report of excel

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Figure 4: CJT 5-year Stock Chart

Executive Summary

2

Sector: Transportation

Buy Recommendation

Target Price: $150 (23% Upside)

Current Price as of January 12, 2023: $122.38

CJT is a high-quality business at a critical inflection point We initiate coverage on Cargojet Inc (CJT) with a BUY recommendation

based on a 12-month price target of $150 using both intrinsic and relative

valuation methods. This target price represents a 23% upside from the last

close price of $122.38 on January 12, 2023.

CJT is Canada’s largest pure play dedicated air cargo freighter, providing

time-sensitive overnight air cargo services for leading domestic and

international transportation and logistics (T&L) businesses. A recent

strategy shift positions CJT to drive strong ROIC and FCF improvements

with excess cash flow being returned to shareholders through a growing

dividend and NCIB program. We view CJT as a highly stable business with

excellent competitive positioning and attractive growth opportunities that

indicate an inflection point in its ability to generate returns.

Investment Thesis Highlights Upon valuing CJT using a DCF and comparable companies analysis, we

believe CJT presents an attractive investment opportunity with a low risk-

return profile.

Thesis #1: CJT has a domestic monopoly with minimal threat of

competition and churn

CJT services 90%+ of Canadian overnight air cargo deliveries at a 99%+

on-time performance rating. Minimal competition combined with 75%+ of its

domestic revenue from long-term contracts with high minimum volume

guarantees creates a highly stable business. The extreme cost and

challenge of insourcing middle mile freight alongside strategic agreements

with DHL and Amazon minimizes customer churn and will allow CJT to

capitalize on the growth of its customers. Given its dominant competitive

positioning, we view CJT as an extremely defensible business with a strong

competitive moat and track record of retaining customers.

Thesis #2: CJT’s high operating leverage will drive margin expansion

due to its growth opportunities

We believe the market may be pricing in modest growth and margin

expansion despite the high growth and high operating leverage nature of

the business. Amazon's focus on Canada as a key market is likely to drive

above market growth for CJT while a partnership with DHL provides them

with access to fast-growing and resilient markets in Latin America (LatAm)

and Southeast Asia (SEA). As 85% of direct costs are fixed, volumes drive

margins and CJT is poised to benefit greatly from its customers’ expansion.

Thesis #3: CJT is at an inflection point and is poised to drive

significantly higher returns

CJT has historically invested in growth at the cost of returns. Now, CJT is

at a critical inflection point where a shift in strategy to focus on profitability

and cash flow generation will drive strong ROIC improvement, as all

operating cash flows generated will go directly to shareholders through

increasing dividends and an active NCIB program. We believe this will lead

to a re-rating of CJT’s multiple and drive sustainable returns.

Figure 1: Company Data

Last Close $122.38

Market Cap $2.11B

Shares Outstanding 17.2M

52-Week High $135.27

52-Week Low $76.50

EV/NTM EBITDA 9.5x

Figure 2: Valuation Results

DCF – Terminal Growth $158

DCF – Exit Multiple $167

Comps – EV / NTM EBITDA $98

Target Price $150

Implied Return 23%

Note 1: Revenue excludes fuel surcharge

Figure 3: Financial Data

22A 23E 24E 25E

Rev.

($M)1 $713 $708 $771 $893

Rev.

Growth 21% (1%) 9% 16%

Adj.

EBITDA

($M)

$327 $309 $343 $419

Adj.

EBITDA

Margin

45.8% 43.7% 44.5% 46.9%

“CJT is an extremely well positioned business with industry-leading

customers that will drive strong growth for them. I don’t think there are any players who can disrupt CJT without

immense levels of investment over the next few years” – Expert F, freight

leader at a regional airline

Cargojet Inc (TSX: CJT)

Source: Capital IQ/Team 4 Analysis, 2024

Source: Team 4 Analysis

Source: Company Filings/Team 4 Analysis, 2023

$122

$50 $100 $150 $200 $250

Jan-19 Jan-20 Jan-21 Jan-22 Jan-23

Industry Overview

3

Business Overview

Founded in 2002 and headquartered in Mississauga, Ontario, CJT is

Canada’s leading middle mile provider of time-sensitive overnight air cargo

freight, servicing 90%+ of the Canadian market through its network of

facilities across 16 city centers and an extensive fleet comprised of 41

leased and owned freighter planes.

Key operating segments CJT operates 71+ routes across three main segments; 1) Domestic

Overnight; 2) ACMI, providing aircraft, crew, maintenance, and insurance;

3) Charter, supplying aircraft on ad hoc charter basis (Figure 5). Revenue

for the domestic overnight network is generated through customers pre-

purchasing a guaranteed space and weight allocation with contracts

featuring high minimum revenue guarantees and full fuel cost pass through.

Any remaining capacity is sold on an ad hoc basis (Figure 6). For ACMI,

CJT is paid a fixed rate to operate a flight with variable costs fully covered

by the customer (Figure 7). Charter flights are sold “all-in” with customers

paying a single, inclusive fixed amount.

Strong position in the transportation value chain As a middle mile air freight operator, CJT picks up goods from first-mile

carriers at an airport and flies them to last-mile couriers at a different airport

(Figure 8). Consistently meeting the often-volatile nature of cargo demand

establishes a symbiotic relationship between CJT and its customers, by

enabling cost reductions and risk mitigations. Emphasizing service, quality,

and punctuality, CJT has earned industry recognition through winning

numerous industry awards with a 99.4% on-time performance record drives

growth and stability in their customer base and overnight freight volume.

CJT’s recurring revenues and history of growth A key factor in CJT’s success is its long-standing customer relationships.

~75% of domestic volumes are secured under long-term contracts through

2029 (Appendix 2), including full fuel cost pass through and minimum

volume guarantees. CJT currently services 400+ customers, and has global

relationships with leading couriers, freight forwarders, specialty shippers,

and international airlines. Key customers include Amazon, DHL, Canada

Post/Purolator, and other leading T&L businesses, with Amazon and DHL

aligned through warrants (Appendix 4).

To form a view on the air freight industry, we interviewed 12 experts across

the value chain. These experts include former executives, senior advisors,

and freight leaders at competitors and customers, as well as lawyers, and

consultants who have significant exposure to the industry (Appendix 1).

Monopoly in a mature industry – Positive Air freight plays a critical role in providing fast, flexible transportation

services and is heavily tied to trade and the global economy. Air freight

caters to the transport of high-value goods, time-sensitive documents,

perishables, pharmaceuticals, and more. In Canada, there are limited

players due to the significant infrastructure investment, logistics expertise,

and anchor customers required to operate effectively. CJT operates a

monopoly on domestic air freight with Air Canada Cargo and WestJet

fulfilling most of their volumes internationally (Appendix 3).

Essential to e-commerce – Positive Air freight is essential to uphold the value proposition of e-commerce giants

like Amazon. Expedited freighters bring goods with unmatched speed and

reliability, allowing for same- and next-day delivery in a geographically

dispersed country like Canada. As e-commerce penetration continues to

rise due to behavioural shifts in consumers, dedicated freighters support

growth aspirations and uphold customer expectations. In Canada, the e-

commerce market is expected to grow at an 8% CAGR from 2023-2027,

mainly driven by Canada’s quickly growing population (Figure 9).

ACMI lessor (CJT)

ACMI lessee (DHL)

Block

Hour

ACMI

Rate

Lessor provides

the aircraft, crew,

maintenance,

insurance

Figure 7: ACMI/Charter

Business Model Overview

Figure 8: Air Freight Value

Chain

Figure 9: Canadian Retail

E-Commerce Market ($B)

Determine Chargeable Weight

The Greater of (Metric Shipping):

Actual Weight: Measured in KG

Volumetric Weight: LxWxH (cm) / 6,000

Multiplied by Air Freight Rate

$42 $46 $49

$53 $58

$62

2022 2023 2024 2025 2026 2027

Figure 5: 2023 Q3 Revenue

Segments

Figure 6: Domestic Business

Model Overview

First Mile: Goods are

transported to the airport

Middle Mile: Goods are

transported by air (CJT)

Last Mile: Goods transported

to final destination

Source: Company Filings, 2023

Source: Company Filings, 2023

Source: Company Filings, 2023

Source: Company Filings, 2023

Source: StatsCan, 2023

42%

29%

12%

17%

Domestic Overnight

ACMI

Charters

Fuel Surcharge

Investment Summary

Competitive Positioning

4

Ongoing freight recession – Negative There is a global freight recession that stemming from the global supply

and demand imbalance, due to softening volumes, and industry-wide over-

investment (Appendix 5). The recession has caused freight businesses to

conduct large-scale layoffs and cost-cutting initiatives to defend against the

competitive landscape, lower prices, and declines in the volume of goods.

Based on our conversations with customers and freight forwarders, the

industry is expected to recover in H2 2024 with volumes beginning to

stabilize (Figure 10) and rates are expected to recover shortly (Figure 11).

High-barrier and strict regulatory environment – Positive Domestically, a significant level of investment and expertise is required to

operate, reducing the threat of new entrants. Internationally, cabotage laws

restrict non-Canadian businesses from transporting goods between two

points in Canada, creating high-barriers for foreign air freight players.

