Q3 2025 Cargojet Inc Earnings Call
Good day and welcome to the cargo jet Canada, Limited Insurance. Call today's conference is being recorded and at this time, I would like to turn the conference call. Over to Mr. David Tom genevi, vice president of investor relations. Please go ahead.
Good morning everyone and thank you for joining us on this call.
with me on the call today, are AJ ramani, executive chairman, Pauline Dylan co-chief, executive officer
Jamie porteous co-chief executive officer.
Aaron McKay Chief Financial Officer. Sanjiv miney. VP Finance. Remy trombay. General counsel and corporate secretary.
After opening remarks of basic order, we will open the call for questions.
I would 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, EBA adjusted earnings per share and return on invested Capital. Please, refer to our most recent press release,
And mdna for important assumptions and cautionary, statements relating to forward-looking information and Reconciliation and non-gaap measures to gaap income.
I will now turn the call over to agents.
Good morning, everyone. And thank you for joining us today.
In November 2023, we announced the first base phase of our leadership transition.
With my move into the executive chair role and the appointment of Jamie porteous and Pauline Dylan as go CEOs.
Today.
As we move into the next phase of that transition, I want to take a moment to recognize the outstanding contributions of Jamie porteous.
And to officially welcome Pauline as cargo Jets next CEO.
Both Jamie and Pauline were founding partners of cargo jet 24 years ago.
From day, 1 day of developed.
And built this company from ground up.
They were Guided by a shared commitment.
Shared commitment of reliability, customer service and excellence in everything we do.
Jamie has played an instrumental role in transforming cargo jet from a small Canadian startup into a global Air Cargo leader period.
His strategic vision.
Discipline and customer first mindset, have been Central to Our Success.
On behalf of the board, our employees and our shareholders. I want to sincerely thank Jamie for his incredible leadership and his 24 years of dedicated service.
While Jamie will be stopping back.
From daily operations, to spend more time with his family. In the new year. I'm pleased to share that he will be.
He will remain available to provide strategic advice.
Support and ongoing guidance for this transition and ongoing business.
His Insight will continue to be a great asset to the organization. And we are thankful to Jamie
For continuing on his role as a strategic advisor.
As executive chair, I will also remain deeply engaged.
With the process mentoring, Pauline working closely with the board.
And the team to ensure a smooth and deliberate and thoughtful transition.
The board is proud to confirm Pauline Dylan as our next CEO effective, January, 1st 2026.
Pauline has been with cargo jet since day 1 and over the past due decades, she has worked and virtually every part of the business.
Customer relations marketing. Government Affairs. Chief corporate officer and co-ceo.
Co-ceo.
She played a key role in buildings cargo jet brand. Strengthening our customer relations ships,
Driving Employee Engagement.
And over the past 2 years.
She has continued to lead with purpose driving growth Innovation, and operational excellence.
Paul has grown up with cargo jet system, she embodies our culture, our people first values, and our customer service obsession,
The same ingredients that have made cargo Jets successful over 20 years.
She has my full confidence, she has the full support of Jamie porteous. She has the full support of board and she has the full support of her team.
To lead this.
Organization to The Next Step, chapter of our Global growth.
Thank you very much.
And I will turn the call over to Jamie for you.
Thanks AJ and good morning everybody.
Let me Begin by sharing house. Sincerely grateful, I am for the career that I've had at cargo jet and to the many colleagues who have helped shape our business into what it is today, including of course, AJ and Pauline
whom I have worked besides since day 1 with a simple but bold plan to create a world-class Air Cargo Carrier.
We are truly a Canadian success story from both a transportation company and a public company standpoint and have built a legacy that will endure for many, many years for all stakeholders.
I am. As AJ said, I am extremely optimistic about the company's future, and I am fully confident in Pauline's capabilities to lead cargojet into the next chapter and wish her in the entire cargo jet family the best of success, and we'll continue to support and cheer you on from the sidelines while I enjoy my next chapter.
Thank you.
Now, let me share some comments on the quarter.
entering the back half of 2025, the near-term impact of seismic shifts in global trade, became more apparent as persistent tariffs and other trade barriers became The New Normal
Demand remained uncertain as major policy shifts continued. Including the removal of the US Dominus exemption disrupting trans-pacific. E-commerce flows and tempering near-term growth expectations.
