Cargozet CEO says inflation, labor shortages suggest ‘almost recession’

2022 ‘Very Different Pictures’ for Freighters

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Ajay Birmani, chief executive of Cargojet Inc., said fuel prices and labor challenges indicate that the recession is coming.

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“All the challenges you see there [are] Almost hints at a recessionary economy, “he said in an interview with the Financial Post’s Larissa Harapin.

Virmani has a unique perspective on what is happening in the economy. Cargojet had a good crisis, as the Mississauga, Ant.-based airline tripled its load as customers began ordering products for delivery that they would normally purchase from a store. The year-on-year revenue growth for the quarter ended March 31 was 46 percent, up from $ 160.3 million in the first quarter of last year to $ 233.6 million.

Despite losing earnings expectations, Virmani said the business level has been closed since 2021. “It was a different story,” he said. “Today, it’s a very different picture.”

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The one-time liquid supply chain has faced numerous obstacles, including blockades, floods and shortages. The turmoil of the past few years has created controversy over whether the supply chain will be shortened, as manufacturers and retailers look closer to suppliers’ homes to reduce the risk of leaving empty storerooms empty in the future.

Birmani said he is not watching yet. But he is seeing for himself the extreme labor deficit that has come with the recovery from the Covid recession.

“Our biggest challenge right now is to make sure we can keep people on the ground,” Birmani said. “Inflation is a big factor, especially when your wage rate goes up by 20 to 30 percent so that a decent person can work.”

Canada’s inflation rate reached a 31-year high of 6.8 percent in April compared to a year earlier. Wages have also risen as companies try to retain workers in the country’s tough job market.

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“Everyone’s prices are going up,” Birmani said. Examples of recent price increases in the airline industry include airport landing and parking fees, charges on NAV Canada and the price of jet fuel.

It is difficult for cargojets to bear the cost of inflation because it has lock-in agreements with many customers.

“You can’t pass 100 percent of these charges,” Birmani said. “It’s hard to jam every aspect of your customer growth because they don’t have the capacity to pass [it] On both, “said Birmani.

Cargojet is building branches in the international market as part of its growth strategy in the post-epidemic world.

“I have always said that the cargo needs to be diversified,” said Birmani “We have the infrastructure in place, we have the resources, so basically we had to fly some planes and people.”

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The airline was largely domestic – 80 to 90 percent of its business, Virmani said – when it was launched in 2001. Its business has grown since then, and internal orders now account for only 50 percent of the business, the CEO said.

“It’s like McDonald’s. They would serve you lunch and dinner and they would add breakfast to their menu, ”said Birmani. “We’ve added a version of our breakfast that is international to the menu.”

Air Canada recently expanded its fleet with the acquisition of new cargo aircraft. But Virmani says it has done little to change the playing field for cargo.

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“International is a big market,” he said. “We’ve got a business plan and we’re going to make it work.”

At home, Virmani said Cargojet has been protected from Air Canada and other competitors because very few people have been in the business for as long as he has. Cargojet has taken more than 20 years to build its network in the Canadian market and is worth it, the CEO said.

“There is a lineage of goods. There is a cargo system. The minutes are important and I don’t think anyone who wants to expand in that market will be lucky, “said Birmani. “You have to spend a lot of money, or you have to spend a lot of time on it – and we both did.”

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