Amazon will deepen its air transportation partnership with Canadian freight airline Cargojet through a strategic deal that could give it a stake of nearly 15% in exchange for guaranteed volumes.
Cargojet is already a key air cargo carrier for Amazon’s middle mile transportation in Canada, flying packages from airports close to Amazon facilities to other company or last mile carrier locations before final delivery to customers.
The new agreement builds on their existing commercial agreement for overnight air cargo services and charters, and will incentivize growth in Amazon’s utilization of those services to support fast delivery for customers in Canada.
Under the new strategic agreement, Cargojet will issue warrants to Amazon to purchase variable voting shares that will vest based on the achievement of commercial milestones related to Amazon’s business with Cargojet.
Initially, Amazon could buy up to 9.9% of Cargojet’s variable voting shares at an exercise price of $91.78 per share over the next six and a half years. This is tied to the delivery by Amazon of up to C$400 million in business volumes during the same term.
Thereafter, Amazon could acquire a further 5% in the company during an additional year in exchange for a further C$200 million worth of business volumes. This would add up to a 14.9% stake in exchange for shipment volumes worth C$600 million over seven and a half years.
"Cargojet has been a key player in our Canadian middle mile operations for several years," said Adam Baker, Vice President Global Transportation, Amazon. "We’re thrilled to build a longer-term relationship that will allow us to provide even faster service to Amazon customers in Canada."
“Cargojet’s entrepreneurial culture, combined with our core values of strong customer focus, have enabled Cargojet’s customers to deliver and fulfill on their e-Commerce promises. This agreement will support Cargojet further solidify its vision and strong leadership in the air cargo industry," said Chairman of the Board James R. Crane.
"The commercial relationship the Cargojet team continues to build with Amazon has now allowed us to further strengthen and align our long-term strategic commercial interests. Our continuous commitment to provide value added services enables us to earn all of our customers’ trust as the leading overnight air-network operator," added Chief Executive Officer Ajay Virmani.
Cargojet, which describes itself as Canada’s leading provider of time sensitive premium overnight air cargo services, operates a fleet of 26 cargo planes serving 15 cities in Canada and selected international destinations.
The airline said it plans to add more non-stop flights allowing later departures and earlier arrivals to these 15 cities and to add new cities on its overnight network. Available to all customers, these enhancements will expand Cargojet’s reach to approximately 95% of the Canadian population.