The longer term impacts of this new trade World. Order are still developing.
With new behaviors Rippling through Global Supply chains and consumer behaviors.
In that light. And as we noted last quarter,
resilience is the key to thriving in this unprecedented period.
This quarter, I would add the word discipline as well.
Although in the longer term, we expect the world to adapt and global trade to reestablish, New Normal patterns, it remains likely that the near term will be characterized by continued uncertainty and some volatility.
Through that environment, resilience and discipline will underpin cargo Jets ability to continue to deliver high-quality results.
Periods of change bring opportunities as well as challenges.
Historically cargo jet has demonstrated a very successful capability to take advantage of macro level economic changes in the past. Most recently through the boom of e-commerce. During Co and our job continues to be to find opportunities for disciplined profitable growth in this ever-changing trade environment.
At the core of our business, our domestic Network remains, strong growing by more than 6% year-over-year and over 12% year, to date, primarily because of the continuing growth of e-commerce volumes within Canada as well as the increased business to business volumes and the impact of inflation-based price increases.
As disruption and transatlantic. Trade routes continued. We saw a corresponding decline in our ACMI Revenue year-over-year as we described in the second quarter.
Despite the disruption, our AC, our ACMI Partnerships remain strong with the decline reflecting a shift in of our ACMI operations, to be more north south focused within the Americas.
Resulting in lower block hours year-over-year.
With the same number of contracted aircraft.
We remain optimistic that in the longer term Air Cargo corridors will stabilize and cargo jet will be well positioned to take advantage of early return of early returning opportunities with our ACMI partners.
the week in the third quarter of 2024 between China and Canada,
We anticipate this frequency recovering late in Q4 as we enter the holiday peak season and we continue to explore new opportunities for longer term Charter Arrangements.
We remain confident that discipline and resilience coupled with our Diversified revenue streams. And flexible Fleet will allow us to continue to deliver strong margins in any macro environment and to remain well positioned to take advantage of and seek out. New profitable growth opportunities through this near-term, period of disruption and in the longer term, when demand returns.
With that, I'll hand it over to my longtime partner, colleague and friend, and our next CEO Pauline Dylan.
Thank you. Jamie. I am honored to assume the role of CEO after serving alongside Jaime as co-ceo for the past 2 years.
Jamie's leadership and strategic Vision Have Been instrumental in bringing building cargo jet into a market leader, with a strong financial and operational Foundation.
I want to thank him sincerely for his Decades of contribution and partnership and his continued support as my co-ceo and going forward. My strategic adviser
I'd like to sincerely thank Jamie for his friendship. I wish Jamie and his family, all the very best as they embark on this new chapter of their lives.
Looking ahead. I am as excited about the future of cargo jet as I was on day 1.
I want to thank the executive chairman along with the board of directors for their continued confidence. In me, we have a clear strategy, a strong Mission and proven capability.
I our diverse Diversified business model disciplined execution, and the highly talented team position us well to capture new growth opportunities and to continue delivering long-term value to our customers, and our shareholders.
As Jamie noted earlier, our position as the number 1 Air Cargo Carrier in Canada is the rez is the result of years of resilient operations.
Delivering time and time again for our customers through periods of both opportunity and adversity.
That resiliency comes directly from our unique culture and the efforts of the cargo jet team. I want to thank each and everyone of those team members for their, ongoing efforts their dedication and their commitment to safety especially as we enter our Peak holiday season.
As we discussed on our Q2, call 2 of our largest customers renewed, long-term agreements with us early in the third quarter.
Demonstrating the strength of those relationships and locking in long-term Revenue sources, and offering cargo jet, preferred opportunities to fly additional routes as they develop.
Even as we renew and reinvigorate relationships with our partners, we continue to look for new opportunities as Jamie mentioned.
To that end. We recently announced cargo jet return to transatlantic markets with scheduled service to leash Belgium linking, our extensive domestic network with direct access into Europe's leading cargo Gateway.
We also continue to explore new long-term Charter opportunities globally as we see real Market opportunity and that vertical.
We also renewed our position as Canada's only ISO 9001:2015 Certified Air Cargo Carrier in the third quarter.