No substitute for other transportation forms – Positive Air freight is defensible, domestically, against other transportation methods

due to its speed and less capacity restrictions. Freight customers care

about reliability and on-time performance and compared to rail and truck,

air freighters are faster and typically more reliable, entrenching the industry.

Note 1: Commercial, Note 2: Maintenance

CJT is the only scaled overnight carrier in Canada Our meetings with freight leaders at Canadian and international airlines,

indicate that the only way a dedicated air freight business can run profitably

is by having anchor customers. Canada Post, Amazon, and other leading

T&L customers create a consistent stream of volumes that sustain CJT’s

operations; which other players do not have. As CJT has recently renewed

contracts with all large-scale customers, it is very unlikely that other airlines

will pursue dedicated freight, especially as passenger businesses struggle.

Customers cannot leave and CJT gives them no reason to Customers using dedicated overnight freight primarily care about one thing:

on-time performance. CJT has leading on-time performance and experts do

not foresee any reason for customers to leave. In addition to the lack of

desirable air freight substitutes, customers will be challenged to replace

CJT in their operations due to the differences between belly and dedicated

freight (Figure 12), as few competitors exist. Our analysis also indicates a

customer would need to individually carry more than 30% of national

domestic volume to break-even on insourcing their middle mile (Figure 13).

CJT has entrenched its top customers Warrants with Amazon and DHL have created moats for the business by

strategically aligning world class customers. These warrants create strong

disincentives for these customers to leave and further entrench CJT as an

industry leader in Canada and a credible player internationally.

Thesis #1: CJT has a domestic monopoly with minimal

threat of competition and churn CJT operates cargo fundamentally different from passenger airlines who

move freight in their unused belly space. With leading reliability, strong

customer entrenchment, and minimal competition, CJT is well positioned.

CJT faces minimal competition for dedicated overnight freight

As a direct result of the anchor customers required to effectively run such a

capital-intensive business, CJT faces minimal competition in the domestic

overnight business (Figure 14). Passenger airlines who attempt to compete

using belly cargo space cannot ship large volumes of cargo, are liable to

have packages bumped, have no capacity for ad-hoc deliveries, and cannot

run dedicated freighters profitably. Attempts to branch into overnight cargo

by Air Canada and WestJet have been unsuccessful (Appendix 3).

Figure 10: Global Air Freight

Volume YoY Change (2023)

(15%)

(10%) (11%)

(5%) (3%) (2%)

3%

D e

c

J a

n

F e b

M a r

A p r

M a y

J u

n

J u

l

A u g

S e p

O c t

N o

v

D e

c

Figure 13: Cost of Insourcing

Figure 12: Dedicated Freight vs

Passenger Belly Freight

Criteria

Dedicated

Freight

Belly

freight

Time-

sensitive

deliveries

Reliable on-

time

performance

Large

volumes of

cargo

“As a former customer of CJT, they were always the only option we looked at for

anything domestic in Canada” – Expert D, CFO at an international freight forwarder

$1

$2

$3

$4

$5

$6

J a n

-1 8

J u l- 1

8

J a n

-1 9

J u l- 1

9

J a n

-2 0

J u l- 2

0

J a n

-2 1

J u l- 2

1

J a n

-2 2

J u l- 2

2

J a n

-2 3

J u l- 2

3

Figure 11: Air Freight Rates

($/kg)

1 2

“There are no real alternative competitors for dedicated freight in Canada and no

customers do enough volume to sustain their own freight operation” – Expert C, senior

executive at an international freight association

($535M)

Source: Baltic Exchange, 2024

Source: DHL, 2023

Source: Team 4 Analysis

Note 1: The question asked was ‘Do you value shopping online more than you value shopping in person?’ 1 being strongly prefer in person

shopping, 5 being that you are indifferent and 10 being that you strongly prefer online shopping. N = 97 5

CJT’s customers will not leave, and CJT has full power in the value chain

Cabotage insulation, lack of significant domestic competition (Figure 14),

and customer dependence on air transport leave CJT as an irreplicable

component of the air freight supply chain. This enables CJT to structure

contracts on terms that are favourable to them, with full fuel cost pass

through, clear block-hour requirements, dedicated time periods to use

planes, and minimum guaranteed revenues. Beyond CJT’s power as a sole

monopoly in a high-barrier to entry industry, the extreme cost and logistical

challenge associated with fulfilling middle mile services deters customers

from churning, as experts believe no customers have enough volume to

fulfill their own demand in an efficient and profitable manner.

CJT has strategic alignment with key customers

Experts interviewed believe customers are highly satisfied with CJT’s on-

time performance and have no interest in leaving. For larger customers like

Amazon and DHL, CJT issued warrants for greater strategic alignment, an

incentive to solidify revenues, and to further reduce the risk of replacement.

CJT plays an important role in Amazon and DHL’s expansive e-commerce

strategies both in Canada and abroad. Warrants that will vest to Amazon

and DHL owning 14.9% and 9.5% of the business, respectively, further

entrench CJT as an industry leader. <

Thesis #2: CJT’s high operating leverage will drive margin

expansion due to its growth opportunities CJT has a high degree of operating leverage with 85% of direct costs being

fixed. These costs are largely driven by facility and fleet expansion, which

we believe is unlikely as CJT has excess capacity due to significant levels

of investment during COVID. High operating leverage combined with strong

growth from its industry leading customers will drive margin expansion.

A reverse DCF indicates the market seems to be pricing in modest revenue

growth and subtle margin expansion

Holding all other assumptions constant, it appears the market is pricing in

revenue growth at a 6.0% CAGR and slight margin expansion (Appendix

12). This is much lower than e-commerce growth rates within Canada and

other CJT focused regions. Stronger than priced-in growth combined with

CJT’s high operating leverage will drive margin expansion that we believe

this is not reflected in CJT’s current share price.

Domestic growth opportunities remain attractive due to shifting consumer

behaviour and a quickly growing population

Amazon has marked Canada as one of its most important markets due to

its low e-commerce penetration (Figure 15) and high population growth.

Throughout COVID, consumer habits have pivoted to favour online

shopping in a meaningful way (Figure 16). This behaviour shift has caused

Amazon and other customers to invest heavily in Canada to capitalize on

the growth (Appendix 6), which will subsequently drive strong volumes to

CJT at low incremental costs.

CJT’s international exposure through DHL is in highly attractive regions

with globally leading e-commerce growth

DHL’s executive leadership has emphasized CJT’s important role in their

global expansion plans, paving the way for significant growth opportunities

over the long-term (Appendix 6). DHL comprises 95% of CJT's ACMI

business and their warrants anticipate $2.3B in revenue over seven years.

Given their strategic priority to heavily invest in SEA and LatAm (Appendix

7), we expect CJT will capitalize on cargo routes to these high growth

regions (Figure 17). CJT fulfills numerous routes for DHL through SEA,

Europe, and LatAm and will benefit strongly from DHL’s recent total $1.3B

investment in the regions. We believe DHL’s market leadership will drive

sustained volumes to CJT as they are strategically partnered with leading

e-commerce marketplaces and will capture significant growth.

Figure 14: Full-Size Dedicated

Cargo Total Fleet

Figure 15: Global E-Commerce

Penetration

12%

13%

14%

14%

14%

16%

30%

31%

32%

47%

Canada

Russia

Japan

Singapore

Mexico

US

S. Korea

UK

Indonesia

China

Figure 16: Team 4 E-Commerce

Behaviour Survey1

“Despite spending cuts in the US, Amazon has made significant investments into Canada near CJT hubs, due to the attractiveness of

the Canadian e-commerce market” – Expert B, consultant with 15+ years of air freight

experience

Figure 17: E-Commerce

Growth Rates

“Cargojet is an important aviation partner of DHL… its versatile cargo fleet and high on-

time reliability position us well to capitalize on the dynamically growing e-commerce market” – Mike Parra, CEO, DHL Americas

Source: Company Filings, 2024

Source: Team 4 Analysis

Source: Oberlo, 2023

Source: Americas Market Intelligence, DHL, 2023

17%

33%

27%

22%

18%

35%

22%

Brazil

Mexico

Colombia

Argentina

Chile

Peru

Southeast Asia

6.5

7.8

Pre-COVID Post-COVID

41

13 7 4

Valuation

6Note 1: Atlas Air was acquired by Apollo (Appendix 16)

We conducted both an intrinsic and relative valuation to arrive at a 12-

month target price of $150 per share, a 23% upside from CJT’s closing

price of $122.38 on January 12, 2024 (Figure 22). Our methodology

assigns a weighting of 80% on our DCF (exit multiple and terminal growth)

and a 20% weight on our comparable companies analysis (EV/NTM

EBITDA) due to the uniqueness of CJT’s operations and competitive moat.

DCF with 5-year projection period We valued CJT using a 5-year DCF model. CJT’s disclosure is limited, so

forecasting volumes, rates and costs by segment is unreliable as there are

complexities and nuances in the business. Instead, we have forecasted

revenue by percentage growth for each segment to reflect the underlying

drivers of the different segments.

