Q4 2021 Cargojet Inc Earnings Call
Okay.
Good day and welcome to the cargo chest Conference call. Today's conference is being recorded at this time I would like to turn the conference over to Pauline Dhillon. Please go ahead.
Good morning, everyone and thank you for joining us on the call today with me on the call today are a jade Rahmani, our president and Chief Executive Officer, Jamie Porteous, Our Chief strategy Officer, and she Sanjiv, many our interim financial officer. After opening remarks about the quarter, we will open the lines for questions I would.
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 EBITA and adjusted EBITDAR. Please refer to our most recent press release, an M. D N a for more important assumptions and cautionary statements relating to forward looking information and for reconciliations of non-GAAP measures to GAAP income.
Now I'll turn the call over to a J.
Yes.
Thank you Pauline and thank you everyone for joining us this morning.
When I spoke to you in November 2021, there was a lot of optimism in the air about the reopening of the economy.
But in December .
They reversed course and omnicom.
It's yet another wave of Lockdowns and the challenges that came with that.
Once again, we are seeing some signs of hope at this time I truly hope that the reopening can be sustainable.
Before I jump into the quarterly results I wanted to share a few observations about the macro trends affecting our business.
Number one digitization.
Beat educational work of shopping.
Digital adopt adoption has gone through dramatic shifts in virtually every industry.
We believe that it is no longer an emerging trend rather it is becoming the new normal.
The trend is profound and amplification.
Vacations for every for every business extra cargo that we see this trend could be a net positive.
Number two hybrid.
I talked about hybrid everything for our last Investor call. This may be the lasting legacy of Covid and workplaces.
Have to adopt a new culture.
Among many other benefits that we see hybrid.
Work, allowing for a better work life balance.
Essentially reduced number of vehicles on the road create more leisure travel and activities.
Which would require online shopping for more categories of goods.
E Commerce.
While this trend was created was already showing strong growth.
Equal with last two years have brought forward at least five years of growth.
Even in the hardest even the hardest opponents of online shopping have now accepted the reality of E. Commerce, many companies, who did not ramp up their e-commerce .
And did not believing that have now started to do so.
In this new World order instead of opening a new store in a shopping mall entrepreneurs now opened their new stores on online portals.
This is a secular shift and we expect this trend to continue to be a tailwind in the medium term.
Number four passenger airlines and cargo.
A prolonged pandemic has triggered structural changes in the aviation industry.
With the dramatic reduction in cross border passenger air travel a significant belly cargo capacity has been taken out of the global supply chain.
At the same time, the pandemic has accelerated e-commerce at an unprecedented rate, creating even more demand for air cargo services.
While dedicated air cargo operators have tried to step up in the short term.
Means a significant gap in the worldwide airlift capacity versus the demand that is expected to persist in the medium term.
As amazing as major face passenger airlines shut their larger widebody fleet 740 Sevens and eights the eighties.
I'm all in favor of smaller more fuel efficient narrow body aircrafts that there is that the direction and resulting belly cargo capacity will likely become longer term structural shifts.
That is very closely watching these trends and its positioning its business.
To capture emerging growth opportunities.
Now, let me get into the fourth quarter results.
Q4 revenue growth of 26, 1% for the quarter compared to the prior year, reflecting the results of our previously announced diversification strategy that is helping deliver a balanced portfolio of growth.
Each line of business was a strong contributor due in Q4.
I stick network posted a growth of 18.2% you.
<unk> posted 26, 7% and the charter business, both posted the largest of all 54, 6% growth.
For the same period last year.
Overall full year growth averaged 13.4% despite extremely difficult comparison to prior year.
The adjusted EBITA for the full year stands at $293 1 million compared to 281 7 million for the same period in 2020 and inquiries out 4%.
This result must be viewed in the context that the cargo jetblue and extra ordinary number of charter flights to Asia during quarter two of 2020, but bring P. P. He lives in Canada.
It is worth mentioning.
We remain disciplined operator and have used over strong results do invest in growth reduce debt paydown aircraft leases and build balance sheet capacity to fund future growth.
Given the structural shifts noted earlier in my remarks.
We're planning to enter a higher capital expenditure phase over the next three to four years.
Okay. This will this will be to take advantage of the long term growth opportunities.
And we believe we have sufficient liquidity to fund their schools.
Our balance sheet remains strong the leverage ratio at 1.36 times adjusted EBITDA.
On the operational side.
Volume growth remained strong average daily volume is up 25, 4% in quarter four versus prior year and is up 24, 3% for full year compared to last year.
We grew our fleet size with 31 aircraft.
Our on time performance remains.
98%.
And this is a critical deliverable given their importance placed on the target by our customer.
We did face some on time performance challenges in the months of November December and January , especially with the book offs because of the Covid situation.
We remain focused on cost.