And in October renewed, our iosa registration, demonstrating our commitment to making safety, the core of everything we do.
During the third quarter, we announced the Redemption of our 5.25% senior unsecured debt debentures due in 2026 2026, which we completed subsequent to quarter end using proceeds, from our offering a 4.599% senior notes extending, our overall debt maturity profile and reducing our interest costs.
We were able to successfully scale many cost lines along with operational activity, resulting in an adjusted EBITDA margin of roughly 32%, consistent with our historical results of adjusted EBITDA margins in the low 30% range.
discipline and flexibility in our Fleet Management, our major drivers of cargo jet success,
during the quarter, we sold 1, 767300 and least 1 1757200 to third parties, reducing our overall Fleet size to 41,
In the fourth quarter of 2025. We expect to take delivery of 1767300 aircraft from conversion and complete the sale of another aircraft resulting in no net change in our Fleet size.
While we expect to take delivery of a fully converted, 767300 in q1 of 2026, we currently expect to lease that aircraft to a third party on or shortly after delivery.
We will continue to look for opportunities to scale our fleet.
Appropriately for the size and the needs of our business. Something we have demonstrated a track record of successfully doing
I will now pass the call over to our new Chief Financial Officer. Aaron McKay, we're excited to have him. Join our team for his remarks on the company's financial performance in Q3
Start off by.
To be joining the leadership team of Canada's leading Air Cargo Carrier.
I'm passionate about Aviation and I've immediately felt the passion that all of our cargo jet team members have for this business as well.
I'm looking forward to the challenges and opportunities. We'll face together as a team in the coming months and years.
As Pauline and Jamie noted, discipline and resilience are words that we are very proud to have described the financial management of the business.
The resilience of the business in a very challenging environment. This quarter is apparent in the diversity of our revenue streams,
In a third quarter, domestic Revenue came in at just under $100 million up, almost 6 million or 6% year-over-year helping to partially offset declines in ACMI and Charter Revenue.
If Jamie and Pauline mentioned, those declines were primarily driven by 2. Very distinct changes linked to the macroeconomic environment.
Fuel search fuel search charge and other Revenue was down 8.7% year-over-year, which compares favorably to the 9.3% decline in direct fuel costs, demonstrating our ability to pass on fuel and other costs as part of our pricing model.
Against that backdrop, the business maintained, a relatively, strong adjusted ebit time, margin, as Pauline noted.
1 item to call out, is the year-over-year. Is that year-over-year in gross margin?
Because we include some less variable. None, impacting items, like depreciation and heavy maintenance. Amortization that are driven by the timing of Maintenance events and Fleet size in direct expenses. Our gross margin was squeezed with Revenue declines, excluding those items are gross. Margin is much more stable year-over-year with some increases in direct costs being partially offset by reductions in sg&a at the adjusted, Evita level.
Prudent and disciplined Capital, allocation remains a key priority for cargo jet.
Maintaining a net debt to adjusted. Evita ratio of 1 and a half to 2 and a half times over the long term.
Supporting the investment grade credit rating. We achieved in the second quarter of this year is a key objective for us.
The current operating environment as well as the timing of certain Fleet transactions has pushed our expected return to a net. Leverage ratio below 2 and a half times which we now expect to achieve in early 2026.
We remain dedicated to that goal and will balance that objective with returns to shareholders through continued dividend growth, and the opportunistic. Use of our normal course. Issuer bit.
Pauline walked through the fleet changes in the quarter, which resulted in growth Capital expenditures of 22 million.
Sequential decline from q1 and Q2 as we believe the Investments we've made to date as well as our near-term. Fleet plans are sufficient to meet near-term growth plans.
Maintenance, Capital expenditures in the quarter were 45.5 million again, a sequential decline from the first 2 quarters of the year.
Net of proceeds from disposal the third quarter. We saw an overall reduction in year-to-date net capex of roughly 41 million to just over 170 million dollars by the end of September.
We now expect Q4, gross, capex to be in the range of 45.
Of 45 to 55 million.
For the approximately half of that amount is growth capex. As a result of the expected delivery of 1 767 300 aircraft from conversion.
As we've previously disclosed, we are actively looking at transactions that may reduce that incremental capex and Q4 to near zero.
