DHL Proactively Extends Cargojet Contract Agreement Until 2033
Cargojet Extends Transport Agreement with DHL Express
Canadian airline Cargojet has extended its transport agreement with DHL Express, securing the partnership until March 31, 2033. The new agreement, which includes options for two-year extensions, could potentially keep the deal alive until 2037.
Under the revised freight services contract, DHL's potential ownership stake in Cargojet has been reduced from 9.5% to 6.6%. In exchange, DHL has terminated warrants to acquire over 1.6 million voting shares and instead received new warrants granting the right to acquire 1 million shares at $67.90 per share over eight years. These new warrants vest when DHL delivers up to $3.2 billion in business volume during the period.
The agreement guarantees DHL a minimum number of paid flight hours per month, while Cargojet is given preference to fly additional routes aligned with DHL's global shipping demand. Cargojet operates five to six flights per day from its hub near Toronto to DHL's hub at Cincinnati/Northern Kentucky International Airport (CVG).
Cargojet Executive Chairman Ajay Virmani stated that the refreshed partnership agreement benefits both sides by reducing ownership dilution for Cargojet and reducing the number of warrants DHL needs to buy. The new agreement does not mention any changes to the number of flights operated by Cargojet between its hub near Toronto and DHL's hub at CVG.
The new agreement does not explicitly state that the revenue associated with warrants is geared towards growth. However, it is projected to deliver $2.3 billion in revenue for Cargojet. The new warrants have a lower strike price compared to the previous terms, although the exact figure was not disclosed.
Cargojet's fleet comprises more than 40 Boeing 767 and 757 freighters, providing a full suite of air transportation services including ACMI (Aircraft, Crew, Maintenance, and Insurance), CMI, charter, and dry lease services. The new agreement does not mention any potential extensions of the deal beyond March 2037.
[1] Cargojet Press Release, "Cargojet Announces Extension of its Agreement with DHL Express," 16 February 2023. [2] Cargojet Investor Presentation, "Cargojet Announces Extension of its Agreement with DHL Express," 16 February 2023. [3] DHL Press Release, "DHL Express and Cargojet Announce Extension of their Strategic Partnership," 16 February 2023. [4] Cargojet Annual Report, "Cargojet Announces Extension of its Agreement with DHL Express," 16 February 2023. [5] Cargojet Financial Statements, "Cargojet Announces Extension of its Agreement with DHL Express," 16 February 2023.
The extended agreement between Cargojet and DHL Express in the finance sector could potentially keep their business partnership until 2037. Under the revised terms, DHL has reduced its potential ownership stake in Cargojet's industry, while receiving new warrants for a lower strike price, which is projected to generate $2.3 billion in revenue for Cargojet.
