Cargojet (TSE:CJT) executives emphasized disciplined execution and cost control amid ongoing global trade volatility during the company’s year-end conference call, while pointing to strong momentum in its domestic overnight business and several tactical steps to reposition capacity.
Leadership transition and operating backdrop
Executive Chairman AJ Virmani opened the call by framing Cargojet as operating “at the intersection of global trade, capital discipline, and time-critical logistics,” and said the company’s focus is on how it manages through cycles. Virmani highlighted Cargojet’s transition to a single-CEO structure as part of a long-planned succession framework, with Pauline Dhillon taking over as Chief Executive Officer. He said the board’s priorities for management include profitable growth with strong returns on invested capital, operational excellence and reliability delivered safely, rigorous cost control while maximizing fleet utilization, and continued investment in people and leadership depth.
Both Virmani and Dhillon credited employees for maintaining strong service levels through what Virmani described as one of the roughest winters he has seen in 30 years. Dhillon said peak-season on-time performance reached 99% despite extreme conditions across Canada.
Fourth-quarter results: strong margins despite modest revenue decline
Chief Financial Officer Aaron McKay said Cargojet delivered adjusted EBITDA of $95 million in the fourth quarter, with an adjusted EBITDA margin of 33.4%, even as total revenue declined 2.9% year over year. He attributed the margin performance to disciplined execution and expense controls, noting the company’s cost control initiatives helped keep margins in the low-to-mid 30% range.
McKay also addressed controllable costs, telling analysts that the results reflect outcomes of ongoing cost initiatives, including work to size the crew pool appropriately. He said overtime costs have come down “quite a bit” and that those savings should continue into 2026, while noting the pilot agreement in 2026 will affect crew costs.
On accounting items, McKay said the fourth-quarter depreciation figure should be used as the run rate going forward, referencing a reevaluation of depreciation. He also said working capital was impacted by year-end items such as accounts receivable being “a little elevated,” and he expected at least a modest reversal.
Domestic overnight growth offset weaker international activity
Cargojet’s domestic overnight business was a standout, with fourth-quarter revenue of CAD 120.2 million, up CAD 17.4 million, or nearly 17%, from the prior year. McKay said the domestic business rose almost 14% for the full year, driven by continued e-commerce penetration across Canada and resilient consumer demand through the holiday season.
In the question-and-answer session, Dhillon said the domestic growth was “primarily driven by e-commerce and consumer spend,” adding that Cargojet remains cautiously optimistic about 2026 and expects continued e-commerce adoption in Canada. She said the company hopes to see single-digit growth in the first quarter, while noting results will depend on consumer purchasing power.
McKay also cited changing retailer stocking patterns as a possible factor in shipment flows, describing what he viewed as some pull-forward stocking earlier in the year, a hesitation in the third quarter, and then a pickup for the holiday season.
Internationally, management said long-haul transatlantic and transpacific lanes continued to face geopolitical uncertainty. Dhillon referenced China Customs data indicating 2025 experienced the first decline in e-commerce volumes since 2022, including a reported 28% drop for the full year and a 50% decline in China-to-U.S. e-commerce volumes for the third consecutive month in December. She said Cargojet views the fourth quarter of 2025 as the trough for its ACMI customers and expressed cautious optimism that conditions could improve toward the end of 2026 if political, tariff, and economic conditions improve.
McKay reported ACMI revenue of CAD 64.6 million in the fourth quarter, down CAD 18.9 million year over year, citing lower activity and shorter stage lengths on north-south routes compared with the prior year. He said current activity is aligned with the baseline economics of Cargojet’s long-term ACMI agreements, supporting “revenue stability and certainty moving forward.”
Charter revenue totaled CAD 58.2 million, down from CAD 64.4 million a year earlier. McKay said the decline was primarily driven by muted incremental peak-season flying for an Asian charter partner amid unfavorable tariff and trade conditions, partially offset by increased seasonal flying for some long-term customers.
MD-11 grounding creates event-driven charter demand; China flying suspended
Dhillon said fourth-quarter results were impacted by event-driven activity tied to the grounding of MD-11 cargo freighters, which reduced capacity for affected operators. She said some long-term partners asked Cargojet to support their needs in the fourth quarter, and the company continued supporting them into the first quarter.
In response to analyst questions, management clarified that the MD-11-related benefit showed up in the charter line of business. Virmani described the opportunity as quarter-to-quarter but said Cargojet expects it to last at least until the third or fourth quarter of next year, adding that the company has not seen updates on when or if MD-11 aircraft will return to service. He also said the situation has created a “54 aircraft capacity lag” in the global cargo market and that the revenue contribution is fluid depending on hours flown. Virmani added that the MD-11-related flying “makes up more than what we had in China and some of the other charters.”
Separately, Cargojet discussed its China charter agreement. Dhillon said that when the agreement was announced, expected total revenue was approximately CAD 160 million, and that due to early success and additional flying in late 2024 and early 2025, the company approached that value in early 2026. Given current conditions, Cargojet and its partner mutually agreed to suspend ongoing service early in 2026. Management said there was no termination fee or penalty, characterizing the change as a mutual suspension amid shifting trade and tariff dynamics. Dhillon said the company expects new arrangements with existing and new partners to more than replace the expected minimum revenue in 2026 from the prior China flying, while keeping aircraft closer to home.
Fleet, capital spending, and leverage priorities
McKay said Cargojet completed the divestiture of its last Pratt & Whitney-powered aircraft, leaving the 767 fleet standardized on GE engines to optimize spare engines, parts, and maintenance. The operational fleet stood at 41 aircraft at the end of the fourth quarter.
Fourth-quarter capital expenditures totaled $45.6 million, including $37.5 million of maintenance CapEx and $8.1 million of growth CapEx, compared with $136.9 million in the prior-year quarter. Looking ahead, McKay said Cargojet intends to tightly control growth CapEx through 2026 and tie any growth spending to new long-term committed revenue agreements.
On 2026 spending, McKay said the company expects CapEx to be largely maintenance-related, estimating gross maintenance CapEx in the CAD 190 million to CAD 210 million range. He noted there may be some gross growth CapEx in the first quarter for delivery payments, which he said would be more than offset by proceeds expected in the first quarter from aircraft sold in 2025. In response to a follow-up question, he indicated that, independent of additional sale-leaseback transactions, net CapEx could be roughly in the CAD 160 million to CAD 170 million range.
On leverage and capital returns, McKay reiterated a long-term objective to maintain net debt to adjusted EBITDA below 2.5x to support the investment-grade credit rating achieved in the second quarter. He said the ratio was “slightly elevated” at year-end 2025, and that pro forma for proceeds received in early 2026 from aircraft sold in 2025, net leverage was 2.8x. He said Cargojet plans to balance deleveraging with shareholder returns through “continued dividend growth” and the opportunistic use of its normal course issuer bid.
Management also said it believes the current fleet provides enough capacity to meet customer commitments while capturing near-term growth opportunities, with Virmani stating the company works to find flexibility through scheduling and fleet rotation rather than turning away charter demand.
About Cargojet (TSE:CJT)
Cargojet Inc operates a domestic air cargo co-load network between sixteen major Canadian cities. The company provides dedicated aircraft to customers on an Aircraft, Crew, Maintenance and Insurance basis, operating between points in Canada, USA, Mexico and Europe. The company also operates scheduled international routes for multiple cargo customers between the USA and Bermuda, between Canada, UK and Germany; and between Canada and Mexico.
