DHL buys into Cargojet with a possibility of acquisition in the future


DHL Express is expanding its airfreight capacity through a “long-term strategic” relationship with Cargojet, a Canadian freighter operator that already sells space on its aircraft to DHL. The implication is that DHL may buy Cargojet in the future.

The two companies have just signed an agreement that “will see Cargojet provide ACMI, CMI, charter, and aircraft dry lease services to DHL to support DHL’s international requirements for Europe and North, South, Central and Latin America, as well as Asia”. This agreement is designed to last at least five years with the option to extend it for a further two years. At its core, the agreement seems to be focused on assigning more of Cargojet’s aircraft capacity to DHL Express although neither company has elaborated on this. At present Cargojet provides 12 freighters dedicated to servicing DHL’s network out of its fleet of 28 aircraft. Although both companies emphasise the global nature of their mutual operations, it does seem that the North American market is at the core of this provision. 

At the strategic level, Deutsche Post DHL is clearly considering purchasing Cargojet. The German Group is buying warrants in Cargojet enabling it to purchase 9.5% of the voting rights of the Canadian company, at a price of C$158.92 a share, with the right to exercise the option over the next seven years. This requires a reciprocal purchase by DHL from Cargojet of C$2.3bn worth of services over the same period. Essentially this enables DPDHL to gradually absorb Cargojet into DHL Express’ business, placing it in a strong position to buy all of the company after the seven-year period.

The background to this deal is the expansion of DHL Express air freight capacity. The company says that this has grown by 18% over the past two years, describing “surging demand”, particularly from e-commerce. DHL Express will add a further five Boeing 767s over the next year alone, having bought 28 Boeing 777Fs over the past four years and Cargojet will provide a further Boeing 777 in 2023.

In the distant past, North American aviation has proven painful for Deutsche Post DHL but these days DHL Express’s business model is too robust for this deal to go too wrong. Rather it illustrates the value of physical assets in the airfreight market and the rapid growth of the global Express networks.

Source: Transport Intelligence, 31st March 2022 

Author: Thomas Cullen