I'll close by saying how pleased I am to become part of the cargo jet family and I look forward to spending more time with cargo jet team members, our customers and the folks on this call
With that, will pass it by back to Pauline to close out before we take questions.
Thanks Aaron.
I want to close by once again, saying how proud I am,
Of the cargo jet team members for their dedication to the success of our business, resilience and discipline, they demonstrate in their work every day.
We have the cargo pedigree.
While the economic environment remains uncertain, we are confident that those qualities will continue to drive success of our business in the long. Run. Thank you for joining us. Kelsey will uh, will take questions now?
Thank you, ladies and gentlemen, we'll now begin the question and answer session. Should you have a question, please? Press the star followed by the 1 on your touchtone phone. You will hear a prompt with your hand has been raised.
Should you wish to decline from the polling process, please press star followed by the 2. And again, if you are using a speakerphone, please lift the handset. Before pressing any keys, hold on for one moment, please, for your first question.
And your first question comes from on our Gupta from Scotia Bank, please go ahead.
Hi there. This is, Nate filling in for konark. Thank you for taking my questions and congrats to Jamie for a great career in polling for succeeding, uh, just 2, quick questions. Uh, 1 is how do you expect the recently, renewed, DHL contract Revenue to ramp up through 2026 as you navigate the near-term route, transition to short haul,
Yeah, thanks, thanks. Nate, and thanks for the comments. Uh, I mean, as I said in the, in my remarks, we don't see, we don't expect a, a rapid increase in revenues, it'll really be dependent on what some of the global impacts of the trade negotiations between the Us and other countries. And as those get resolved, I think we'll see a slow and steady ramp up, but I, I don't anticipate, it would be until later in 2026 and into 2027 at this point.
Yeah, I just want to add in also that, um, with detail, we are one of the preferred carriers because of our strategic partnership with them. And, uh, when Europe and other areas slowed down for them, we were given the opportunity to fly routes in South America, which are fewer block hours, but none of our aircraft were displaced. And I think, uh,
DHL and carpet installation, being strong enough. We are the last carrier that who gets any notice? If there's any slowdown would be the first 1 to be brought in when uh, things, uh, turn positive and I just want to add to ha and Jamie's comments.
When when DHL does ramp up again, we we are ready for the ramp up, we will be prepared to continue to service their Roots uh both in the short term and the long term.
Okay, so that's that's very helpful. Um the second 1 I would ask is what has led to a decrease in China frequencies from last year, against a backdrop of rising e-commerce demand in Canada.
Yeah, it's just been the overall sort of uncertainty from a geopolitical standpoint, and the uncertainty regarding tariffs, which affect more of the U.S. than Canada. But we saw a decline from the frequencies that we were flying in the third and fourth quarters of last week. It really started at the beginning of this year. It started strong; we were probably flying 4 or 5 frequencies in the first quarter, but then demand seemed to soften down to 3 frequencies per week, which was consistent through the third quarter. As I said, we're expecting stronger demand and have already seen some stronger demand in the fourth quarter.
And also the, the elimination of, uh, demand numbers, uh, you know, which impacted shipments to the US, but a lot of us shipments Transit through Canada as well.
Okay. Okay, thank you, guys.
Thank you. And your next question comes from Walt. Walters bracklyn from RBC Capital markets. Please go ahead. Yeah, thanks very much. Uh Jamie it's really been a, a great pleasure working with you all. All of these years you're going to be, you are going to be sorely missed and and I do wish you the best of luck. Um, uh, I, I envy you a little bit on that, uh, on that regard. Um, thanks Walter. Yeah. Um, turning to the, uh,
After Q4. So I'm not seeing anything in 26 or 27 is that, right? And if so, you know, are we looking at any growth capex, or should we model in some, some some feed stock purchases, curious to see where Curious, to hear, what what we should model in for growth capex in in light of limited to, uh, new deliveries.
Walter, it's Aaron here. Um,
We did mention that we expect to take delivery of one aircraft early in 2026, but it's our intent to lease that out either on or shortly after delivery. Beyond that, I think you're correct; we're expecting pretty minimal growth capex through 2026 at this point. You know, Walter, as you know, we've always...