Expense.
And expense management and full year.
SG&A cost is down 9.6%.
One area that remains a challenge obviously from over numbers as the cost of.
Bruce.
The crew cost.
Have been impacted by a combination of factors, including the recently implemented new cargo fatigue rules by transport Canada.
That discriminate Canadian air cargo carriers against the U S and other international all cargo carriers.
We are also investing in pilot training to prepare for growth in our fleet.
This has added short term cost in the quarter. We are focused on finding cost effective solutions to address their sandwich.
And over the coming quarters.
In order to take advantage of the new digital and global Aviation reality.
We're investing heavily in acquiring and retaining talent.
We have now built a strong.
Experienced and seasoned international cargo team that nicely complements our core talent that continues to successfully manage our growing domestic network business.
Once again, thank you for joining us this morning, we'll now open the call.
To the questions.
Thank you.
Ladies and gentlemen, if you would like to ask a question. Please signal by pressing star followed by one on the.
Its star one to queue for a question.
Well move to our first question from Conor <unk> Gupta of Scotiabank Social capital. Please go ahead. Your line is open.
Thank you operator, good morning, everyone.
So my first question is on the fleet I think looking at the fleet table in the MD&A verses, what you disclosed in Q3.
It seems like there is an additional five Boeing 757, which are coming in 2022 and that there are now eight going triple Sevens are coming between 2023 and 2026 instead of four that you're anticipating before.
So I wanted to ask you what is the purpose of investing in incremental aircraft. At this point here are you seeing any kind of you know inventions from your existing and new customers are in a in the sense that they bought to secure more capacity.
Only on spec.
Is that do you anticipate the amount of the future.
You know, we never go out and gambling back on these things Oh No Ark you should look at looked at over 21 year track record on these first of all three aircraft I need it badly do 760 sevens I need it badly for our maintenance and spare aircraft.
Because every time, we do have one you know customers have requested that we fly easier by our charters sitting and deployed any which way we can because of the shortage of capacity.
So those three aircraft that needed a forever in house needs.
To cover our operational and maintenance needs on a daily basis are the 757 strategies an interesting one.
That we need to the domestic network.
<unk> is at the present time, a combination of seven 6% and seven slide seven network. So all the strategies to more use more 75, 7% domestically and.
Take the 760 sevens out for AC My business. So the strategy is obviously based on the band and what I hear from the customers and what we have been told and what the requests are so the 757 also provides our customer with better service.
As they can be more nonstop flights from Hamilton, Western Canada, and Eastern Canada, and similarly from Montreal, as well and to pay back. So 760 Sevens are a bigger aircraft they are more challenging to handle.
The stop over flights from an it bag of Calgary and controlling onto Vancouver, certainly a it takes more time. So this also improves over service. It also.
Improved more capacity that we need for growth and secondly, thirdly. It also frees up 760 sevens or international and you see it like a man, which seems to be continuously high.
So therefore sevens have been added based on our discussion ongoing discussion with customers. When we look at the ongoing demand that's going on and all the backup is like if you have two or four extra planes, there's sufficient demand to even dry lease. These if we needed to so we have a we have back.
Our plans after the backup plans. These are not just back of aircraft.
Okay. That's good color do you think you'll end up.
So far the air felt that you are expecting this year entered into seven five San Luis you mentioned them. That's the relief from the Celtics I'm sorry, your CMI opportunities.
When do you expect to formally signed the CMI opportunities foreclose the Celtics.
We'll announce them as soon as we sign them. There's ongoing discussions we also have opportunities that are beyond.
Beyond HDMI like those out for you know, they're on international growth and a similar to what we do domestically.
Also have opportunities to sign longer term.
Block space agreement, even on some of the international lanes.
We service AD hoc are on charter basis, and so we have choices you can either go that route or we can go with you My route.
We would we don't like to form up things and tie up until.
Until we know that the aircraft is on its way at least three to four months before so the opportunities are there. We just haven't signed them up you know as I said on both a block space agreement just like they were domestic network and also on a sea of my I would imagine that.
Probably I'm, hoping that next quarter, we'll have more to announce on those.
That's great color. Thanks last one for me a sense, even if you have any guidance.
Guidance on Capex for this year and next year, given the increase in fleet size.
Yeah.
Uh huh.
The Capex plan for this year definitely move up with this new additions.
B will be in the range of 525 to 550 million that includes might get a maintenance capex as well.
So so that will be the range, which we will be looking for in 2020 due in 'twenty two 'twenty three it will be in the range of 300 to 350 billion.
Are you looking at 120 million for maintenance Capex and the balances our growth. We also have do simulator 767, and Triple Sevens are that we will be doing other one pilot training in house and Hamilton.
Which would also you know longer term. This would also bring their cost down and increase that we're training and efficiency and safety as well so.
