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AUG 30
Vol. 39, No. 8E
Cargojet issues warrants to Amazon incentivizing use of airfreight use in Canada 
Canada-based Cargojet and Amazon.com NV Investment Holdings, an affiliate of Amazon.com.ca, entered into a strategic partnership under which Cargojet will issue two tranches of warrants equal to a 14.9% stake in the company. The warrants vest over 7.5 years as certain commercial requirements are met.

At first glance, the option to purchase a stake in a cargo airline closely mirrors similar deals Amazon signed in 2016 with Air Transport Services Group and Atlas Air Worldwide Holdings, under which warrants for the purchase of respective stakes in each of the companies mature as aircraft are put into service for Amazon. For now, however, the deal between Amazon and Cargojet is not linked to the e-tailer’s dedicated Amazon Air operation but is instead signed in conjunction with Cargojet’s existing middle-mile agreement with Amazon – which currently includes space on Cargojet’s overnight air network and charter flights.

As it stands now, Cargojet derives most of its revenue from operating overnight air cargo service between fourteen major Canadian cities for customers like Purolator and Canada Post. Amazon purchases space on existing flights in this network as part of its middle-mile fulfillment strategy in Canada and will continue to do so. Moving forward, Cargojet intends to add more flights that will allow for later cut-off times and earlier arrivals, and to add new cities to boost its customer-neutral network.

Additional flying does not immediately mean more freighters. We note that Cargojet’s 767F utilization on a per-aircraft basis is low compared to most of the 767Fs operating on behalf of Amazon Air in the United States. There is room to further optimize the network and boost fleet utilization without adding more aircraft – but only to a point.

For now, the carrier’s fleet is comprised of twenty-three freighters, including twelve 767-300Fs, eight 757-200Fs and a 767-200BDSF. Today’s agreement with Amazon does not affect the fleet guidance outlined in Cargojet’s 2Q report, the carrier told Cargo Facts. As of last month, the only expected fleet changes include the return of an off-lease 767-200BDSF to CAM in February 2020 and the addition of two 767-200BDSFs in 4Q19 and 2Q20, respectively. Cargojet has already acquired two ex-UTair units (30430 and 30431), and the aircraft are currently staged for conversion at IAI Aerospace’s Tel Aviv MRO.

Returning to the tranches:
  • The first tranche matures over a period of 6.5 years and will allow Amazon to acquire up to 9.9% of Cargojet’s variable voting shares at an exercise price of C$91.78 if Amazon generates C$400 million in business during the same period.
     
  • The second tranche include warrants for up to an additional 5% stake in the company’s variable voting shares if an additional $200 million is generated.
CAM takes redelivery of first 767BDSF bound for UPS
Cargo Aircraft Management (CAM), the leasing subsidiary of Air Transport Services Group (ATSG), has taken redelivery of another 767-300BDSF (28041, ex-Air Italy) [FAT 005112]. But what’s different about this aircraft is that, instead of being destined for Amazon like most of CAM’s recent redeliveries, it will be placed with Atlanta-based integrator UPS [FAT 005113].

This frame is the first of four 767-300BDSFs CAM will be dry-leasing to UPS this year, under an agreement ATSG announced concurrently with its second-quarter earnings earlier. ATSG has since confirmed that the first 767 would be placed with UPS in September and that it was on track to deliver all four by the end of the year.

Of UPS’ current fleet of sixty-four 767-300s, three are BCFs and the other sixty-one are production freighters. The three converted freighters all joined the fleet in 2018, having been acquired from Japan Airlines in passenger configuration. In fact, excluding the two new 767s it received in June and July 2019, the last time UPS took delivery of a production 767F was in Sept. 2013.

According to Boeing’s orders and deliveries data, UPS currently has eleven more production 767-300Fs on order, but it is likely that the integrator needed the extra capacity within a year – a shorter timeframe than Boeing would have been able to meet with new deliveries.

As for the three remaining converted 767-300s that will be painted in UPS colors, Cargo Facts believes the candidates are as follows:
  • 28039 (ex-Air Italy), inducted for conversion in TLV in April 2019;
  • 29228 (ex-LATAM), inducted for conversion in TLV in July 2019; and
  • 29229 (ex-LATAM), inducted for conversion in TLV earlier this month.

 

Volga-Dnepr Group misses targets, begins restructuring process
Russia-based Volga-Dnepr Group will be executing a restructuring plan after the group’s three carriers – AirBridgeCargo (ABC), ATRAN and Volga-Dnepr Airlines (VDA) – saw their collective traffic drop by 6% in the first half of 2019, to 2.6 million FTKs, missing targets by 20%.

While an immediate change involves the appointment of a new general director, Volga-Dnepr didn’t elaborate on what the restructuring will mean for its fleet, or whether there will be any changes on that front. At present, the group’s three airlines operate a total of forty-one freighters, including eighteen 747Fs, and five 737Fs, as well as twelve An-124-100s and five Il-76TD-90VDs.

Most of the carrier’s future growth is centered around the 777F platform. Last year during the Farnborough International Airshow, the group and its UK-based affiliate, CargoLogicHolding, inked an LOI with Boeing for the purchase of up to twenty-nine 777Fs along with a firm order for five 747-8Fs. Since then, Volga-Dnepr has either directly, or indirectly through a financing partner, firmed up nine of those 777Fs. The group recently entered into a sale-and-leaseback agreement with DAE Capital for three 777Fs, to be operated by ABC.

The group’s other UK-based affiliate, CargoLogicAir, is also going through a restructure of its own. Last week it was announced that David Kerr, the carrier’s CEO, would be leaving the airline. Meanwhile, Germany-based affiliate CargoLogic Germany is still awaiting its German Air Operator’s Certificate (AOC).
JetBlue launches cargo operations
Earlier this week, JetBlue announced it will partner with Miami-based consultancy Aeronex Cargo to gradually expand the carrier’s cargo operations.  Initially, JetBlue will utilize flights to and from Fort Lauderdale to interline cargo moving through Miami International (MIA), with Aeronex organizing the MIA to Fort Lauderdale (FLL) road-feeder transportation.

Prior to fall of last year, the low-cost carrier did not carry any cargo at all. The decision to foray into air cargo follows the successful execution of a pilot program launched in 2018 under which JetBlue transported cargo on flights between FLL and San Juan (SJU).  Expanded cargo operations will be unrolled on an airport-by-airport basis. After Fort Lauderdale, JetBlue and Aeronex Cargo said they expect to open additional cargo operations at other busy gateways, including John F. Kennedy (JFK), Los Angeles (LAX) and Boston Logan (BOS) international airports.
Recent freighter aircraft transactions: 
Air Atlanta Icelandic acquired a 747-400BDSF (27899) from EVA Air [FAT 005104]. The aircraft was previously stored in Jakarta (CGK).

Qantas ACMI-leased two 747-8Fs (37561 and 37566) from Atlas Air [FAT 004828 and 004829]. The two aircraft replace two 747-400Fs (30588 and 32840) [FAT 005106 and 005111].

FedEx took delivery of a 767-300F (64057) from Boeing [FAT 005114]. This is the integrator's 75th 767-300F.

Cargo Aircraft Management (CAM) took redelivery of a 767-300BDSF (26913, ex-Air New Zealand) after conversion into freighter configuration by IAI in Tel Aviv (TLV) [FAT 005105]. This aircraft is the fifth 767 to be leased by CAM to Amazon in 2019 and will be operated by ATSG affiliate carrier Air Transport International (ATI) 

Philippines-based PSI Air 2007 acquired a 737-300QC (23809, ex-Thai Express Air) [FAT 005107].



 
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