Kept, uh, our minds and doors open. If there's more business and if we have some guaranteed contracts, we do have access to 2 aircraft uh which is 767200 sitting in our possession right now uh that we acquired only for engine values which we have already extracted and those remain available to us to convert if the market picks up, or if there's a demand or a guaranteed contract,
Okay, that's great. Um, in terms of ACMI and Charter Revenue Cadence, um, I don't know if looking at your historical is the right thing to do here. Given given everything going on around us, but I know Q4 typically, you know, certainly last year saw quite a pickup, uh, quarter to quarter from Q3 to Q4 in, in all in Charter. Obviously, some of the new business there and then an ACMI, we also saw a pickup. Um, when we model now for Q4 and then also 2026. Uh, how do we look at Q4 Cadence, uh, relative to Q3 and, and for 26, or should we
You know, given our given the world around us today, should we should be building in any growth in your overall ACMI and Charter businesses respectively for 2026?
Uh, how how do you look at the or how do you, how do you approach the Outlook from uh from that from that angle?
Well uh just quickly uh quarter for. I'll I'll get uh Jimmy and Pauline on this uh after I make my comment. Uh quarter 4 is certainly, as we know, traditionally better than quarter 3.
And, uh, that is just the nature of the business that the peak period. Uh, overall demand is up, whether it's Charters domestic, or HMI everything is uh, relatively out, uh, so quarter 4, uh, yes. It'll definitely be better than quarter 3. That's all I can tell you right now.
Uh 2026. We are in the process at this time, with our customers, uh, discussing the needs for the first quarter because at this stage nobody's committing anything to go to 2 quarter 3 or 4 to 4 next year.
So at this stage, our discussions are primarily focused on quarter 1 of 2026. Uh, and everybody, uh, to be honest with you, uh, as we know what the conditions are, wait and see, sort of mode. So I wish we could give you a little more color on it, but this is exactly what we have right now. Is that in another week or 10 days, we will have
uh, most of our quarter 1 of 2026 finalists
And just to add to AJ's comments Walter, I think sequentially, you'll see an increase in both ACMI, and the charter revenues in Q4 versus Q3 of this year, but it won't be of the magnitude of increase that we historically, see, uh, sequentially from Q3 to Q4 similar to, as an example for last year. And as AJ said, I think, you know, going into 2026 at least in the first quarter. I think you'll see similar revenues that we saw in in uh, year to date in both the ACMI and the charter.
Segments. Yeah, Walter Pauline here and just to add to ha and Jamie while while that's what we expect from the customers. And as AJ explained in Q4, um, we do plan to see an uptick going into 2026. We're also going to look at um, new trade routes. We're going to look at new opportunities, at we're going to go out into the market and see how we can expand the brand, uh, outside of the current customer base that we have today.
Starting with the leash program that we announced last week.
Great. Okay, that makes a lot of sense. My last question here is on margins and I'm not sure if this I know Pauline has been near and dear to your heart, but also uh Aaron um you you you explicitly called out your efforts to rationalize costs and and and spoke uh constructively about your merge and profile going into 2026. And
With lower Revenue. How should we look at margins in 2026? Is this something that you, you know, you see enough line of sight that given a fairly consistent Revenue profile. If we were to assume that is this something you can get better margins on, or is there something else we should consider? When we look at the 2026,
Yeah. Walter, it's Aaron here. I think you're right for 2026. We'll start to see.
More and more of the positive outcomes of the cost control initiative. We're taking
Um so I think you'll see the margins you know stay consistent and you'll start to see that.
Uh, impact of those initiatives uh, through the cost lines.
Okay. That's that's great. Appreciate all the time. And again Jamie best uh best of luck.
thank you, you
Thanks Walter.
Thank you. And your next question comes from Chris Murray from ATB Capital markets. Please go ahead.
Yeah, thanks folks. Good morning. Um, so first off, Jamie, you just want to wish you a a good retirement. Um, I want to thank you for all your help over the years. It's, uh, it's really been appreciated and Paul and congratulations on our new role and Aaron, welcome to, uh, welcome to cargo jet. Um, thank you. Well, that being said, um, with that being said, you know, maybe just trying to put together the, the, the ACMI and the charter but also with the mainline business, um, into Q4 and
Maybe just thinking about this a different way. You know, your Block hours were down, um, you know, year-over-year about, I guess about uh, 15%. Um, just wondering, you know how if we use Block hours as a metric? How should we be thinking about block our Evolution over the next couple quarters? Um because it seems like the myth is going to change. And generally we've seen that, you know, independent of where you're pointing the aircraft, it's really the Block hours that drives, you know, the revenue. So just just any thoughts maybe. Uh, on a block our basis on how to how to think about the next couple quarters.