But the but the.
Important part here corner to notice that we plan to fund this growth mostly from internal cash flows and secondly, we do have a line of credit of 700 million. That's on an underutilized. So we have sufficient liquidity to fund this growth.
Going forward.
That makes perfect sense, thanks for that.
Okay.
Well move onto our next question from Chris Murray of HEB Capital markets. Please go ahead. Your line is open.
Thanks, So just one of the questions I have unfortunate situation, but with what's going on in Russia, Theres been a lot of discussion around a lot of Russian cargo carriers moving out of the market and I'm. Just wondering if you have any commentary around how this is changing what you are seeing some demand even on short term charter and if theres any longer term opportunities for you to.
Pick up other other lift that may have been dislocated.
Yeah. So you know there is a number of fresh and carriers that have been grounded with Antonov you know at least 20 to 25 747 cargo planes.
If he was triple sevens.
And if he was seven five sevens that are operated by the Russian carriers. So.
So yes short term we have had a lot of inquiries. We've had a lot of demand are you know wherever we can plug it over the weekend, we have done it and we will continue to do so take advantage of those AD hoc opportunities, but most importantly, we do not have presently the fleet to deploy a wish we had 20 aircraft.
Which we could advance these three years and have these aircrafts today and they will all be working but you know these are opportunities you know about six four months ago, we had opportunities when the B C. Highways Oh, you know had the flooding. So you know these short term opportunities Duke.
Do start keep popping in and and you know wherever we can plug we can a lot of requests that come in even for our charters to Poland for relief goods as well besides besides the normal trading. Besides just the normal you know day to day charters that we have been there.
Question for <unk>.
We will you know, we're obviously are weighing each one of them. We do not want to take on additional work are disruptive or day to day normal long term customers, but if there are opportunities to continue to use those.
Okay.
That kind of goes to my next question because I mean, one of the questions. We always get is the no the question about capital.
Capital spending in bringing in these new aircraft is it fair to think.
That you know what.
You alluded it to it maybe in the earlier question about the fact that you know you've got the opportunities you really wont aside until three to four months before you get the aircraft, but is it fair to think that that those aircrafts will be fully utilized pretty much. When they arrive then we should see kind of a margin profile similar to what we've been seeing over the last couple of years.
Yeah, absolutely I mean, we wouldn't be investing if we didn't believe in our business plan and what we have done a out of a track record so.
There is not going to be an aircraft you know that we feel today are certainly that is not going to be utilized there are going to be underutilized. So yes, we have a lot of openings. We have a lot of requests we even have requests from people who are you know do they cannot get conversion slots.
You know, we could even sell those conversion slots. If we wanted to make it make the short term profit, but we could also Brian leaves them. So there is many many opportunities.
That this capital is not just going to be sitting there are collecting dust. So are they will be fully utilized one way or the other.
Alright, that's helpful. Thanks folks.
We'll move onto our next question no men of Laurentian Bank. Please go ahead. Your line is open.
Hi, Good morning, everyone. So my first question is more on the highest cost I know that you know.
The bulk of fuel costs, you can pass that on but I'm, just trying to get a better sense of if if if the fuel prices remain at these elevated levels would you expect some sort of demand destruction to happen in the air cargo business, maybe if there are some learnings from the last sanguine oil prices had gone that much.
Higher because you're adding a lot of capacity, but you're still confident that all of that will get absorbed even if there is some sort of demand destruction from higher oil prices.
Yeah, because simply you know whenever we had a higher fuel prices, yes, the demand did come down in the previous experiences and maybe Jim you can chat a little more light on it but just keep in mind that today. The supply chains are very disrupted and there is no end in sight for these so there is.
A little bit tailwind, we get when the Ocean, then and you know rail and trucking isn't.
Performing to what they should be.
Even the radial like you know with the CP rail strike in insight. So when you look at all the factors that are happening today.
I believe that.
Yes, if you would lose high all time high but also you know people do need the goods when people do need to supply chain and that people do need that e-commerce and daily necessities and when you can depend on surface transportation air becomes the choice, especially when a belly capacity doesn't exist in the market that used to exist. So combining all of these factors.
And higher fuel price are you can you can look at it this way that yes, good food food prices are going to be higher.
And that's where we have everybody screening the inflationary pressures in various industries.
Industries, but.
But generally we feel that it.
It should not.
In fact, the air cargo business.
As as people.
Demand is certainly a much higher than the supply today and every logistics business and Jim you want to add some color to that.
Yeah, No I was just going to say a competitor.
Really what we saw fuel prices rise you know 10, or so years ago. The one fundamental differences and say Jay suggested.
Demand is at an all time high and.
Capacity is probably pretty close to an all time low so with the continued.
Delays in the global supply chain demand for for global Air cargo services, we feel it's going to continue to be very strong regardless of the price.