Revenue growth As CJT represents 90%+ of the domestic overnight market, growth has

historically been strongly correlated to the growth of e-commerce in

Canada. We forecast growth in the domestic business at a 6.6% CAGR, to

126% 153%

139%

51%

95%

187%

2017 2018 2019 2020 2021 2022 CJT Atlas ATSG

Figure 18: Capex / Adj. EBITDA

3%

8%

13%

2017A 2019A 2021A 2023E WACC ROIC

Figure 20: Historical ROIC

28 31 39 43 43

$0

$200

$400

2020A 2021A 2022A 2027E 2028E

Revenue/Capacity(lbs) Fleet Size

Figure 21: CJT Revenue per

Lb. of Cargo Volume

Figure 19: Capex Spend ($M)

Figure 22: Target Price Ranges

Current | $122 Target | $150

“CJT’s pursuit of growth and leadership has come at the sacrifice of returns. The business is now at a critical inflection point where it no longer needs to invest in its fleet to maintain

its leadership and keep pace with future demand and excess cash flows will go straight to shareholders” – Expert A,

consultant with 20+ years of air freight experience

Comps - EV/NTM EBITDA (20%)

DCF - Terminal Growth (40%)

DCF - Exit Multiple (40%)

52-Week Range

Source: Capital IQ, 2024

Source: Company Filings, 2024

Source: Company Filings/Team 4 Analysis, 2024

Source: Team 4 Analysis

Source: Team 4 Analysis

Thesis #3: CJT is at an inflection point and is poised to

drive significantly higher returns CJT's pursuit of growth and industry leadership led to sacrifices in FCF and

ROIC (Appendix 8). Now at a key inflection point, CJT no longer requires

significant fleet investments, resulting in minimal capex. This shift promises

higher ROIC, with excess cash flowing directly to shareholders.

CJT’s past investments have focused on growth, putting pressure on ROIC

CJT’s proportional capex spend has consistently surpassed dedicated

freight peers (Atlas1 and ATSG) over the last five years (Figure 18). In

2022 alone, capex spend represented approximately 32% of CJT’s

cumulative capex since 2005 (Figure 19). CJT has made significant

investments in its fleet to consolidate the Canadian market and capture the

surge in e-commerce. Consequently, excluding the COVID period, CJT has

consistently produced subpar ROIC due to its investment in growth (Figure

20). This has led to CJT’s stock trading down, reflecting concerns regarding

FCF generation and poor ROIC in a higher cost of capital environment.

CJT’s investment in its fleet has led to excess capacity

As announced during a January 15th, 2024, press conference, CJT has

excess capacity. During CJT’s growth period, they expanded from 22

aircrafts in 2016 to 41 in 2023, moving away from those with limited

payload capacity to wide-body planes, allowing for more efficient volume

reconsolidation, driving margin improvements. Analysis of CJT’s total

capacity across its fleet reveals that revenue per pound of cargo volume

will not exceed pre-pandemic levels (Figure 21). This means fixed costs

will remain highly stable and there is minimal need for growth capex. This

will lead to greatly reduced capex spend and stronger returns.

Strategic shift: prioritizing cash flow and capital return to shareholders

CJT is streamlining its fleet and pausing its expensive international

expansion strategy. This shift will reduce future growth capex by $450M.

CJT has canceled all of the initially planned eight 777 freighters and listed

four Boeing 757s for sale. These adjustments showcase management’s

agility and are forecasted to result in strong positive FCF and ROIC (Figure

28). To underscore this strategic focus towards shareholder value, CJT

announced a NCIB program to buy back 8.7% of public float by the end of

2024 and a 10% increase in quarterly dividends. CJT has already

repurchased 2.1% of public float. These initiatives signal a long-term

emphasis on returning capital to shareholders and were received positively

by the market, as CJT has traded up 45% since the announcement. We

strongly believe that combined with CJT’s strong growth potential, its

strategy shift will drive long-term, sustainable returns for shareholders.

reflect a conservative view on the 8.0% CAGR of the e-commerce market

in Canada. As DHL represents 95% of CJT’s ACMI business, we have

forecasted growth in the segment to reflect the nature of CJT’s relationship

with DHL. CJT is an important part of DHL’s expansion into LatAm and will

benefit greatly from 20%+ CAGR’s expected in the region (Figure 17).

Through strategic warrants, DHL is expected to deliver $2.3B in revenue to

CJT by 2029 (Appendix 4). We have taken a conservative view on a mix of

LatAm growth and the expected revenue from DHL to forecast growth at a

12.0% CAGR in the ACMI business. The charter business performed

strongly during COVID due to the high volume of emergency flights. CJT

fulfilled emergency PPE flights for the Canadian Government and rescue

flights for the Hawaii wildfires. We do not believe growth in the segment is

sustainable and is forecasted to contract to pre-COVID levels to reflect a

normalized level of charter demand.

Management’s strategy shift As outlined in Thesis #3 on p. 5, CJT has undergone a recent strategy shift.

Management plans to complete its capex plan by 2025 with the focus

shifting to cost optimization to drive higher margins. This has been reflected

in our valuation as we have forecasted minimal growth capex after 2025.

Due to the high operating leverage nature of CJT’s business (85% of direct

costs are fixed excluding, fuel), margins are largely driven by volume

growth. We have conviction in CJT’s growth prospects and margin

expansion, driving modest EBITDA margin growth over the projection

period from 44% in 2023E to 48% in 2028E (Figure 24).

WACC Cost of Debt: We considered three methodologies to calculate the cost of

debt: 1) the rate used to calculate the PV of hybrid debentures, 2) weighted

average interest rate on hybrid debentures, and 3) credit spreads. We

believe the rate of 7% used to calculate the PV of hybrid debt reflects the

long-term borrowing capabilities of CJT more than the weighted average

borrowing cost of 5.5% and is a more conversative view on their cost of

debt. CJT does not have a reported credit rating, as such, we could not

benchmark CJT’s cost of borrowing against similarly rated peers.

Cost of Equity: CJT’s beta of 1.17 was derived from relevering its peers’

unlevered beta at CJT’s target capital structure1. This is a less aggressive

view than CJT’s 5-year monthly beta of 1.04. We used CAPM to calculate

cost of equity as, in a higher rate environment, CAPM is reflective of

investors’ return requirements. CAPM derives an implied cost of equity of

9.10%, which is similar to CJT’s 5-year average return on equity of 8.82%.

WACC: CJT is at its target leverage ratio, extrapolating at its current D/E

level using a cost of equity of 9.10% with an after-tax cost of debt of 5.11%

implies a WACC of 8.20% (Figure 26).This is conservative in relation to

Damodaran’s industry average cost of capital for air transport of 6.98%2.

Terminal growth and exit multiple We assumed a terminal growth rate of 2.25% given the strong correlation

between GDP growth and the Canadian 10-year government bond yields of

3.25%. Our chosen exit multiple is 9.0x which is a strong discount to CJT’s

historical 5-year EV/NTM EBITDA multiple of 11.0x (Appendix 17). As a

result of CJT’s competitive moat and attractive FCF generation potential,

we believe CJT should trade closer to its long-term average when

combined with the premium it historically traded at above other pure plays.

Comparable companies analysis We have chosen a peer set comprising of businesses that have similar

underlying drivers as CJT. Based on our comp set with criteria outlined in

Appendix 15, CJT currently trades at a premium to peers implying a 20%

downside (Figure 27). We have chosen to weigh comps at 20% of our

valuation due to the uniqueness of CJT’s business and competitive moat.

CJT is a domestic monopoly in a high-barrier industry with long-term

contracts that include high minimum revenue guarantees. We have not

included FCF multiples as CJT has historically been cash flow negative and

complex balance sheet items skew earnings-based multiples.

7Note 1: Excludes outliers ATSG and Chorus Aviation, Note 2: Source (Aswath Damodaran)

Figure 23: Segmented Revenue

$327 $309 $343

$473 $543

46% 44% 45% 47% 48%

30.00%

35.00%

40.00%

45.00%

50.00%

55.00%

60.00%

65.00%

70.00%

75.00%

$0

$100

$200

$300

$400

$500

$600

2022A 2023E 2024E 2026E 2028E

Adj. EBITDA

Adj. EBITDA Margin %

Figure 24: EBITDA Forecast

$714 $708 $771 $1,000

$1,124

2022A 2023E 2024E 2026E 2028E

Domestic ACMI Charter

Pre-tax Cost of Debt 7.00%

Tax Rate 27%

After-tax cost of debt 5.11%

Figure 26: WACC Buildup

Risk-free rate 3.25%

Market risk premium 5.00%

Levered beta 1.17

Cost of Equity 9.10%

Net debt $764M

Market value of equity $2,598M

Enterprise value $3,361M

WACC 8.20%

4.8x 5.3x

8.5x

11.2x

6.7x

12.2x

9.5x

Average: 8.2x

Figure 27: EV / NTM EBITDA

Figure 25: Case Scenarios

Criteria Bear Base Bull

Revenue

CAGR 5.3% 8.0% 10.8%

EBITDA

Margins

44%

->43%

44%

->48%

44%

->52%

Implied

Return 3% 33% 100%

Source: Team 4 Analysis

Source: Team 4 Analysis

Source: Team 4 Analysis

Source: Team 4 Analysis

Source: Capital IQ/Team 4 Analysis, 2024

8%

13%

13% 4%

23%

Bear Base Bull

8

Financial Analysis

Stronger than anticipated post-COVID growth COVID was a perfect storm for CJT. Massive supply/demand imbalances

due to the cancellation of passenger flights and the boom in e-commerce

meant CJT benefited from excess demand and a lack of capacity. While

COVID growth rates are not sustainable, we believe CJT has significant

growth opportunities post COVID through their top-quality customers, as

outlined in Thesis #2 on p. 4.

