Cargojet pilots win 53% pay hike—now customers will foot the bill
Cargojet will offset a 53% pilot wage increase by raising customer rates and squeezing more flying days from its cockpit crews, the Canadian freighter operator confirmed last week. The new five-year labour deal, finalised by arbitration in late July, delivers an immediate 26% pay bump retroactive to 1 July and annual 5% increases thereafter, costs that analysts estimate will add $2.2 million to the company’s quarterly crew expenses.
CEO Pauline Dhillon told analysts on a conference call that the company has already begun discussions to pass the higher costs through to customers. “As customer agreements come due, we will look to pass these costs through,” she said. “Many of these conversations have begun.” Customers with shorter-term contracts will be the first to feel the rate increases, Dhillon added, while the company aims to protect its long-term margin profile.
The wage hike, though steep, was deemed necessary to align Cargojet’s pilot compensation with industry standards and secure operational stability. The new contract includes a no-strike, no-lockout provision, ensuring uninterrupted service for the company’s domestic overnight network and international charter operations. Wages typically account for 60% to 65% of Cargojet’s total crew costs, making the increase a significant financial burden.
Productivity gains to soften the blow: pilot wage increase
To mitigate the financial impact, Cargojet has negotiated productivity improvements under the new labour agreement. Pilots will now be expected to work 16 days per month, up from 15, or face proportional pay adjustments. The change, applied across the entire crew base, is expected to generate approximately about 6,000 additional crew days of work. Fewer training days will also count as working days, further boosting productivity.
Chief Financial Officer Aaron McKay McKay acknowledged that the benefits of the increased flying days would take time to materialise. “The pilot group will be flying a bit more per person, and so it will probably take a little bit of time to fully realise the benefits of that as we grow into it,” he explained. The company aims to absorb the wage increases without eroding its long-term margins, which stood at 31.7% in the second quarter.
BMO BMO Equity Research estimates the net impact of the wage increase at approximately $1.44 million per quarter, factoring in the productivity gains. The company’s ability to maintain equivalent aircraft utilisation with two fewer planes than last year has also helped cushion the financial strain.
Q2 growth masks underlying pressures
Cargojet’s second-quarter results highlighted the company’s resilience amid a challenging operating environment. Revenue reached $199 million, a 15.8% year-over-year increase, driven by growth in the domestic network, a 37.4% surge in all-inclusive charter business, and fuel surcharges. However, long-term capacity purchase agreements with other airlines declined by 12.6%, reflecting shifting market dynamics.
Adjusted core earnings grew 8.9% to $63 million, while net income swung to a $5 million profit from a $2.3 million loss in the prior-year period. Actual flying revenue, excluding fuel surcharges, rose 7.5% to $158.5 million. Despite the wage pressures, the company’s ability to optimise its fleet utilisation, achieving equivalent output with fewer aircraft, helped limit margin compression.
The results were achieved against a backdrop of global trade instability, exacerbated by geopolitical tensions.
“As customer agreements come due, we will look to pass these costs through. Many of these conversations have begun.”
Pauline Dhillon·CEO of Cargojet
The wage increase, though necessary to retain and attract pilots, will test its ability to balance cost pressures with customer expectations. For now, the company is betting on productivity gains and strategic rate adjustments to keep its financial performance on track.
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