Pricing, particularly with customers.
Okay.
Okay, No that's fair and maybe just.
On the same thought process when historically in Florida. Some of your customers that the costs have gone up but you know you guys have generally your margins are still pretty high like do the conversations start to move in the direction, where they sort of ask you to share some of the burden or generally a it's just a small component of vehicles and an end.
Did those discussions don't come up.
No I mean jud.
Generally they don't know men with you know we have you're right I mean, we make a concerted effort to manage our you know the rest of the reason we've maintained the margins because obviously, we pass on to fuel the increase in fuel as a surcharge to our customers and we continue to do so.
Two to manage the rest of our operating cost very diligently every day and I would say no normally that.
That doesn't happen.
Okay. No. That's good color and just one last one from my end I think in Q4, you mentioned that you had some additional relief charter flights up for the U S and Canadian government and that's going to continue in the first stop I'm just trying to get a sense of the sequential improvement in all in charter business.
This is primarily from that one and we should expect a similar run rate for the coming quarter.
Oh, well, that's kind of hard to say, but it's a it's certainly a you know it depends on where we were last quarter last quarter. We also had some charters from the.
The V C Highway situation, we also had some relief charters as well and.
Time around right now, it's a different kind of charters that are going on so what our experience tells us that there's something or the other that that is happening that encourages charters in various directions. We are strictly a these are opportunities that we take a you know what people call. It right. Please.
We call it easier my obviously, so we take the best use opportunities.
Where are you seriously from a standpoint that we wanted service or a regular customers and also focus on some AD hoc opportunities if our system and other people are.
And ER aircrafts can accommodate those but certainly at.
At this stage I can tell you that you know if you wanted to book six months ahead of charters from even over a regular customers we could.
They just it's not just the AD hoc opportunities, it's our regular customers looking for more of a lift you know that that's where the opportunities come in.
Okay. That's great. Thanks for taking my questions and congrats on the quarter.
Thank you.
We'll take our next question from Walter <unk> of RBC Capital markets. Please go ahead. Your line is open great.
Great. Thank you very much operator, and good morning, everyone.
So starting on on your on your Capex plan could you, perhaps give us a sense of your the 'twenty 'twenty four 'twenty five like the the years, where before you get down to the 120 in maintenance.
What what those Capex numbers, just so for visibility purpose for investors going forward that they can appropriately model and then you know our job is to do no cut to calculate returns on that new invested capital going forward. So understanding the capex spend through through your entire.
Fleet plan additions would be helpful. So I don't know if you have those numbers for 'twenty four and 'twenty five.
As of now I can just give you a rough estimate because things will change as the year passes right. So but whatever fleet plan, we have in place a week.
We expect maintenance Capex will be in the range of 120 to 125 in coming years, very but gross capex a like I said for 'twenty two 'twenty three I have already given the bigger instrument before and 25.
We expect our AD based on the year in which almost 777 supply will come in other capex will be in the growth Capex will be in the range of 225 to 250 million for 'twenty, 'twenty, four and and around 175 to 200.
2020.
2025, Yep, that's growth only you said right.
Yeah, Yeah, Okay, and Walter just you know that planes are do need facilities in ground support equipment and investment in training for pilots and maintenance people and spare parts. So yes.
So this is all sort of inclusive that goes with it you just can't get Triple Sevens are not real yourselves. So alright. This has this had hangers attached to it that says simulators attached to it. This is a training attached to it spare parts. So there's a lot of moving parts on all this.
And then my next question and that's helpful. Yeah. That's a good consideration and then my next question. Then is once you have this fleet in place.
You know, even if we were to only assume a CMI and I know Jay you were talking about upside if you did block hour blocker or flying internationally, but if we were to only assume a CMI is goes into the aircraft that come out from this.
I don't know if you have what your you know Oh, well, we're going to be looking for is what is your total revenue dollar.
Capacity and then you know you've looked differently. If I go to my model and use the 10 million U S revenue per aircraft per year for E. C. Am I is that is that a good number to use now or is this inflationary environment made that $10 million U S per year per aircraft.
Maybe 12 billion or something something even higher.
Uh huh.
You know, we obviously are there you'd see them I can do about.
You know anywhere between two to $300 a month.
So.
Just.
Just one second I can give you some kind of idea on what this is.
Part of aircraft so.
Yeah.
10, $10 million to $11 million is a good number for revenue for easy money Okay.
760 Sevens, probably and that's just the base.
That's you do everything a CMI and if you do.
Your your block hour business, then that's that's pure upside right. They do is the best way to look at that.
Yes.
So I did get Oh, sorry, there was that a yes, yes.
Yes, yes, okay perfect okay.
Alright, and then.
Under your existing contracts would you can you update us as to whether as to when you expect your current long term contracts with your major domestic customers to be renewed and what flexibility do you have in your current contract two two.