Margins stabilize above pre-COVID levels Net operating profit margins increased during COVID as e-commerce grew

significantly and capacity diminished due to a lack of passenger flights. CJT

filled the gap for cargo traditionally transported in passenger aircrafts and

shipped critical goods such as PPE and COVID test-kits, which drove

higher margins due to increasing volumes. These tailwinds were unique,

and top-line will not grow as rapidly as it did during the pandemic. However,

in the future, we expect margins to stabilize above pre-pandemic levels as

CJT has already managed their largest cost driver, capacity utilization. By

selling off smaller aircrafts and consolidating cargo volume, CJT now

avoids suboptimal routes, reducing operating costs. Margins are expected

to expand to drive higher FCF in a sustainable manner.

Increasing returns for investors Management’s strategy shift is anticipated to drive higher ROIC for

investors. While it is too early to see any impact from the strategy shift, our

analysis indicates it will drive ROIC improvement above pre-pandemic

levels by 2025 (Figure 29). Improved operating efficiency and growth

spending reductions combined with growing dividends (Figure 30) and an

NCIB program (Figure 31) will drive higher returns for investors despite

entering a higher cost of capital environment. As this has been a historical

concern for investors, we believe it will be a catalyst for stock performance.

Strong sustainable cash flows Despite the possibility of increased capital expenditures resulting from

significant volume growth, CJT's lean operations and sizeable margins will

persist, ensuring the generation of substantial FCF. Furthermore, as a

monopolistic middle mile air freight operator, we believe that CJT’s

forecasted steady FCF profile is sustainable.

Improving credit profile CJT has made meaningful strides in reducing its leverage, seen in its

increasing interest coverage ratio and decreasing debt/EBITDA ratio

(Figure 32) to its target leverage levels. The company is maintaining a

strong balance sheet through its asset sales and reduction in capex. CJT’s

level of debt capacity also enables them to pursue aggressive growth

should market conditions be optimal for it and historically, CJT has

performed extremely well during times of expansive market conditions

related to e-commerce, especially during COVID.

Figure 31: Share Buybacks

Figure 29: ROIC Forecast

COVID

Figure 32: Debt/EBITDA

4.1x 4.8x

4x

2x 1.4x

2.2x 2.6x

'17A '18A '19A '20A '21A '22A '23E

Target leverage: 1.5x-2.5x

Figure 30: Dividend Growth

$0.19 $0.21 $0.21 $0.23 $0.26 $0.28

$0.31

'17A '18A '19A '20A '21A '22A '23A

NCIB announced and approved

on November 7, 2023

CJT can acquire a maximum of

1.5M shares, representing

8.72% of outstanding shares

Ends November 8, 2024

1

Source: Company Filings, Team 4 Analysis

Source: Team 4 Analysis

Source: Company Filings, 2023

Source: Company Filings, 2023

Source: Company Filings/ Team 4 Analysis, 2023

2019A 2020A 2021A 2022A 2023E 2024E 2025E 2026E 2027E 2028E

DuPont Analysis

Gross Margin 32.8% 45.2% 39.4% 34.7% 22.7% 24.8% 30.5% 33.2% 34.8% 35.1%

EBITDA Margin 43.1% 16.8% 58.6% 55.2% 41.4% 42.4% 45.1% 45.8% 46.4% 46.9%

Adjusted EBITDA Margin 32.2% 52.1% 49.3% 45.8% 43.7% 44.5% 46.9% 47.4% 47.8% 48.3%

Net Profit Margin 2.4% -13.1% 22.1% 19.5% 8.4% 5.7% 10.6% 13.3% 14.7% 14.9%

Asset Turnover 0.4x 0.6x 0.6x 0.6x 0.5x 0.5x 0.5x 0.6x 0.6x 0.5x

Return on Assets 1.1% -7.8% 12.9% 11.4% 3.8% 2.7% 5.7% 7.6% 8.3% 7.8%

Financial Leverage (A/E) 4.0x 5.8x 3.5x 2.4x 2.5x 2.4x 2.1x 1.8x 1.6x 1.5x

Return on Equity 4.2% -44.8% 45.6% 27.6% 9.5% 6.4% 11.9% 13.8% 13.6% 12.1%

Return on Invested Capital 5.0% 12.7% 11.5% 8.5% 3.9% 5.3% 8.8% 11.3% 12.6% 12.8%

Liquidity

Current Ratio 0.6x 0.5x 2.0x 0.8x 0.8x 0.7x 0.9x 2.1x 3.1x 4.5x

Quick Ratio 0.6x 0.5x 2.0x 0.7x 0.7x 0.7x 0.8x 2.0x 3.0x 4.4x

Debt Ratios

Interest Coverage Ratio 1.4x 4.3x 5.6x 5.1x 1.7x 2.6x 4.9x 7.4x 8.5x 8.9x

Debt / Adj. EBITDA 4.0x 2.0x 1.4x 2.2x 2.6x 2.1x 1.4x 1.0x 1.0x 0.9x

Figure 28: DuPont Analysis

9

Investment Risks

Risk #1: Customer concentration risk Customer concentration poses a notable risk as 80% of CJT’s revenue is

derived from its top 10 customers (Figure 35), a consequence of the

oligopolistic nature of Canadian delivery services. Potential alternatives

such as rail, passenger plane belly cargo space, or inshoring by key

customers could adversely impact revenues and influence other customers

to seek better contracts or leave.

Mitigant: Despite the risk, CJT benefits from a lack of alternatives in the

market. Customers have few viable alternatives as other methods of freight

lack the timeliness required and passenger belly freight is unreliable. The

stable nature of revenues is attributed to world-class anchor customers with

long-term contracts, creating a scenario where customers are locked in and

satisfied, reducing the incentive for churn. Additionally, the sheer cost of

insourcing the middle mile creates strong disincentives to customer churn

as it is highly unlikely customers could profitably insource their middle mile.

Risk #2: Inability to turn around ROIC CJT’s historical struggle to drive ROIC above a minimum return threshold

concerns investors as they enter a higher cost of capital environment.

Investors are concerned about management’s ability to generate returns as

rates continue to rise and the macro environment for freight softens.

Mitigant: CJT’s track record of flexible capital management, evident in

selling planes even during recessions, supports our view of their ability to

manage through a higher cost of capital environment. Management's

commitment to completing growth capex plans by 2025 (Figure 36),

combined with ongoing cost-cutting measures and optimized capacity

utilization, mitigates the risk of inefficiency. Attractive growth avenues at

minimal incremental cost combined with high operating leverage will likely

lead to sustained margin expansion and cash flow growth.

Risk #3: Heightened International Competition Although the threat of new entrants is low, DHL and Amazon have their

own dedicated air freight businesses through ACMI agreements with other

airlines. This would limit CJT’s sole focus on high-growth areas. Market

share growth is constrained domestically, and international expansion is

highly challenging. The primary growth source lies in the expanding e-

commerce market (Figure 37 / Appendix 6/7).

Mitigant: Despite domestic limitations, CJT is well-positioned to stay

strategically aligned based on a proven track record that maintains top

performance. We can expect CJT to capitalize on DHL’s expected double-

digit growth in SEA and LatAm. CJT’s high quality customers are leaders in

their respective markets and are partnered with leading local e-commerce

players which will continue to drive strong volumes for CJT, despite

slowdowns in the macro environment.

Figure 33: Risk Matrix

Note 1: Adj. EBITDA Margins based on revenue incl. fuel surcharge

57%23%

20%

Top 3 Top 10 Other

Figure 35: Customer

Concentration

R1

L ik

e li h

o o

d

Impact

R3

R2

Figure 37: Amazon

Investments in Canada

Figure 36: CJT Capex

Breakdown ($M)

45 65

2021 Present

While Canadian facilities grew 40%,

facilities in the United States decreased

by 8% in the same period

Management plans to

complete majority of

its growth capex plan

by 2025E

R4

Superior EBITDA margins against peers As evident by Figure 34, CJT has consistently stronger margins than

peers. This is due to CJT’s strong competitive moat and monopolistic

characteristics in Canada and favourable agreements with customers. We

believe CJT’s margin advantage is sustainable as the business continues

to focus on cost optimization efforts to further enhance profitability.

2019 2020 2021 2022 LTM

Cargojet 32% 44% 39% 34% 35%

Atlas Air 18% 26% 25% 19% n/a

ATSG 30% 32% 31% 31% 27%

Chorus Airways 25% 36% 26% 24% 28%

Figure 34: Peer Adj. EBITDA Margins1

Source: Company Filings, 2023

Source: Company Filings, 2023

Source: Company Filings/Team 4 Analysis, 2023

$84 $165

$482

$31 $32 $31 $0

'20A '21A '22A '23E '24E '25E '26E

Maintenance Capex Growth Capex

Source: Capital IQ, 2024

Meeting

Date Ease

No

Change

1/31/2024 18.6% 81.4%

3/20/2024 77.2% 22.8%

5/1/2024 97.0% 3.0%

6/12/2024 100.0% 0.0%

7/31/2024 100.0% 0.0%

9/18/2024 100.0% 0.0%

With the upward trend in the importance of and efforts toward achieving

sustainability, CJT’s ESG profile impacts stakeholder views on the

business. CJT is rated as a medium risk by ESG rating agencies (Figure

39), with environment and social being weaker components as there is less

disclosure on initiatives (Appendix 17). Based on our internal analysis of

the most important and industry relevant ESG factors (Figure 40), CJT

does not lag peers in any category. Our scorecard method is further

detailed in Appendix 18.

