priority air cargo continues to be one of the few reliable options for customers requiring certainty and speed in moving critical shipments. This makes it a valuable service for many customers despite the current market environment. Our revenue growth combined with our continued focus on revenue quality, cost control and fleet and flight-level asset utilization resulted in another strong quarter of adjusted EBITDA. 7% when adjusted for the approximately 260 basis point compression as a result of fuel price increases represented a slight year over year improvement in the core business.

2 million during the quarter. 5 million cash outflow experienced in the second quarter of 2025. 5x. Consistent with our capital allocation priorities and our commitment to returning capital to shareholders, we also repurchased 121,390 shares during the second quarter of 2026.

We will continue to evaluate opportunities to repurchase shares when we believe they represent an attractive use of capital. Before I conclude, I want to provide some additional context regarding our recently completed five-year pilot agreements. As Pauline noted, we're pleased to have concluded a new agreement with our pilot group that moves us more towards market standards of both compensation and operational productivity. Effective July 1, 2026, our pilots will see a wage increase of 26% followed by annual increases of 5% each over each of the subsequent four years through June 30, 2031.

Just as the agreement brings our pilot group more in line with market on wages, it also includes several productivity provisions which bring us closer to market standards, including moving us from a baseline of 15 to 16 working days per month, with an option for those who value the current work—life balance to stay at 15 days for most of the year with proportional compensation. These improvements bring our business more in line with the market.

As Pauline noted, a key component of this agreement is the continued inclusion of the no-strike, no-lockout provision which recognizes the different operational requirements between cargo and air passenger carriers, as the provision provides our customers with confidence in the continued reliability and stability of our operations. For clarity, crew costs as reported in our financial statements include several costs which are not directly driven by wages, including per diems as well as hotel and transportation costs. Costs driven directly by wages have historically represented approximately 60% to 65% of the total crew costs reported in our financial statements.

Overall, we believe this agreement provides the appropriate balance between recognizing the important contribution of our pilots, maintaining our competitive position, and providing the long-term operational certainty required by our customers. Absorbing these costs without long-term impact to our margins is critical to our business. As you know, we've been focused on cost control initiatives for some time and as Pauline mentioned, as customer agreements come due, we will look to pass through the additional cost increases. That will take some time to work through.

But I'll note that some of these conversations have already begun and with that, I'll hand the call back to Pauline. Pauline Dhillon, Co-CEO Thank you, Aaron. In previous quarters, we have highlighted the elevated levels of volatility and uncertainty across our markets as we move through the third quarter. These challenges remain, but we are also seeking new opportunities to emerge.

Our partners continue to grow, which gives us confidence that their growth will create additional opportunities for Cargojet. More importantly, we remain focused on pursuing selective and accretive international growth opportunities that leverage our existing fleet. We have said many times that Cargojet is built for change. What has become evident during this quarter is that we are also built for disciplined growth.

Our business continues to evolve. Over the past several quarters, we have challenged ourselves to identify opportunities for improvement across our entire organization, from finance to sales and technology to operations. While the foundation of Cargojet will always remain the same, a stronger and more agile Cargojet continues to emerge. I understand that change can be challenging.

That is why I want to extend my sincerest and deepest appreciation to the entire Cargojet team. It is their hard work, their commitment and their belief in this organization that continues to drive our success. With that, operator, we'll take questions. OPERATOR Thank you.

Ladies and gentlemen, if you'd like to ask a question, please press star one on your telephone keypad. If you'd like to withdraw a question, press star two. One moment please for your first question. Your first question comes from Konark Gupta from Scotiabank.

Please go ahead. Konark Gupta, Analyst at Scotiabank Thanks and good morning everyone. Congrats on a good quarter. Pauline Dhillon, Co-CEO Thanks, Konark.

Konark Gupta, Analyst at Scotiabank Morning, Pauline. I want to dig into the ACMI segment a little bit here. DHL recently reported their quarterly numbers and seems like they're seeing a volume inflection in their Express segment. I guess those are your customers.

Obviously one of the biggest customers you have. Just curious, when do you see the inflection in your ACMI business with them? I mean, is there any disconnect between what you do versus what they are seeing in their volumes, or they haven't yet given you sort of incremental volumes for the next little while. Pauline Dhillon, Co-CEO Yeah, Konark, I'll take that question.

No, they haven't given us any indication at this time, but we have a very strong relationship with DHL. You know, we've always been their first-in and last-out operator. As their volumes continue to grow, we definitely look at that as opportunities for Cargojet's ACMI growth. Aaron McKay (Chief Financial Officer) The only other thing I'll add there—it's Aaron here, Konark—the only other thing maybe I'll add is by the end of Q2 last year we had completed the transition to the North—South intra-Americas flying for them.

So I would expect from a comp perspective, as you look forward to future quarters, you'll be more in line. You won't see the same annual declines. Konark Gupta, Analyst at Scotiabank I see. So the comp effect will normalize going forward in the second half, but we should not expect maybe a big turnaround in volumes, if I understand correctly.

Pauline Dhillon, Co-CEO Well, at this—sorry. We anticipate that they will grow because that's where they're trending at this point. But their projections for Q3, Q4 have all indications that ACMI and their volumes will grow. And as I stated earlier, we are their first preferred partner of choice.

We're the first in and the last out. So as market trends change, as global flows increase, we are positioned well to take on any additional ACMI flying that they may have. Konark Gupta, Analyst at Scotiabank Understood. That makes sense.

Thanks. And maybe, Aaron, on the fleet side, it seems like you haven't changed anything for the fleet plan, but I noticed that this 767-200 that you guys are converting right now that's coming in 2027—looking to offload that.