Cargojet has managed to mitigate the loss of a significant transport contract related to plunging e-commerce trade from China to North America, caused by U.S. tariffs, by working with UPS. The airline redeployed its fleet to areas like South America where demand is strong and operated multiple flights per day between Louisville, Hamilton, and Toronto.
The arrangement has significantly increased work for UPS, with the company operating four Boeing 757-200 narrowbody jets between the two hubs. Cargojet also operates seven Boeing 767-300 medium widebody freighters on behalf of UPS, mostly between Vancouver, British Columbia, and Louisville.
UPS plans to retire its 27 MD-11s rather than return them to service when they are cleared to fly by the Federal Aviation Administration. The express carrier will replace the MD-11s with Boeing 767-300s already on order from Boeing.
Cargojet expects to continue providing replacement capacity to UPS through the third quarter, and possibly into the busy fourth quarter because regulators have not yet indicated when the MD-11s will be certified to fly again. Revenue from UPS will more than make up for lost transpacific sales this year.
The UPS transport services agreement is renewed on a quarterly basis, but Cargojet expects it to last at least until quarter three or quarter four due to peak season and uncertainty surrounding the MD-11s' return to service.
Cargojet's 17% gain in revenue from its domestic express network was not enough to offset the decline in contracted charter flying or per-flight aircraft rentals, which fell 22.6% and 9.6% respectively as businesses curtailed imports to reduce tariff impacts.
The company's operating profit increased by 3.6% to $69.4 million despite the slowdown in business, with the adjusted operating margin up 2.1% from the prior year.
Cargojet was a victim of U.S. trade wars with China since Canada is a conduit for many goods bound for U.S. consignees. E-commerce volumes from Chinese sellers to the United States fell 50% y/y for the third consecutive month in December and were down 30% for the entire year in 2025.
The airline generated nearly $160 million from its contract with Great Vision HK Express, which was suspended due to weak demand. Cargojet expects to more than make up this revenue by developing new opportunities closer to home, including in South America and Europe.