Environmental CJT engages in initiatives led by the Canadian government, sustainability

regulatory bodies, and is aligned with the global aviation industry.

Global aviation industry goals: The aviation industry contributes about

11% of the world’s emissions, which is why the United Nations Climate

Change Conference committed to net-zero greenhouse gas (GHG)

emissions by 2050. CJT joins industry players in improving their fuel

efficiency, carbon-neutral growth, and reduction in net aviation CO2

emissions. CJT is in line with dedicated freight peers with respect to their

emissions score, creating no cause for concern.

Sustainable Aviation Fuel: As a founding member of the Canadian

Council for Sustainable Aviation Fuels (C-SAF), CJT’s role is to accelerate

the commercial production and use of Canadian-produced low-carbon SAF.

While SAF is seen as a costly method to decarbonize, there is currently no

alternative that is as universally implementable or effective. However, with

the current regulatory limits and production capabilities for SAF, C-SAF

activism may not be as impactful for CJT’s GHG emissions in the next year.

Carbon capture and offsetting: CJT is a participating airline under the

Carbon Offsetting and Reduction Scheme for International Aviation

(CORSIA) and is required to monitor, report carbon emissions, as well as

purchase carbon offsets. Furthermore, CJT plans to adopt small-scale

Carbon Capture Utilization and Storage technology to capture residual

emissions once these devices become available. However, this is highly

dependent on the technology development and availability of devices.

Fleet modernization and optimization: CJT recognizes the challenges

they face due to the inherently carbon inefficient air cargo model of

converting old passenger planes, thus taking a multi-pronged approach by

modernizing their fleet, implementing the Fleet Efficiency and Optimization

Program, and implementing the Aircraft Maintenance and Load Control

Program to minimize GHG emissions unrelated to customer flying hours.

Social CJT is in line with regulations and has management support to promote

safety and diversity in their workforce.

Figure 39: ESG Scorecard

Overall

Score Environ. Social Gov.

LSEG 37/100 21 47 44

Morningstar 27.1/40+

Bloomberg 3.39/10 2.72 2.47 6.2

Team 4 3.5/5 3.4 3.2 3.8

3.4

3.2

3.7

3.5

0 1 2 3 4 5

Environment

Social

Governance

Overall

CJT ATSG FedEx UPS DHL

10

ESG

Overall

Rating

CEO

Approval

Would Rec.

to a Friend

CJT 4.1 88% 84%

Atlas Air 3.7 99% 70%

Air Canada 3.6 69% 67%

WestJet 3.4 39% 57%

Figure 41: Employee Reviews

Figure 40: Team 4 ESG

Scorecard

Risk #4: Prolonged impact of the freight recession The current freight recession, triggered by post-pandemic interest rate

hikes leading to decreased consumer spending combined with industry-

wide over-investment in freight capacity poses a threat to CJT’s financial

performance. As consumer spending diminishes, demand for cargo

services may remain subdued, impacting volumes and, consequently,

revenue. The prolonged nature of this recession could exacerbate the

challenge, leading to sustained financial pressure.

Mitigant: CJT’s ability to weather the impact of the freight recession is

supported by its strong performance throughout the ongoing freight

recession as well as its geographically diversified revenue streams,

operational flexibility, and high-quality customer base. While the business

may experience a slowdown, the company's established relationships with

major players like Amazon and DHL and high minimum volume

guarantees, CPI-based price escalations and full fuel cost pass through

provide a level of stability and resilience. Figure 38 also demonstrates

investors believe interest rates will decline, providing relief for CJT.

Figure 38: Interest Rate

Forecast

Source: Apollo Global Management, 2023

Source: Company Websites/Team 4 Analysis, 2023

Source: Team 4 Analysis, 2024

Source: Glassdoor, 2024

Workplace health & safety: All CJT employees receive mandatory health

and safety training at onboarding and refresher training every three years

per regulation guidance. In addition, CJT also provides a Non-Punitive

Safety Reporting system that all employees can access to report incidents,

a whistleblower program, and an Employee Assistance Program for

employee well-being and safety.

Workforce: CJT discloses the diversity of their workforce, with 16%

identifying as female, 27% as a visible minority, and 2.1% as persons with

disabilities; similar to their diversity in the prior year. As an air cargo carrier,

CJT employs around 300 pilots and 1,500 logistics and warehousing

personnel. These careers have been pre-dominantly male; with only around

6% of pilots globally being women and 7% in Canada. Considering the

industry diversity, CJT’s workforce is much more diverse than initially

implied. Overall employee reviews of CJT are more positive than other

airline peers, with a high CEO approval and likeliness to recommend the

company to a friend (Figure 41). CJT has one group of unionized

employees, pilots, that are represented by the Airline Pilots Association

(ALPA). CJT’s collective bargaining agreement expires in 2026 and from

our discussions with lawyers that have experience with dealing with airline

unions, we believe there is a low likelihood of an adverse outcome.

Governance CJT has strong corporate governance practices and policies that align

management interests with its stakeholders.

Shareholder ownership: CJT is currently majority owned by institutional

investors and as part of passive mutual funds (Figure 42). RBC Dominion

Securities is the only current shareholder that owns more than 10% with

Amazon and DHL poised to own 14.9% and 9.5% of CJT respectively if

their warrants are exercised (Appendix 4). We do not believe there are any

shareholders that will exercise significant or negative influence over CJT.

Executive Compensation: Executives are compensated through a base

salary, a STIP, and an LTIP, with 74% of compensation being variable in

2022 (Figure 43). STIP and LTIP are based on CJT’s adjusted EBITDA for

the year, annual absolute ROIC, and relative total shareholder return, which

strongly aligns management with CJT’s strategy. On a relative basis,

executive compensation is greater than peers (Figure 44), however, CJT’s

total compensation in the past five years is significantly lower despite

generating higher shareholder returns compared to the majority of peers

(Figure 45), indicating strong and effective pay for performance links and

excellent management. We have strong conviction in management’s ability

to execute on their strategy shift due to their alignment through STIP and

LTIP, as well as their ability to generate above average returns in recent

years compared to peers.

Management: CJT’s newly appointed co-CEOs, Jamie Porteous and

Pauline Dhillon, have been with CJT since its inception. The management

team is comprised of highly experienced individuals, with decades of

relevant industry experience and prior executive experience, ensuring CJT

is well-positioned to execute on the opportunities ahead (Appendix 19).

With the industry experience and familiarity with CJT’s historical growth

strategies and successes, CJT’s management is very well-positioned to

execute on the ongoing strategy shift. The co-CEO transition will benefit

from the involvement of Dr. Ajay Virmani, the founder of CJT, who will

remain involved in the business as the Executive Chairman.

Board of Directors: The tenure of the Board, excluding their newest

member, ranges from 5 to 17 years, with strong shareholder approval

ratings in 2022. With the addition of the new member, there is a 40%

female representation on CJT’s Board, surpassing both the average

representation of women on Canadian boards and that on the boards of

other airlines. The diversity of industry experience across the Board

members and years of experience in management positions and other

board positions positively reflects on the abilities of CJT’s Board (Appendix

20).

Figure 43: Executive Historical

Compensation Mix

11Note 1: Does not incorporate CEO change

Figure 45: Executive Comp. vs

Shareholder Returns

Figure 44: Executive

Compensation Benchmarking

83% 82% 88% 65% 74%

2018 2019 2020 2021 2022

Fixed Variable

$53 $40

$183 $218

$118

68%

(30%)

46% 62%

85%

-120%

-70%

-20%

30%

80%

0

100

200

300

400

500

Cargojet ATSG FedEx UPS DHL

Total Comp. ($M) 5Y-Return

$0.98

$16.60 $1.64

$90.16

1.20% 0.11% 0.34% 0.04%

-50%

-40%

-30%

-20%

-10%

0%

10%

20%

30%

40%

50%

0

10

20

30

40

50

60

70

80

90

100

Cargojet Air Canada

Air Transat

FedEx

Annual Revenue ($B)

% of Annual Revenue

1

“Cargojet’s management team is highly capable and having Ajay stay involved in the

business will massively support the success of the strategy shift” – Expert A, consultant with

+20 years of air freight experience

Figure 42: Shareholder

Ownership Assuming Amazon

and DHL Warrants are

Exercised

Source: Capital IQ/Company Filings, 2023

Source: Company Filings, 2023

Source: Company Filings, 2023

Source: Capital IQ, 2023

37%

35%

15%

10% 3%

Institutions

Public

Amazon

DHL

Insiders

12

Appendix 1: Expert Interviews Conducted1

Segment breakdown and revenue generation Key customers

Domestic Network: The domestic air cargo network generates revenue

primarily through customers pre-purchasing a guaranteed space and

weight allocation on CJT’s fleet network. As a result, a significant amount

of domestic revenues are contracted (over 75% of domestic volumes) due

to guaranteed allocations but will fluctuate with customer volume. The

remaining capacity in the domestic network is sold on an ad hoc basis to

varying contract and non-contract customers.