To move your pricing higher with cost inflation or is that something that we're kind of have gonna have to wait for that might we see a big lift in your pricing to capture some of the higher inflation that we're seeing we're seeing today or what can you do it under the under your existing contract.
First of all over you know, we just were new to our medium sized contracts last quarter.
And we have two major ones coming up but they're not due till were another 36 months or even some a bit longer.
So.
No we.
We have certainly kind of had this.
Fashion, where they were customers of longer term sort of extending them.
But as you can know three years in this business is to a currently certainly.
Between this year and before it reaches 24 months.
We certainly plan to have the serious discussion you said in the next quarter and quarter, two and quarter three with them.
But.
You know also customers and we have both nervous as.
As many of our suppliers have we've asked for long term contracts and we are sad you know okay. We are not taking these contracts right now because.
You know those contracts have been quoted on whats happening today. So there is some kind of a nervous fast on parts of suppliers and customers as we have been in similar situations that do to hold off and see if things stabilize a if we were to lock in an agreement.
Today with the customer I was nervous now says that we could be faced with even higher cost increases.
So that is a bit of a challenge both on the supplier and our customer side for us, but also keep in mind that you know, we we feel confident about the renewals. We have not you know in our track record. We have never had a situation where we haven't renewed a contract. Yes. There are a few small.
Competitors knocking on the door are we all know that but what we have water a cause for renewal, which is our infrastructure 20 years of cargo pedigree. Our on time performance our people our investment we have six to 7000 ground support equipment and handling.
We are we have 250 maintenance engineers that work on it we have over 350 pilots. So we have a lot of infrastructure. We have spares. We have we can reroute planes that are so much flexibility would give her customers.
And with the 757 introduction of more nonstops to Hamilton in Montreal, we'll be able to serve seven cities nonstop.
In Canada.
Both in both directions is a major plus and you know the combination of the network. The combination of the discipline the cargo culture that we have developed.
Prior to card with Geoff coming in as you remember there was 15 cargo Airlines who've tried and gone from 1985 to 2000.
And you know we are well funded well capital capitalize we've got a great team.
We've got all the assets that we need to make this work and I'm pretty confident that those renewals are going to happen.
Can I give you in writing it and guaranteed nothing is there forever nobody expected the ratio to be at war to so given what I know given the circumstances, we have given the assets we have given the performance. We've done there's no reason why we wouldn't get it at a fair price now would we be able to capture every every cent.
I I don't know what the situation will be when we sit down at the table.
But certainly it's not lost on us and we are we will start those discussions we've.
We have had informal discussions, but we will you know we have exchanged notes we have.
Talked about what ifs, but I think we will only get serious when between I would say when we have you know close.
Closer to 30 months, rather than 36 months.
Anyway, it makes sense and and and you mentioned trepidation about locking into long is that it or are we to interpret therefore, a J that you'll be looking at similar structured agreements that would be seven to 10 years in nature upon upon as a minimum.
Yeah as a minimum our guidelines it always has been to get a flight between five and 10 years agreement. So if you've got let's say two years left on an agreement, we'd certainly like to add a minimum of three with renewal options for one or two years as we go along got it.
Okay. That's all my questions. Thanks, so much again.
Okay.
We'll move onto our next question question from Kevin Chiang of C. P. C. Ibs. Please go ahead your line is open.
Thanks, Thanks for taking my question congrats.
Congrats on a good Q4, there I'm just wondering is there a way to frame I don't know if my block hours or another metric just.
How much maybe how much demand you're leaving on the table today did the the size of your fleet just to kind of level set how much of the globe.
That youre planning for the next few years is to backfill existing demand that you see versus maybe having to chase demand for making a call with them and it looks like you know two to four years from now.
Gave me.
I think Kevin a good indicator of that would be.
Comment that we've made before that not only are.
Looking at the dedicated air cargo demand for freighter aircraft around the world, but pre COVID-19 over 50% of the world's air cargo moved in the belly of passenger aircraft, particularly.
Long haul Intercontinental.
Lights flying between Asia, North America, North America, Europe , but Europe , and Asia, and with most of that capacity still.
You will never come back to pre COVID-19 levels at a time when demand globally driven by.
The surge in e-commerce grows the supply chain issues.
Issues globally in terms of logistics, but we're very confident that the demand is going to continue to be very strong for at least the next five to 10 year period. It's one of the reasons why we're making the investments in aircrafts now and as Jay indicated we have.
Extremely strong 21 year track record of being very successful and being very prudent when it comes to Capex.
During that we only enter into a new into agreements to get aircraft. When we know there's a certainty that we're going to put those aircrafts to use whether it's whether it's in Asia by basis, whether it's enhancing our domestic network or continuing to grow our international charter business.