Yeah, thanks Chris for the comments and, and, uh, in terms of Block hours, you're right. I mean, it's a big, it's a big driver of Revenue, uh, especially on the ACMI and the charter segment. Our domestic hours seem, you know, our our our pretty constant other than peak season. We obviously see a significant increase because of demand there. Um, you know, the biggest driver of the reduction in overall Block hours by 16% in the quarter. Was the redo accommodation of the biggest part of it was the reduction in ACMI, Block hours flown by DHL. And as I noted in my, in my prepared remarks, you know, 2 things to point out, you know, we haven't reduced the or DHL, our biggest ACMI customer hasn't reduced. We're operating the same number of aircraft that we've operated in previous quarters. We're just flying those on Lower stage lengths routes. And as I've said, previously, you know, typical ACMI contracts are
Structured on a rate per block, our with a minimum number of Block hours per month, uh depending on the aircraft type. Uh, you get the benefit of the incremental Revenue, when you fly incrementally more Block hours on longer stage Trends, Atlantic European trans-pacific routes uh, that we've seen in previous years in the, in the last few quarters as
DHL has shifted capacity, excuse me globally. Um, to meet the lower demand, and we've seen more flying from within North America. And between North America sort of on a north south basis between North America and Mexico and South America. You see, a corresponding reduction. In those incremental Block hours, we still fly above the minimums, but I expect that, that will continue into at least the first half of 2026 on on the charter hours. It it's a combination, our Charter revenues are combination of the scheduled Charters. We do, uh, with our Chinese customer between China and Vancouver, which you see some, a corresponding reduction in hours there based on the frequencies per week that we fly the other portion of that revenue is our ad hoc Charter, which has remained strong year-over-year.
That's helpful. Thank you. And then Aaron, maybe a question for you there. There was a sale and Lease back in the, uh, in the quarter. Um, and you've talked about, uh, maybe just for capacity management, um, looking at the, uh, the sale or, or maybe a, maybe a lease on the, uh, on the 767 coming in, but I guess the bigger question,
Here is thinking about, um, you know, the the how you're going to kind of Finance our craft and the balance sheet right now. Um, I'm just trying to understand if this is a kind of a more structural move to just find a balance between owned aircraft and Lease aircraft or or how you're thinking about managing the cap stack uh around the aircraft over the next few years. Um, and if there's any sort of a shift that we should be aware of
Text the question, Chris. I don't think there's any sort of strategic shift. I think what you're seeing is
we've grown the fleet a little bit in the recent past, and we're looking at the right ways to
Structure, the financing of those aircraft. We mentioned earlier, you know, we've got 1 aircraft coming early, 2026 and we have opportunities with feed stock that we have, if we need them. But X, that our expectation, is that growth capex for next. Year's going to be pretty limited. So I don't think you'll see a, a strategic. Look at, um, you know, financing aircraft in different ways. This is just a bit of catch-up.
Okay, could you? I I just I can also go back to like your comment about Q4 capex. Might be neutral. Um, so I'm just wondering if the, you know, if there's up additional aircraft to look into your sales and lease backs with or something else going on there.
That's exactly right.
Okay.
All right, I'll leave it there. Thanks folks.
Thank you. Thank you.
Thank you. And your next question comes from Kevin Chang from CIBC please. Go ahead.