ACMI: Under an ACMI agreement, CJT provides aircraft, crew,

maintenance and insurance to a customer. Variable flight costs such as

fuel, navigation fees and landing fees are borne by the customer. CJT is

paid a fixed amount to operate the flight priced as a rate per block hour.

Charter: CJT provides dedicated aircraft to customers on an ad hoc and

scheduled basis typically in the daytime and on weekends for cargo and

passenger charters. Charter flights are sold at an “all-in” basis where the

customer will pay a single, all inclusive fixed amount per flight.

Fuel Surcharge: CJT’s domestic customer contracts contain variable

surcharges for uncontrollable costs with the ability to pass through 100% of

fuel costs on to customers.

Domestic Network: CJT has

signed long-term agreements with

Amazon, Canada Post and UPS

who are key customers in the

domestic segment. Other customers

include leading T&L businesses like

FedEx, TFI International and others.

ACMI: CJT has a long-term ACMI/

CMI agreement with DHL through

2029 to support their international

expansion.

Charter: Demand in this segment is

variable, with examples including

carrying COVID test kits and PPE

for the Canadian Government.

$249 $264 $300 $325 $361 $121 $124 $115 $167

$267 $176

$240 $439 $487

$669 $758 $981

2018 2019 2020 2021 2022

Domestic Surcharge & Other ACMI Charters

Expert A • Consultant with 20+ years in air cargo at a leading global consulting firm

Expert B • Consultant with 15+ years in air cargo at a leading global consulting firm

Expert C • Senior executive at an International Freight Association

Expert D • CFO at a leading international freight forwarder

Expert E • Freight leader at an international airline

Expert F • Freight leader at a regional airline

Expert G • Senior freight leader at a top 10 customer of CJT

Expert H • Board director at an air freight company with 30+ years of experience in air freight

Expert I • Former IT executive at an international airline

Expert J • Senior leader at a law firm that has previously covered airline union disputes

Expert K • Freight leader at a Latin American airline

Expert L • Consultant with project experience advising transportation and logistics companies on ESG matters

Expert M • Consultant with project experience advising airports on cargo expansion strategies

Appendix 2: Breakdown of Business Segments

Source: Company Filings, 2023

Note 1: Experts are not named due to requests to maintain confidentiality

13

Appendix 3: Competitor Profiles

Note 1: UPS, FDX, DHL, 2. CNR, CP, UNP, 3. ATSG, CHR, 4. SAIA, JBHT, KNX, ODFL, MTL, TFI, XPO

Appendix 4: Amazon and DHL Warrants

Appendix 5: Peer Performance/Freight Recession Overview

Amazon Warrants to acquire 9.9% + 5.0% of

CJT – August 23, 2019:

Share Price: $102.33

Strike Price: $91.78

Status: Vesting

Terms: $400M in revenue delivered during 2019 –

2026 period

DHL Warrants to acquire 9.5% of CJT – March

29, 2022

Share Price: $185.03

Strike Price: $158.92

Status: Vesting

Terms: $2.3B in revenue from 2022 –2029

Lower Risk of

Replacement

Warrants significantly reduce the risk of key

customer churn while creating incentives for

increased economic activity.

Cash Inflow Assuming warrants are exercised, CJT can use the

cash for Capex, debt paydowns and buybacks.

Guaranteed

Revenue

Financial incentives encourages major customers

to invest alongside CJT and continue to grow with

them.

Aligned

Interests

In similar agreements, Amazon has held shares

after exercising and has acted as a strategic

partner to ATSG and Atlas.

• Operates a diverse fleet that moves

cargo in the belly of passenger planes.

• Operates 7/200 planes as dedicated

cargo freighters.

• Prioritizes passenger baggage,

special deliveries, urgent shipments,

temperature sensitive goods, human

remains, and humanitarian aid above

cargo.

• Unable to offer time-sensitive

guarantees to customers and is not

focused on expedited overnight freight.

• Cancelled plans to add two B777s to

their fleet of dedicated freighters after

underperforming in Q2 2023.

• Attempted the conversion of four

passenger planes to dedicated cargo,

the completion of which took over a

year for regulatory approval.

• Experienced low bookings on

dedicated cargo planes and have been

unsuccessful so far.

• Unable to guarantee timeliness to

customers for belly-cargo business due

to the likelihood of being bumped by

higher priority packages.

• Few long-term contracts with

important customers and no anchor

customer exists to provide volume

certainty.

• There are a few small dedicated

freighters focused on fulfilling select

routes for single customers.

• Morningstar Air Express supports

some FedEx volume but is primarily

focused on charters.

• Buffalo Airways services a dedicated

freighter route between Edmonton and

Yellowknife and is focused exclusively

in Northern Canada.

• There are no other scaled, nationwide

players that are focused on domestic

overnight.

Since 2022, the cargo market has been suffering from an imbalance of supply and demand, resulting in a

freight recession. Although freight volumes have been more robust than expected during an economic recession,

overcapacity has led to lower freight spot rates, more competitive pricing, and changing dynamics in cargo

movement between dedicated freighters and the belly of passenger airlines. This recession has caused many

peers in the air freight and transportation industries to perform poorly, while having to navigate an economic

environment where growth is difficult to achieve.

(100%)

(50%)

0%

50%

100%

150%

200%

250%

300%

Dec-18 Jun-19 Dec-19 Jun-20 Dec-20 Jun-21 Dec-21 Jun-22 Dec-22 Jun-23

CJT Integrators Rail Dedicated Freight Less-Than-Truckload1 2 3 4

Source: Company Filings, 2023

Source: Company Filings, 2023

Source: Capital IQ, 2024

DHL

• September 2021: By John C. Munro International Airport, CJT’s main base in Hamilton, DHL invested $100M

CAD to build a facility to meet the needs of increased shipping volumes to Canada.

• July 2023: DHL has announced an investment of $562M into LatAm over the next five years given the strong

growth in the region, requiring rising supply chain management services.

• October 2023: DHL will be deploying $370M in capital over the next five years within SEA to boost their

warehousing capacity, workforce, and sustainability initiatives.

• November 2023: DHL has invested $410M in the expansion of their Hong Kong Hub to increase the capacity of

their only warehouse in East Asia.

Amazon

• April 2022: Adjacent to John C. Munro Hamilton International Airport, Amazon opened its most advanced

robotics facility to extend the reach and capability of their expansion plan in Canada.

• August 2023: Amazon business has begun to creep up in Canada, driven by CJT operating a new 40,000-

square-foot cargo terminal at Vancouver International Airport, which has enabled CJT to add a direct flight out of

its base in Hamilton to Vancouver with one of two Amazon-provided 767s.

• August 2023: Over the past two to three years, Vietnamese enterprises have led SEA in garnering the highest

international sales via Amazon. The value generated from e-commerce in Vietnam is expected to continue its

robust ascent.

• September 2023: Amazon has launched its biggest last-mile delivery center in Mexico City to expedite

deliveries in the densely populated area. This expansion is part of Amazon's $3B investment in Latin America,

aimed at strengthening its market presence and competing with regional and global players.

• November 2023: Amazon announced its fourth renewable energy project in Canada. These projects will help

power Amazon’s operations in Alberta, including its fulfilment centers, sortation centers, delivery and more.

• Q4 2024: Amazon had announced the development a sorting centre in Windsor. In August 2023, after

reevaluating their needs, they stated the facility would be 50% larger than officially announced 16 months ago.

Appendix 7: E-Commerce Growth in LatAm and SEA

Appendix 6: DHL and Amazon’s Expansion

14

Eight of the top ten countries ranked by retail e-commerce growth

globally are located in LatAm and SEA. The surge in e-commerce

across these regions is driven by technological and demographic

shifts. Increased internet and mobile device penetration have

provided a solid foundation for digital marketplaces, with both

regions witnessing widespread adoption of online shopping,

especially among the younger, tech-savvy populations. The rapid

urbanization in these areas has also facilitated a more consolidated

consumer base, making the logistics of e-commerce more viable.

Simultaneously, economic expansion has bolstered consumer

spending power, thus fueling demand for the convenience and

variety that online shopping platforms offer. The COVID pandemic

has been a significant catalyst, expediting the shift from brick-and-

mortar stores to online retail. Innovative payment options have

emerged, while government initiatives to support the digital

economy have encouraged entrepreneurial ventures and

investments. The e-commerce sector in these regions is poised for

sustained growth, with a notable shift in consumer purchasing

behaviors towards online platforms. In mature e-commerce markets,

70% of sales come from marketplaces, this is lower in North and

Latin America and as these markets mature marketplace penetration

will increase. As seen on the left, CJT’s customers are either leading

marketplaces or are partnered with top marketplaces.