And as I said, that's at risk management. We also have a backup plan because these aircraft are in slots are so much in demand that we could even dry lease them. So.
There is opportunities even in that Kevin.
Right I mean, it does help but these items are fungible assets.
We oh the market is very very tight now in the foreseeable future.
Just like the Triple seven strategy.
You are adding more aircraft here you know that in your updated fleet plan.
It does feel like if youre starting to shape, how you see these larger aircrafts or what would these larger aircraft like plagued your net worth giving you I didn't I didn't.
Bigger bigger aircraft type is that something you can share with US you know.
Is it.
Did you see more international opportunity that you kind of tested out the market is it's primarily you know if you can talk about using you know 75 studies domestically do you think any more triple separate so they can fill the truck routes between.
Vancouver.
Hamilton, So you need a bigger aircraft, but just wondering how you see that triple seven strategy evolving here, given you're adding more of those aircrafts.
Yeah. So you know we're a strategy on Triple Sevens is a combination of a like I said Rep leaves a CMI operation and also are you know some of the routes that are always in the past 30 years, if I looked at it they are always in demand like you know like somehow.
Calm, but China are sold Korea or some of these flurries places today, you know to reduce the dependence on the Chinese market Theres, a lot of flights coming in from Vietnam, and even Thailand.
So where customers are branching into some of those Asian countries, where the lift theres not as much. So you know we have an opportunity on this triple sevens to operate from from the far east any of those destinations today, even if he liked one destinations you can all he always connect from other.
Destinations on an interline basis feeding into that so.
So we would we would look at probably a you know far east where initial plans call it flights going as far as far east coming.
Coming back into Vancouver are then going over to Europe , and maybe do due to India and then to 76 seven network would.
Probably be more suitable to bring into Europe .
Do connecting with again to connecting with our Triple Sevens.
Europe and also Triple Sevens, 760 sevens to south of South and Latin America as well.
So you know Harvard yet our plans to be a truly global airline.
All five continents. So.
You know triple Sevens would be long hauls, and 760 sevens would be medium medium medium haul Oh, yeah, and you know again as I said Triple Sevens, we have opportunities in discussion, which I'm not I can't say right now because theres nothing concluded, but there is definite interest.
In terms of you know somebody CMI operation of these and then a few for commercial just like we do with the domestic network on block space agreement with certain users. So that oh, Okay, I think that as as we move forward you will see a.
A lot more clarity on our on our business plan you know.
Because of competitive factors and some of the stuff that we havent finalized so we can't totally come out on that as well, but all I can assure you is argued.
It does not go out and and put money. If we didn't believe in braselton didn't believe in the business flat and on top of it we have backup plans. So.
Right.
This strong track record there maybe just a last one for me just to get on the fleet.
Do you have any intention to do you see the need to.
To add aircraft that are smaller than the 75 seven payload of a I think a number of Oems have started to push.
Pushed through freighter conversions of some of the larger narrow body aircrafts or things like that brand is doing something at Airbus with the April 21.
Or are those things that you think needs to be.
Do you think that's an asset that needs to be the larger could be utilized within your fleet or is this otherwise I wouldn't kind of above the line in terms of how small you want to go.
Jamie.
Yes, Kevin we we always have entertain looking at other aircraft types of you know there are some markets that are smaller aircraft might be more a more suitable but really the benefits that we have with the 787 and 757 with a common cockpit that same flight crews can interchange between aircrafts provides.
There's a lot of both operational efficiencies and cost efficiencies. So.
I think it would you know our our intent would be more into entering into the agreements in the wide body or there's some triple seven aircrafts, because we feel theres certainly global opportunities you know driven by increased demand and the lack of belly cargo capacity as Jay just said as you know in 767 is ideally suited aircrafts.
For certain lanes, but when we when we talk about long range Intercontinental from Asia to Canada.
Some of it is more conducive to operating in that on those lines.
We continue to look at it but it's not something that you know in the short term horizon that we're looking at smaller aircraft.
Excellent. Thank you very much that's all for me.
Thankfully I move onto our next question from David Ocampo of Cormack Securities. Please go ahead. Your line is open.
Oh, Thank you good morning, everyone.
Yeah.
I just wanted to circle back on the fleet and maybe Jamie can answer this but the seven five sevens that are they're coming in mentioned that it's going to free up some 760 sevens.
That's gonna be on a one for one basis or should we think about the five aircraft that's maybe freeing up.
376 items for for AC.
Yeah.
Seven five Sevens are you free up one 767, so that's the kind of or.
Yes.
Give me you might want to add something to that.
Yeah that was going to say, it's not it's not it's.
Not a one to one it's really to me. It's a good look at it in terms of capacity. Some five seven is about an eight approximately 80000 pound gross payload aircraft, where the triple set or there's some 6300 is 125000. So it's certainly not a one to one it's more as you just suggested two to one there are some times, where we could add 375, 7% essentially free up to 75 seven.
