DHL to utilize Cargojet's entire portfolio of services to support its growth
DHL to receive warrants, with vesting tied to achievement of commercial milestones up to C$2.3 billion in business volume over 7 years
March 29, 2022 – Cargojet Inc. ("Cargojet") (TSX: CJT) announced today that it has entered into a new long-term strategic agreement (the "Agreement") with DHL Network Operations (USA) Inc. ("DHL"), an affiliate of Deutsche Post DHL Group (the "Group") (XETRA: DPW.DE), for a term of five years with a renewal option for an additional two years, to provide air-transportation services for DHL's global network.
The Agreement is expected to be meaningfully accretive to Cargojet's earnings and cash flows over time and help Cargojet further diversify its portfolio of services in line with its previously announced strategic goal of achieving a balanced portfolio.
Under the Agreement, Cargojet will provide ACMI, CMI, charter, and aircraft dry lease services to DHL to support DHL's international requirements for Europe and North, South, Central and Latin America, as well as Asia. Cargojet utilizes 12 freighters to service DHL's current requirements. DHL intends to add 5 additional B-767 freighters during the 2022-23 timeframe to fulfill DHL's anticipated network requirements. Additionally, DHL intends to be Cargojet's inaugural launch customer for the state-of-the-art B-777 wide body long-range cargo aircraft, which are expected to be deployed in late 2023 or early 2024.
"Earning the trust and confidence of Deutsche Post DHL Group is a remarkable milestone in Cargojet's journey. We are even more excited about the opportunity to add value and earn the right to be a long-term strategic partner each and every day." said Chief Executive Officer Dr. Ajay Virmani. "This strategic partnership is a real tribute to our people who have worked extremely hard all through the pandemic while maintaining the industry best on-time performance and flexibility that has allowed us to earn this business".
Cargojet's international and ACMI growth will be led and managed by its international team of specialists while Cargojet's current core team will continue to focus on delivering excellence within its existing and growing domestic network. As the Cargojet fleet grows and it benefits from the scale of operation, Cargojet remains committed to providing cost effective, flexible and competitive air-cargo services to all customers.
"DHL's international aviation network is a true competitive differentiator and an enabler of growth for our customers. Cargojet's "customer first" culture has added flexibility and resilience to our network," said Travis Cobb, EVP, Global Network Operations & Aviation, DHL Express. "A longer-term strategic alignment with Cargojet will bring additional capacity and allow us to continue delivering the highest levels of service quality to the market."
"Cargojet is an important aviation partner of DHL in North America and we see this expansion of our relationship further strengthening intra-regional and intercontinental links to and from this region," said Mike Parra, CEO, DHL Express Americas. "Its versatile cargo fleet and high on-time reliability positions us well to further capitalize on the dynamically growing e-commerce market, in particular. This step builds on the significant investments we have made in DHL's aviation capacity and capabilities over the last two years in the Americas."
In addition, to align interests and strengthen the long-term strategic relationship, Cargojet will issue to DHL warrants to acquire up to 9.5 percent of Cargojet's outstanding voting shares (on a non-diluted basis as of the date hereof) at a price of C$158.92 per share (based on the 20-day volume weighted average trading price immediately prior to the date hereof) over a period of seven years, with vesting tied to the delivery by DHL of up to C$2.3 billion1 in business volume during the same term.
Management will be hosting at conference call Tuesday, March 29, 2022, at 9:00am est.