CJT's competitors have been investing heavily in globalization. International expansion provides significant benefits

through increased volumes and exposure to high quality freight. DHL and Amazon have focused on regions such

as Canada, LatAm, and SEA. Trade routes from manufacturing hubs in SEA and Europe to LatAm prefer to pivot

through Canada due to lower exchange rates and faster customs times, which positions CJT well to capitalize on

international growth opportunities and increased investment in Canada and nearby regions.

Improving Infrastructure

MercadoLibre (#1 ranked LatAm e-

commerce marketplace) and Shopee (#1

ranked SEA e-commerce marketplace)

are both strategic partners of DHL

Source: Company Filings, 2023

Shifting Consumer Behaviours

Mobile-First Society

Source: Americas Market Intelligence, DHL, Company Filings

15

Appendix 8: Historical ROIC

Appendix 9: Fleet Assessment

Appendix 10: Cost Optimization

Aircraft Model Capacity (lbs) 2021A 2022A 2023E 2024E 2025E

B767-300 125,000 16 18 21 22 23

B767-200 100,000 3 3 3 3 3

B757-200 80,000 9 13 17 15 15

B767-200 100,000 1 1 - - -

Challenger 601 6,000 2 2 - - -

Cessna 750 2,375 - 1 - - -

Beechcraft 1900D 4,375 - 1 - - -

Total 31 39 41 40 41

Fiscal Year Total Capacity (lbs)

2019A 2,352,000

2020A 2,802,000

2021A 3,132,000

2022A 3,708,750

2023E 4,285,000

2024E 4,250,000

2025E 4,375,000

2026E 4,375,000

The main fleet initiative was CJT selling off its smaller passenger aircraft. In 2023, to adapt to lower market demand,

the company sold the entirety of its passenger fleet including a non-converted B767-200, two Challenger 601’s, a

Cessna 750, and a Beechcraft 1900D. The latter three aircrafts each had total payload capacity of less than 10,000

pounds. This decision also enabled CJT to reposition pilots and implement a new long-term incentive plan to maintain

industry-leading pilot retention. These changes led to aircraft and crew costs in aggregate being cut by $1.8M. By

streamlining their fleet, CJT is now able to focus on repositioning with larger aircraft by selling its 757s. Performing a

detailed fleet analysis allowed us to determine that total payload capacity (lbs) will significantly exceed pandemic

levels, eliminating the necessity for increased growth capex to meet growing demand.

2013A 2014A 2015A 2016A 2017A 2018A 2019A 2020A 2021A 2022A

NOPAT Margin 2.8% -2.7% 0.6% 6.5% 8.6% 10.2% 9.0% 18.6% 16.8% 13.0%

Invested Capital Turnover 1.9x 1.1x 1.2x 1.1x 1.0x 0.7x 0.6x 0.7x 0.7x 0.7x

Return on Invested Capital 5.1% -3.0% 0.7% 7.2% 8.4% 7.1% 5.0% 12.7% 11.5% 8.5%

The relationship between CJT’s NOPAT Margin (net operating profit after tax / sales) and invested capital turnover

(sales / average invested capital) provides greater clarity into the firms historically underperforming ROIC. Net PP&E

accounts for approximately 90% of CJT’s average invested capital. Invested capital has been steadily increasing due

to CJT’s significant year-over-year investments in growth capex, which has reduced their turnover. When combined

with poor operating margins, CJT has failed to drive a reasonable return on invested capital in the past. However, the

need for further growth capex spend is no longer present, and with a stable PP&E base, margin improvements will

directly lead to a higher ROIC. From the high degree of operating leverage, route optimization, and increasing

volumes, CJT will be able to drive higher margins and ROIC.

For dedicated air cargo carriers such CJT, suboptimal capacity utilization translates to diminished yields and

revenues. This occurs as the number of block hours and the associated cost per block hour remain constant, but

the revenue generated declines with lower capacity utilization. CJT leverages robust customer relationships

fortified by strategic long-term contracts and a stellar on-time track record. This approach enables CJT to engage

closely with customers, steering clear of suboptimized routes. This, in turn, leads to a reduction in block hours and

associated costs. CJT’s ability to move away from suboptimal routes is a core strength, demonstrating superior

cost management capability compared to competitors within the domestic overnight market. This can be directly

observed by calculating CJT’s direct cost per block hour (excl. fuel costs/D&A). CJT has been able to drive direct

costs per block hour lower than pre-COVID levels with ongoing efforts expected to drive further declines.

$5,296

$4,745 $5,016 $5,061 $5,125 $5,064

$5,283 $5,502

$5,179 $5,245

2019 2020 2021 2022 Q1 2022 Q2 2022 Q3 2022 Q4 2023 Q1 2023 Q2 2023 Q3

Direct Cost per Block Hour (Excl. Fuel Costs/D&A)

Source: Company Filings, 2023

Source: Company Filings/Team 4 Analysis, 2023

Source: Company Filings/Team 4 Analysis, 2023

16

Appendix 11: Valuation Support (Base Case)

Source: Team 4 Analysis

Discount Terminal Growth Rate

Rate 1.75% 2.00% 2.25% 2.50% 2.75%

7.2% 46.9% 54.3% 62.5% 71.5% 81.6%

7.7% 31.7% 37.8% 44.4% 51.8% 59.8%

8.2% 18.8% 23.9% 29.4% 35.4% 42.0%

8.7% 7.7% 12.0% 16.7% 21.7% 27.2%

9.2% (1.9%) 1.8% 5.8% 10.1% 14.7%

Discount Exit Multiple (EV/EBITDA)

Rate 8.0x 8.5x 9.0x 9.5x 10.0x

7.2% 27.0% 34.9% 42.8% 50.7% 58.6%

7.7% 24.2% 32.0% 39.7% 47.5% 55.3%

8.2% 21.5% 29.1% 36.7% 44.3% 52.0%

8.7% 18.8% 26.3% 33.7% 41.2% 48.7%

9.2% 16.2% 23.5% 30.9% 38.2% 45.5%

Valuation Takeaway

CJT discloses few details about revenue which makes a detailed revenue build challenging. Due to the nature of

disclosure, it is challenging to have conviction over an implied level of volume and average rate charged by

segment. We have chosen to forecast revenue by segment using a % growth approach in order to reflect the

fundamental drivers of each segment. Costs have been forecasted by category based on the fixed or variable

nature as well as using a % of approach.

Free Cash Flow Projections

Terminal Growth Method

Basic S.O 17.21

(+) In-the-money options 0.00

(-) Shares repurchased from proceeds 0

(+) Warrants Outstanding 4.02

Fully diluted shares outstanding 21.23

Exit Multiple Method

Terminal Growth Method

WACC 8.20%

Terminal Growth Rate 2.25%

Implied Exit Multiple 8.5X

PV of UFCF $718

Terminal Year UFCF $4,629

PV of Terminal Year $3,122

EV $3,839

Less: Debt & Leases ($773)

Less: Minority Interest $0

Add: Cash $43

Equity Value $3,109

S.O 21.2

Implied Price $146

1-Yr Target $158

Current Price $122

Implied Return 29%

Exit Multiple Method

WACC 8.20%

Exit Multiple 9.0X

Implied Growth Rate 2.55%

PV of UFCF $718

Terminal Year EBITDA $4,886

PV of Terminal Year $3,295

EV $4,013

Less: Net Debt ($773)

Less: Minority Interest $0

Add: Cash $43

Equity Value $3,283

S.O 21.2

Implied Price $155

1-Yr Target $167

Current Price $122

Implied Return 37%

Shares Outstanding Cost of Equity Methodologies

Cost of Equity (DDM)

Annual dividend per share 1.28

Current share price $122.38

Sust. Dividend growth 10%

Cost of Equity 11.05%

Cost of Equity (CAPM)

Risk-free rate 3.25%

Market risk premium 5.00%

Levered beta 1.17

Cost of Equity 9.10%

Historical Forecast CAGR

2019A 2020A 2021A 2022A 2023E 2024E 2025E 2026E 2027E 2028E ‘19-’22 ‘23-’28

Domestic Revenue $264 $300 $325 $361 $350 $378 $427 $470 $498 $513 8.1% 6.6%

ACMI Revenue $66 $132 $176 $240 $259 $298 $373 $436 $488 $513 37.9% 12.0%

Charter Revenue $33 $122 $90 $113 $99 $95 $93 $94 $95 $98 36.1% (0.0%)

Revenue (Excl. FS) $363 $554 $591 $713 $708 $771 $893 $1,000 $1,082 $1,124 18.4% 8.0%

% Growth 52.5% 6.6% 20.7% (0.7%) 8.9% 15.8% 12.0% 8.2% 3.9%

Gross Profit $119 $251 $232 $248 $161 $191 $272 $332 $377 $394

Gross Margin % 32.8% 45.2% 39.4% 34.7% 22.7% 24.8% 30.5% 33.2% 34.8% 35.1%

Adjusted EBITDA $157 $289 $291 $327 $309 $343 $419 $473 $518 $543 20.1% 9.8%

Adjusted EBITDA Margin % 43.2% 52.1% 49.3% 45.8% 43.7% 44.5% 46.9% 47.4% 47.8% 48.3%

EBIT $59.7 $169.1 $172.9 $172.9 $96 $122 $199 $254 $294 $308

Operating Margin % 16.4% 30.5% 29.3% 24.2% 13.5% 15.8% 22.3% 25.4% 27.2% 27.4%

NOPAT (Net Operating Profit After Taxes) $44 $123 $126 $126 $70 $89 $145 $186 $215 $225

(+) D&A $92 $98 $114 $140 $183 $205 $204 $203 $207 $219

(-) Capex ($218) ($147) ($278) ($611) ($262) ($181) ($184) ($156) ($222) ($172)

(-) Change in NWC $34 ($36) $3 $0 ($18) ($12) ($8) ($6) ($2)

Unlevered Free Cash Flow ($82) $108 ($73) ($342) ($10) $95 $153 $224 $193 $269

Discount Rate 8.20% 8.20% 8.20% 8.20% 8.20% 8.20%

Discount Period 1.00 2.00 3.00 4.00 5.00

Present Value of Unlevered Free Cash Flow $88 $130 $177 $141 $182

17

Appendix 12: Reverse DCF

Reverse DCF Takeaway

To understand the level of growth the market may be pricing in, we conducted a reverse DCF. After adjusting

revenue growth and direct cost assumptions until our model arrived at CJT’s current price, it is evident that the

market seems to be pricing in modest growth and margin expansion. We believe this is not reflective of the

opportunities CJT has at hand and have conviction that top line strong growth will drive margin expansion given the

high level of operating leverage in the business.

