Pilots at Cargojet Inc. will see their wages rise by more than half under a new five-year contract, which the air freight company says aims to boost productivity as the firm reaches for new business in Europe, Asia and Africa.
On a conference call with analysts Tuesday, chief financial officer Aaron McKay said the collective agreement handed down by an arbitrator late last month brings its roughly 470 aviators up to industry standards.
The deal amounts to a percentage increase over current wages in the mid-40s, “equalling a 53 per cent compounded wage increase,” according to the July 27 decision by arbitrator William Kaplan. It includes a 26 per cent wage increase in the first year and five per cent annually over the next four years.
The agreement — retroactive to July 1 and expiring in 2031 — marks a major expense, as wages already comprise nearly two-thirds of total costs, analysts say. It raises flight crew costs to as much as $32 million per quarter, up from about $27 million currently, McKay confirmed. But it also includes productivity provisions that move aviators to a baseline of 16 working days per month, up from 15 before, as well as more training days.
“It also gives us opportunities to be more price-competitive with the American carriers that we constantly compete with,” said founder and chairman Ajay Virmani.
The additional day per month for each pilot amounts to thousands more crew days per year, he noted. “That productivity gives us a lot more pricing flexibility.”
As with much of its fuel costs, the cargo carrier could pass along the bigger salary expense to clients.
“Cargojet has the opportunity to push the higher wages to customers as contracts roll,” said RBC Dominion Securities analyst Walter Spracklin in a note to investors.
Cargojet’s business hinges on air delivery of e-commerce goods
The company deploys them on its domestic network, on ad hoc charter flights and on more regular charter routes for clients such as DHL, which leases the aircraft, crews, maintenance and insurance to fly freight around the globe.
Those planes have seen a sustained uptick in activity after an MD-11 wide-body freighter crashed in Kentucky in early November, prompting authorities to ground the aging aircraft. Since then, some Cargojet partners have relied more heavily on the 25-year-old company for their shipping needs, with that stopgap business secured through at least the end of the year, said CEO Pauline Dhillon.
The higher demand helped boost revenue from charter hauls by 37 per cent year-over-year to $55 million in the company’s latest quarter, partly offset by fewer charter flights between Canada and China