Hey, good morning everybody and again, echoing. Congratulations Jamie. And and Pauline um maybe if I can ask the the the fleet uh question differently. So so if I if I just take a simple ratio of
Of like Block hours to maximum payload, um, you know, you're running, you know, just rough math. Let's call. It almost 20% below some of the peak levels. You saw during the pandemic, when, when I when, when, when, uh, you know, I, I understand things were probably stretched stretched at that at that point in time. But, you know, when you look at the volume environment ahead, um, you know, you've kind of adjusted this Fleet at at the margin. But is there an opportunity to, to, to kind of reduce that what what looks to be excess capacity. Um, and, and the number of aircraft, you have just given the current volume environment or, or is that difficult to do, just given some of the changes in length of haul or or some of these longer term strategic agreements. You, you know, you want to make sure that your service holds as as volumes do recover with with, with the likes of DHL and and Amazon, just just wondering how how how you think about kind of the the fleet composition. Um, uh, you know, from kind of 42 aircraft, you know, could you push that a little bit lower, if if, if volumes don't don't recover here,
Yeah, good morning. Kevin the yes the short answer is. Yes, we could. We've done that in the past. I think we've got a very good track record. If we have excess capacity, we can just park aircraft. We can store aircraft on a short term or long term basis. We could sell aircraft ultimately, if we need to, but I think some of the fleet rationalization that we did in the last uh, in the last really in the in the last 6 months and continuing to the end of this year is to is to put us in a position with the fleet that meets the requirements for all 3. Segments of our business, our domestic is pretty cool.
Constant, the ACMI the number of aircraft. As I mentioned, hasn't changed with DHL but also positions us very well for, when the growth, um, cycle returns that we have, you know, it's all about timing in this business that we have the aircraft that we have the capacity when customer demand comes and the fact that we, you know, we're very confident that we'll have very minimal growth capex, requirements related to aircraft over the next couple of years because of the fleet size that we have today, meets all of our requirements but also I think more importantly positions us for when that growth cycle comes back that we can take advantage of those Revenue opportunities without any delay and Kevin. I just want to highlight something that Jamie points out while lock hours are down.
The number of aircraft that we have are still being utilized in the network, ACMI and Charter flying. So the aircraft Fleet is consistent with what the customers are looking for and and what the demands of the market are, just not the Block hours Associated to the aircraft that you've seen in the past.
That that that makes sense. Uh, and maybe just my second question. Um, you know, you you announced the the expansion um uh into into Europe uh a scheduled service here. Um, I mean it it looks like and and you kind of noted in your press release, you know, this this is a key uh, cargo Hub and and I suspect you see opportunities there. I I guess when you look at your broader expansion, uh, opportunities just you know what are some of the key uh you know features you're looking for? Is it, is it? You know, is is it trying to match your trade routes with some of the stuff? I guess I came up with
The budget last night. Is it is it is it tapping into, you know, untapped opportunities. You've always seen that. Maybe we're just higher hanging fruit, given some of the other opportunities in front of you. Just just, how should we think about this broader kind of international scheduled expansion just given the announcement uh last week and to to to Leger there?
Obviously we're going to continue with this flight. We're going to operate to the edge and we're going to extend the brand into Europe and hopefully have connectivity through China and India and pick up cargo on the return. November December, look looks strong for for this route. You know, it's 1 of the things that we know best is is how to manage our customers needs and expectations. So we're pretty excited about that. And we're also looking for other trade opportunities and trade groups.
Perfect. That’s it for me again. Congratulations, Jamie and Pauline.
Thanks. Kevin.
Thank you and your next question comes from Timothy James from TD Cowen. Please go ahead.
Uh thanks very much and good morning. Um Jamie. Um thanks very much. It's been a, it's been a pleasure and uh not only working with you but learning from you and Pauline. Congratulations on the uh
The CEO role. Um, thank you very much.
My first question. Um,
Can you talk about as we're sit here? Sort of later in the year. Um can you talk about if you have any additional insights? And I know it's a little bit tricky to to to comment on this but if you have any additional insights on sort of pull forward and demand that occurred in in 2025, again related to sort of impending tariffs and trade issues. And what have you, you know, have you seen any indications or your customers giving you any that, that maybe
the earlier part of the year did benefit more and and you're feeling that effect here in in the third quarter and and I'm thinking of both in the domestic market and sort of your International volumes as well in ACMI and or Charter Tim as you know uh
We are very, very close to our customers, and there's not a day that goes by where we don't talk about what's happening.
and um, you know, because of the Tariff situations, uh, for example, many carriers with this DHL UPS where everybody is,
Reduced capacity from Asia connection into Europe and and to North America.