Okay. That's that's helpful for us and then.
Just a quick one for me last one on the BTB volumes you guys noted that it picked up in the Q4, where was that relative to pre pandemic levels and how do you see that trending throughout the year.
Yeah, Yeah, it's hard to.
Hard to pinpoint David only because as I think we've said before we don't have clear transparency from all of our customers from all of our customers unless they are strictly in one space you shouldn't be to see what would be the you know Amazon as an example, the strictly an E. Commerce play. So we know 100% of their business is b to C, where a lot of our other customers have volume in both space.
And it's really and then it'll differentiate between them you know container a b to C volume or B to B volume, we have very very little business that are very.
A few customers that participate strictly in the beta be set.
Sector, although from dialogue and communication and conversations with them as more and more businesses and economies where reopening.
We're indicating that we're seeing you know the return of our B to B business that they hadn't seen for a while I still think it'll be you know I think certainly the last couple of years as a percentage of our overall domestic revenues I would I would suggest that the BDC.
Certainly as the majority now and I think that's going to continue to be so going forward.
Okay. That's helpful. That's it for me thanks, guys.
Thank you Sir.
Okay.
Well take our next question from Matthew Lee of <unk>. Please go ahead. Your line is open.
Hey, good morning, guys just in terms of the varying economics per plane I mean, it's part of the reason you're taking on those triple sevens, because youre getting them at a relatively attractive price just given the number of that are being shut in international community.
And then just similarly, you know he's a strategy of adding seven times seven relate to your ability to get those at an affordable rate.
Again 77.
Okay.
Yeah.
Give me.
Yeah, No I would say the.
Not necessarily driven by by discounts on on trader aircrafts freighter aircrafts are in extremely strong demand, there's certainly a large.
Pool of available, but we called feedstock where passenger aircrafts that have been retired.
The early or prematurely.
Huge pool of feedstocks sitting around the world, but pricing, we haven't seen pricing really drop on the feedstocks, yet primarily because the demand to convert those aircrafts into freighters remains extremely high globally and Theres unlimited capacity to actually convert the aircraft. There's only a few facilities around the world that do do freighter conversions all of them are rapidly trying to expand there.
Their conversion capabilities, but even just expanded their for somebody who's going to take them. A couple of years. So demand is going to stay strong and I think pricing is going to remain strong for the next several years.
The second part of your question sorry to repeat the second part of your question about it.
Yeah, just in terms of the 757 I mean, you know it is their smaller size you know just a more efficient way to transport or is it.
Are you seeing feedstock that about 75 all right.
Again, it's really you know trying to fit the right aircraft to the right market and we've realized over the last couple of years that we've made some adjustments in sort of reengineered. Some of our domestic network flying by adding a couple of direct routes, where the 757 and it's having a significant impact on on service to our domestic customers. So.
You know piggybacking on that we'd look and it freed up some 760 sevens out of our domestic network allowed us to utilize those aircrafts are either taking on that additional new ACO my business in advance of taking delivery of a converted aircrafts or to use those operational spares and with the with the additional 750 sevens that we found it became available.
Acquiring this year the attempt to surgery suggested earlier was to continue to enhance our domestic networks, where our overall domestic customers by fly more.
More direct points in about in turn frees up which it likely will some 760 sevens, we think there's some opportunities to put those into into either a spares to backstop our.
Domestic.
Or to put those into new AC my flying potentially earlier than we otherwise would by waiting for delivery of a converted aircraft.
Okay, Great and then in terms of your contract with DHL as passenger cargo kind of comes back a little bit more are you seeing any slowdown in terms of their desire to add routes.
Well you know.
I've always said that look when passenger cargo comes back.
Our belly cargo comes back keep in mind that also and you know the fuel prices paid by the passenger carriers are pretty well at the same as what we pay so it's even if the belly cargo comes back would it be in the same form what the pricing would be and looking at the fuel prices and fuel surcharges.
There's nobody nobody can afford to give those away like they used to.
So that's one thing second thing is also the size of the passenger aircraft are coming back. There's a lot of triple Sevens are being sold out so a lot of <unk> hundred <unk>. It not coming back 740 Sevens are not coming back. So you know the 737 Max can do Toronto, London. For example, so you'll see a lot more narrow body.
Let's that belly cargo knocked holidays right, you'll see some of that those are changes that are going to be in the marketplace. So we.
We feel that there will be some erosion of demand with the belly cargo it has to happen.
But also a lot of our customers, including DHL and others have now experiencing a higher levels of service and they've built there are competitive.
Their own competitive situations in their marketplace based on the service they have been providing for a year and a half two years. So it could go back to if you are buying stuff on E. Commerce today of daily necessity would you go back to the store and buy your toothpaste from you know again or would you keep ordering so similar.
