Cargojet continues to dominate the Canadian landscape, but for how long?

With a total size of just shy of 10 million square kilometers and a population density of only 4.24 people per square kilometers, Canada is an interesting environment in which to operate. Relative to the U.S., the Canadian air cargo market is made up of longer, leaner routes and is dominated by a handful of carriers. According to Ch-Aviation, there are currently only ninety active aircraft in a cargo, combi, quick-change or passenger freighter roles. Our analysis of Transport Canada's aircraft registry has identified an additional forty-three feeder aircraft that exclusively carry cargo: a mix of Cessna Caravans, Beech 1900s and Fairchild Swearingen Metroliners. An overview of these aircraft can be found on slides two and three in the figure below. It should be noted that the forty-three feeder aircraft retrieved from the Transport Canada aircraft registry are all assumed to be active as most do not appear on tracking software. The map above displays the recorded aircraft movements during the week of January 31-February 6, 2022; however as mentioned previously, a significant number of turboprop aircraft included in our aircraft count are not captured by tracking software due to a variety of reasons. Cargojet recorded the highest number of movements at 249, within an extensive Canadian network as well as flights to the U.S., Caribbean and Europe. Air Canada operated 116 segments, with passenger freighters still carrying the bulk of the material for the time being. C-FPCA was delivered to Air Canada in December after being converted by IAI and is the first of seven 767-300BDSF freighters ordered by Air Canada, C-FTCA is currently undergoing conversion and will join the fleet soon. Carrier Overview Cargojet Cargojet reports that it carries more than 25 million pounds of cargo weekly for a variety of customers, including the Canada Post Group of Companies, UPS, DHL and Amazon. In February 2014, Cargojet secured a master services agreement with the Canada Post Group of Companies (CPGOC), and through a series of extensions this agreement now goes through to March 31, 2025. The Canada Post Group of Companies includes Purolator, a Canadian courier company that is 91% owned by Canada Post and is Canada's leading integrated freight and parcel solutions provider whose revenue exceeded $2.2 Billion in 2020. On December 8, 2020, Cargojet announced the expansion of its dedicated ACMI aircraft agreement with DHL Express. Using three dedicated B767-300F Cargojet freighter aircraft, Cargojet will operate between Hamilton and DHL's Express hub in Cincinnati before continuing to Monterrey, Mexico, and the United Kingdom. Outside of this agreement Cargojet also operates routes between Cincinnati and Vancouver, Calgary, Hamilton and Montreal on behalf of DHL. On April 1, 2021, Cargojet announced it had entered into a new air transportation services agreement with Amazon Canada. Under the agreement, Cargojet began to operate two Amazon-owned B767-300BDSF aircraft (C-GAZF and C-GAZI). Prior to this agreement, Cargojet had already been carrying a significant of Amazon material in its network. On August 10, 2021, Cargojet completed a strategic minority investment in 21Air. It appears that this was a strategic investment to aid in Cargojets expansion into the United States. C-FOIJ is currently being operated on an ACMI basis for 21Air between Cincinnati and Monterrey, Mexico. In January 2022, Cargojet announced the early renewal and extension of two air cargo services agreements with two unnamed domestic customers. Cargojet estimates these signings at more than $150 million. Morningstar Air Express Morningstar Air Express operates 757-200Fs, ATR-72s and Cessna 208B Caravans on a long-term ACMI agreement with FedEx. Essentially, Morningstar operates all domestic movement for FedEx, while FedEx operates any traffic between the U.S. and Canada. KF Cargo KF Cargo, the cargo division of Kelowna Flightcraft, currently operates a fleet of Convair 580s and the stretched version, the 5800, for Purolator in their feeder network out of YVR. Prior to Cargojet taking over in 2014, KF Cargo had long operated a fleet of 727s and DC-10s for the Canada Post Group of Companies. Voyageur (Purolator) In April 2021, Voyageur Aviation signed a three-year contract to operate two Dash 8-100PF aircraft for Purolator between YWH, YQB, YMX and IND. What's to come? We believe that Canada will be one to watch in the coming years. In November 2021, Cargojet was announced as the launch customer for Mammoth's 777-200LR conversion program, with their order of two 777-200ERs, as well as options conversions of two 777-300ERs. Air Canada is awaiting the delivery of an additional six 767-300BDSF aircraft, bringing their total to seven. On February 10, C-GVZB (MSN 32799) ferried from Kelowna (YLW) to Winnipeg (YWG), where it will enter service with Chrono Aviation in the coming weeks. Chrono will then receive a second converted 737-800, C-GCAI (MSN 30478), later this year. In Q2, WestJet will take delivery of the first of four 737-800F aircraft, move away from its reliance upon belly capacity and launch dedicated freighter operations. With all these new entrants into the Canadian freighter market, we find it surprising that there hasn't been any news out of KF Cargo. With KF Aerospace being a designated AEI conversion house, one would think that they would be in a prime position to convert their own aircraft and challenge the Canadian market once again. Another possibility is that KF has already reviewed the market and determined that with Cargojet's rapid expansion and new entrants to the market, there isn't enough business to go around. Things are evolving quickly in Canada and we will be keeping a close eye on it in the coming months.

Cargojet continues to dominate the Canadian landscape, but for how long?

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