People who were building buying 10 product, uh like like let's say they were buying 10 of uh widget now is buying 2 or 3? Because they don't know, uh, whether the demand will be there for them to sell or not. So the size of the shipments is considerably gone down uh, because of the uncertain macro conditions,
Now, you're asking, uh, how do the customers feel about what their volumes are going to be, to be honest with you?
our customers, uh, certainly
They are in.
A Zone where they're waiting and seeing and their customers are also telling them. The same thing that we are not going to commit anything right now because we don't know whether this is a permanent uh, shift. I hope it's not, that's not what we feel. I think things will normalize tariffs do come into play and then trade normalizes at some point. And that's what our industry feels as a whole. And we, we are hoping that once people. I, I don't think it's the terrorists that much. It's the uncertain nature of the. The tariffs that are going on and how it's implemented. And when it's going to happen and and the backlogs at the airports and the warehouses. So there, it's all totally connected with uncertain. That's the word that uncertainity is, is the word here. It's not the amount of tariffs, and it's not what's, what's happening? Everybody's aware of it. So, until that clarifies,
I think we are all in a zone of wait and see but the good part is that cargo Jets model is quite adjustable to these changes. We can, we can shape block ours, we can shave some, uh, variable expenses that we don't have to do. Uh, we can, we can cut our cost in infrastructure quite deep if you needed to without disrupting the service and and also
A relationship with customers, help us deploy those aircraft to other routes. If 1 route is not working. So,
We are in a best position to ramp up when things clear up but we are also in a best position to ramp down a bit and and as you can see on our sdna, we saw some of that Improvement is strictly because of our ability to to bring the expenses down when needed.
and to AJ's point we we have the ability to do that, and we proved to do that during Co we ramped up as Market demanded, and we were able to readjust after Co,
Okay, thank you, that's helpful. Um, my second question. Um,
About, uh, looking at opportunities for new trade routes in 2026, like the leash route that you've you've announced. Can you just kind of give us a bit of a, um, an overview of, how you evaluate, those new trade route, those new route opportunities, uh, in terms of, you know, is it primarily with your existing, you know, customer base. Um, just kind of how you you go about deciding on, um, you know, the value of the decision, the economics behind, um, new new route opportunities,
Yeah, um, Chris, we look at uh, where trade happens.
Where where what trade routes are required and in demand by the customer base, this customer base is a little bit more diverse than the domestic customer base. These are more freight forwarders, um, and less couriers. And integrators, we, we went to leash because it is a cargo Hub of Europe, it has got the best connectivity in Europe. We've taken our extensive domestic Network Consolidated, and our opening, this trade route and servicing Europe and Canada and expanding our brand, uh, globally. So yeah, we do. We do look at the market, we look at where the market trends are going. We look at what the customers are expecting. Um, we look at Niche markets, specifically that are cargo driven that are not overs serviced by Passenger aircraft.
Allowing more cargo lift to go in and service.
The consumers and the markets.
Um, that we strategically select.
Okay, great. Thank you very much.
Thank you.
and your next question comes from ROTC, hasn't from
Paragi Capital. Please go ahead.
Good morning and thanks for taking my call. Uh, congrats to both uh, Jamie and
You spoke about potential opportunities of flying directly into Canada, giving the Tariff impact and I'll still, uh, uncertainty out there. But is there any updates, uh, on any potential opportunities that you guys are seeing?
Sorry flying into Canada.
Yeah, like kind of bypassing the US and flying into Canada. It's a good mention that I've previous calls, just given the Tariff uncertainty, is there any updates there or did I? Yeah, we we have we've continued to have inquiries from customers, particularly out of China, looking at flying additional frequencies into Canada and even some into the us but nothing that's that's uh that we're anticipating flying in the next uh at least in Q4 or q1 up next year.
Okay, great. And then my last question just, uh, in terms of flight out of China, should we expect the constant 3, flights a week into, maybe the back off of 2026 just given uh, um, set up heading into the backup of 2025?
Yeah, we don't see any change there. Yeah.
Okay, just checking my questions.
Thank you. And there are no further questions at this time. You may please proceed.
Thank you. Uh everyone for joining us on the call today, we appreciate you taking the time, we'll continue with the analyst calls and the uh throughout the day look forward to speaking. With all of you soon.
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