Early on of our customers feel they have formed a certain habit they've got a certain discipline of service. He was their dedicated capacity, which they are making them more competitive with their with their competitors.
So, yes, there will be a little bit, but we don't expect it to be huge to.
Create any kind of imbalance there that.
That will be harmful so there's always an adjustment period when things.
Things come back through totally normal, but we also got to be very.
Aware of the fact that what's going to come back as passenger.
Traffic not necessarily belly associated with what it used to be so if 100 triple sevens are being taken out of the marketplace.
That capacity is not being replaced by.
Any other aircraft, yes, theres triples, avonex, but that's a $250 million to $300 million of aircraft.
And you know the demand of that aircraft is not.
Going to be on on boots with 737, Max can service for example, so we believe confident that any any analysis, we have done from Boeing and Airbus and some of the other industry pundits, we certainly believe that there.
There will be some.
Stuff going back to valley, but also keep in mind that you.
You know service that we've provided and people have now adjusted their service levels it'll be extremely difficult with now for these companies to go back and that's the feedback we consistently get.
Alright, Thanks, that's great color.
Well take our next question from Kamran source kind of National Bank Financial. Please go ahead. Your line is open.
Thanks, very much good morning, I guess first question just on the a CMI contracts in your sort of more recent discussions with potentially see my customers are you seeing a desire for for longer term are a CMI contracts and I'm. Just wondering you know how how that might have compared to say three years ago on the kind of typical length of an a.
Yeah. My contract are you seeing some.
Desire for there to be your longer term for those contracts.
Yes, we are absolutely seeing that compared to what it used to be.
Definitely.
And is there any I guess sort of detail you can provide around that I mean, what would have what would a typical I guess you might call. It dragged me a few years ago versus the discussions that you're having today.
Well they used to be more like a 30 60, and 90 day contracts and today. They are at least are you know who they.
Talking anywhere from one to two to three years and even five year contracts. So.
There's a definite shift in.
In that direction.
We don't want to dwell on too much competitive information, but yes. The trend is certainly for the longer term.
Contracts.
No that's fair enough.
And just a second question for me just with regards to that the pilots and the cost it certainly sounds like you're seeing some easing there just based on reading to the M. D. N. A maybe you can just talk about your sort of expectation for I guess some of the.
Higher costs, you've seen on the on the pilots the last couple of years and whether you're still very confident and in pilot availability. As you you will grow your fleet.
Okay constantly hiring theres not a month goes by where we're not adding 15 to 20 pilots do the team will continue to do that yes. There is some erosion are you know people.
Some people love to fly cargo and some people hate to fly cargo so.
People that love to fly cargo are are the people who are you know like to fly at night and they don't want to be bothered with all of them going to airports and you know all the changes that go to a cargo has better schedules are their life is a lot better than cargo.
And yes, we did find that in the past.
Three to four months that we have.
A number of people leave to go back to cargo carriers.
You know puts a little bit of cost pressure and people person people pressure as well, but I think so far we have.
Been able to attract a lot of expats, who want to come back to Canada and.
You know they find it probably gets a great home they are wide body aircraft and we although there is a pressure there is a shortage of every kind of great today, whether it's maintenance, where there's pilots where there's accountant whether its I T.
So pilots are no different than other.
Sectors that facing shortfall in.
But however, it remains an attractive place to for people do apply and worked so well so.
So far as I said, we've been.
Having pilot training courses and new pilots about 15 to 20 every month and we will continue to do that.
Okay, No that's great. Thanks very much.
And it appears there are no further questions over the audio at this time I'd like to turn the conference back for any additional or closing remarks.
Yeah. Thank you everybody for joining us today are you know our heart goes out to what's happening in Russia, Ukraine crisis, when we see the images on T V and cargo jet Oh, it's not handling any and in line with the government guidelines in some of the mandates are not handling any and university of product.
Fine or any of that stuff, which we never did any way, but we are more cautious of it than we ever were.
You know, we have our sympathies and Oh My heart goes out to the people that are suffering especially in Ukraine.
And we will continue to help as a company and as a corporate good corporate citizens.
We'll also be doing some relief flights for all the refugees and that are coming.
Coming into Poland, and some of the neighboring countries.
Had a number of requests we obviously cant meet every request, but wherever we can we congregate will do its part at it's always done and we did it during Lebanon crisis, we did it during India.
The prices we have done it in many parts of the world and cartridges will do its fair share as as a Canadian spirit to make sure that we do our part to help out.
Thank you again for everybody Who's joined US today and we appreciate the support.
That'd be get from you guys.
Thank you.
Okay.
Ladies and gentlemen, this concludes today's conference call. Thank you for your participation you may now disconnect.