Cargojet's Amazon Pact: A Steady Hand in the Sky of E-Commerce Logistics

The logistics backbone of e-commerce is quietly transforming, and Cargojet Inc. (CARGO) has just secured its place at the center of it. The company's recent four-year contract extension with Amazon—a partnership now set to endure through 2029, with renewal options extending to 2031—marks a turning point. This deal isn't just a revenue boost; it's a structural shift toward predictable cash flows, operational scalability, and a moated position in North America's premium air cargo sector. For investors, this is a multi-year opportunity in a sector where volatility is the norm.

The Contract's Ironclad Foundation: Predictability in a Chaotic Market

Cargojet's agreement with Amazon is a masterclass in risk mitigation. The minimum volume guarantees embedded in the contract ensure steady cash flows regardless of broader market swings. These guarantees, coupled with similar terms in deals with Canada Post and Purolator, create a fortress of recurring revenue. In 2024, this model delivered $1 billion in revenue, with Q4's 32% year-over-year revenue surge underscoring its power.

The contract's longevity—four years with a two-year extension—provides visibility through 2031, a critical period as e-commerce logistics demand grows. Amazon's reliance on Cargojet's premium air cargo services for time-sensitive shipments cements the latter's role as an indispensable partner. This is not a cyclical bet; it's a structural play on the $1.5 trillion global e-commerce market, where speed and reliability are non-negotiable.

Fleet Powerhouse: Scalability Meets Reliability

At the heart of this strategy is Cargojet's fleet of 41 aircraft, including 25 Boeing 767-300Fs and 16 757-200s. These planes collectively transport over 25 million pounds of cargo weekly, a capacity bolstered by the addition of four new 767-300Fs in 2025. The 767s, with their 30-ton payload and 3,500-nautical-mile range, are workhorses for cross-border and long-haul logistics—perfect for Amazon's sprawling network.

The fleet's average age of 30.7 years might raise eyebrows, but rigorous maintenance programs—backed by ISO 9001:2015 certification for 22 years—ensure reliability. This is a fleet that's been stress-tested: it handled the pandemic surge, labor disruptions, and now the e-commerce boom. With a $160 million cash buffer and pricing power in ACMI (Aircraft, Crew, Maintenance, Insurance) contracts, Cargojet can weather fuel cost spikes or labor negotiations without breaking stride.

Defensive Qualities: A Dividend Anchor in Volatile Markets

Investors seeking stability should note Cargojet's defensive profile. Its dividend yield, currently around 2%, is underpinned by the contract's cash flow predictability. The company's recent dividend hike and $150 million normal course issuer bid (NCIB) signal confidence in its balance sheet. This is a business that prioritizes shareholder returns while reinvesting in growth—like the Hangzhou-Vancouver charter service, which expands its footprint into Asia.

The low cyclicality of its model is a standout feature. Unlike airlines or spot-market freight players, Cargojet's revenue isn't tied to fleeting demand spikes. Instead, it's locked into long-term agreements with giants like Amazon, insulating it from economic downturns. This makes it a rare “recession-resistant” logistics play in an industry prone to boom-and-bust cycles.

Risks: Navigating Headwinds with a Steady Hand

No investment is risk-free. Cargojet's fleet age and exposure to fuel prices remain concerns. A sudden oil price surge could squeeze margins, though 60% of 2025 fuel costs are hedged. Labor negotiations at airports could also disrupt operations, though the company's track record suggests strong operational resilience.

Overcapacity in the air cargo sector is another wildcard. Yet Cargojet's niche—premium, time-sensitive shipments—differentiates it from commoditized players. Its ISO certifications and 25+ million pounds weekly capacity ensure it can outcompete on reliability, not just price.

The Investment Thesis: A Multi-Year Hold with Upside

The case for Cargojet hinges on two unassailable facts: e-commerce isn't slowing, and speed-to-consumer is a must-win battle. Amazon's need for a reliable air cargo partner isn't a passing fad—it's foundational to its Prime ecosystem. With the contract extension, Cargojet's earnings volatility is minimized, and its fleet is primed for growth.

The dividend yield acts as a safety net, while the NCIB suggests management sees value at current levels. Even with the stock up 30% year-to-date, there's room to grow: analysts project 15% annual revenue growth through 2026.

Final Take: A Blue-Chip Play in Disguise

Cargojet isn't a high-flying tech stock—it's a blue-chip logistics operator in a sector ripe for consolidation. Its Amazon deal isn't just a win; it's a template for how to build a durable, cash-generating business in a fragmented industry. For investors with a 3–5 year horizon, this is a rare opportunity to own a company with:
- Predictable cash flows through ironclad contracts.
- Scalable infrastructure to meet e-commerce's insatiable demand.
- Defensive dividends in turbulent markets.

The risks are manageable, and the upside—driven by contract renewals, fleet expansion, and potential market share gains—is compelling. This isn't a bet on a boom; it's a bet on a business built to last.

Recommendation: Buy with a 5-year hold horizon.