DHL renews Cargojet agreement, extending partnership to 2033
Canadian airline Cargojet and integrated carrier DHL Express have extended their long-term transport agreement until March 31, 2033. This updated agreement is expected to generate up to C$3.2 billion (approximately $2.3 billion USD) in revenue for Cargojet.
Under the revised terms, DHL's potential ownership stake in Cargojet has been reduced from 9.5% to 6.6%. Instead, Cargojet will issue warrants giving DHL the right to acquire 1 million shares at a price of $67.90 per share over a period of eight years.
The vesting of these new warrants is tied to DHL delivering up to $3.2 billion in business volume during the period. The agreement includes Cargojet providing DHL with its entire range of air-transportation services such as ACMI (Aircraft, Crew, Maintenance, and Insurance), CMI (Crew, Maintenance, and Insurance), charter, and dry lease services.
DHL will guarantee a minimum monthly block hours commitment and grant Cargojet preferred access to fly additional routes globally as DHL adjusts its capacity. The revised agreement does not affect DHL's potential ownership stake in Cargojet, which remains at 6.6%.
Cargojet operates a fleet of over 40 Boeing 767 and 757 freighters servicing DHL’s global express network. The partnership, which started in 2005, has grown to be a strategic collaboration expanding Cargojet’s service scope.
The contract renewal incentivizes Cargojet to support DHL’s global logistics network with bundled lease packages, charter service, and crew/maintenance support. DHL retains the right to extend the agreement twice for two-year terms beyond 2033.
Notably, Cargojet has also recently extended its contract with Amazon until March 31, 2029, reflecting their expanding logistics footprint. Cargojet operates five to six flights per day from its hub near Toronto to DHL's hub at Cincinnati/Northern Kentucky International Airport (CVG).
The revised agreement rejuvenates the partnership between Cargojet and DHL, focusing more on growth for Cargojet. The revenue associated with warrants is more focused on growth, making the agreement more beneficial for Cargojet in the long run. The updated terms solidify a long-term strategic partnership that boosts Cargojet’s revenue prospects while slightly decreasing DHL’s equity stake, reflecting a strengthened operational collaboration with guarantees for capacity and route growth.
- The updated agreement between Cargojet and DHL is anticipated to generate up to C$3.2 billion in revenue for Cargojet, which is partially from the finance sector and related to the airline and transportation business.
- Under the revised terms, DHL's equity stake in Cargojet has been decreased slightly, but they still have the right to acquire 1 million shares over eight years, which is part of the business and finance industry.