$363

$554 $591 $713 $708 $771

$893 $1,000

$1,082 $1,124

43.2% 52.1% 49.3% 45.8% 43.7% 44.5% 46.9% 47.4% 47.8% 48.3%

20. 0%

40. 0%

60. 0%

80. 0%

100 .0%

120 .0%

140 .0%

$0

$20 0

$40 0

$60 0

$80 0

$1, 000

$1, 200

2019A 2020A 2021A 2022A 2023E 2024E 2025E 2026E 2027E 2028E

Revenue excl. fuel surcharge Adj. EBITDA Margin %

Base Case Graphic

Reverse DCF Graphic

$363

$554 $591 $713 $708 $773

$850 $915 $970 $1,003

43.2% 52.1% 49.3% 45.8% 43.7% 44.8% 44.5% 45.9% 46.0% 46.4%

20. 0%

40. 0%

60. 0%

80. 0%

100 .0%

120 .0%

140 .0%

$0

$20 0

$40 0

$60 0

$80 0

$1, 000

$1, 200

2019A 2020A 2021A 2022A 2023E 2024E 2025E 2026E 2027E 2028E

Revenue excl. fuel surcharge Adj. EBITDA Margin %

Appendix 13: Cost Breakdown

81% 83% 81% 83% 85%

19% 17% 19% 17% 15%

2021 2022 2023 Q1 2023 Q2 2023 Q3

CJT Fixed vs Variable Cost Trends CJT’s fixed direct costs include aircraft costs, D&A,

maintenance costs, crew costs, ground services, and

SG&A (mainly fixed salaries). Fixed costs constitute a

larger share of direct costs and are influenced by the scale

of Cargojet's aircraft fleet. Consequently, CJT experiences

a high degree of operating leverage. Given that fixed costs

make up a portion of the operating expenses for each

flight route, the costs associated with individual flight

routes do not fluctuate in direct proportion to the number

of shipments handled by Cargojet. We maintained this

cost trend through the forecast period with fixed costs

grown at a nominal rate of 5% annually. Variable costs are

directly related to the volume of flight activity, determined

by the level of customer demand and are therefore

forecasted as a % of revenue. Fuel costs are variable

costs that are completely passed through, leaving no

impact to cash flows.

Source: Team 4 Analysis

Source: Team 4 Analysis

Source: Company Filings, 2023

Target Acquirer Date

Transaction

Value (USD $M)

EV/NTM

EBITDA

Equity

Premium

Aug 4, 2022 $5,117.7 4.7x 57%

18

Appendix 15: Comparable Companies Analysis Criteria

Note: 1. ATSG, CHR. 2. DHL, UPS & FedEx. 3. SAIA, JBHT, ODFL, XPO, KSX, MTL, TFII. 4. CNR, CPKC, UNP

Appendix 16: Dedicated Freight Precedent Transactions

Appendix 17: Historical EV/NTM EBITDA Multiple

Appendix 14: Bull, Bear and Base Case Assumptions

Domestic

Revenue

ACMI

Revenue

Charter

Revenue Overall

Bull 10.5% 13.5% 3.3% 10.8%

Base 6.6% 12.0% (0.0%) 8.0%

Bear 4.9% 7.9% (2.0%) 5.3%

Revenue CAGR EBITDA Margins Implied Return

3x

5x

7x

9x

11x

13x

15x

17x

19x

Dec-18 Dec-19 Dec-20 Dec-21 Dec-22 Dec-23

Cargojet Dedicated Freight Integrators Less-Than-Truckload Rail

5Y

Average

Current

Multiple

Cargojet 11.0x 9.5x

Dedicated

Freight1 5.9x 5.1x

Integrators2 8.9x 8.8x

Less-Than-

Truckload3 10.1x 12.2x

Rail4 14.4x 15.3x

‘23E ‘24E ‘26E ‘28E

Bull 44.3% 45.8% 50.0% 52.3%

Base 44.3% 44.5% 47.4% 48.3%

Bear 44.3% 40.8% 42.1% 43.2%

Implied

Target Price

Implied

Return

Bull $244 100%

Base $163 33%

Bear $126 3%

A Demand for time-sensitive freight (e-commerce) Freight volume/capacityB

C Government fiscal stimulus Globalization of supply chainsD

Key

Performance

Drivers

E Fuel Costs Fleet / equipment capex spendingF

G Labour and workforce costs Regulatory compliance costsH

Key Cost

Drivers

Segment Performance Drivers Cost Drivers Included in Comps

Dedicated Freighters A, B, C, D E, F, G, H ATSG, Chorus Aviation

Integrators A, B, C, D E, F, G, H DHL, FedEx, UPS

Less-than Truckload A, B, C E, F, G, H TFI International

Commercial Airlines C E, F, G, H None Included

Railways B, C E, F, G, H None Included

Source: Team 4 Analysis

Source: Capital IQ, 2023

Source: Capital IQ, 2023

19

Appendix 18: ESG Scorecard

Source: Company Filings, Team 4 Analysis, Note: 1. Glassdoor

Rating Description Team 4 Assessment

0 N/A No or lack of evidence of effort to achieve criterion.

1 Laggard Evidence of some effort but little success to achieve criterion.

2 Satisfactory Evidence of effort and a level of success to achieve criterion.

3 Average Effort and success in line with industry standards for criterion.

4 Excellent Higher level of effort and success in achieving criterion.

5 Leader Innovator for industry initiatives and high level of effort and success.

Approach & Rationale

With the lack of standardization on ESG reporting and CJT’s unique position as a firm, CJT has been penalized or

rewarded by ESG rating agencies for the industry assigned. We consulted the LSEG, Bloomberg, and MSCI rating

rationale and selected peers that best represented the mix of each of the ESG factors for CJT to develop our own

scorecard. Our ratings and rationale for the factors that are most relevant to our analysis are below:

Criteria Cargojet ATSG FedEx UPS DHL

GHG Emissions

Committed to net

zero by 2050 and

invested heavily in

SAF and

modernizing their

fleet.

No specified

commitment to a

net zero target, but

clear path to

reduce emissions

with past results.

Committed to

carbon neutral

operations by 2040

and clear path to

achieve their

commitment.

Committed to

carbon neutrality

by 2050 with

intermediate goals.

Committed to net

zero by 2050 with a

clear path to

achieve their

commitment and

past results.

Target Reduction 3.0 0.0 4.0 3.0 3.0

Plan & Execution 4.0 4.0 4.0 4.0 4.0

Use of clean energy 4.0 4.0 4.0 4.0 4.0

Disclosure

Annual ESG

reports disclose

relevant

environmental

concerns and

activities. Also

discloses GHG

emissions.

Annual ESG

reports disclose

clear and concise

details on

environmental

activities and

impacts as a direct

result of changing

practices.

Annual ESG

reports disclose

details on past

actions and impact

as well as detailed

plans and

objectives, with

additional data in

an appendix.

Annual

sustainability

reports disclose

major plans and

objectives and

historical

achievements in

environmental

activities.

Annual ESG

reports disclose

plans and

objectives.

Additional

downloadable data

including GHG

emissions.

Timeliness 3.0 3.0 4.0 3.0 3.0

Relevance & Specificity 3.0 4.0 5.0 4.0 5.0

Environment 3.4 3.0 4.2 3.6 3.8

Criteria Cargojet ATSG FedEx UPS DHL

Workplace Health &

Safety

Required

onboarding and

refresher training

for all employees

with standard

incident response

protocols.

Ongoing training

and emergency

practice drills with

13 safety programs

to assess and

mitigate risks.

Required

onboarding training

for all employees.

Tracked key

metrics and

employee

engagement on

safety procedures.

USD$343M

investment in

training in the past

year with details on

types of training

available. Standard

incident response

protocols.

EUR€193M

investment in staff

development but

no details on

frequency of

training. Standard

incident response

protocols.

Training 3.0 3.0 3.0 4.0 3.0

Incident Response 3.0 4.0 4.0 3.0 3.0

Workforce

Required diversity

training for

employees on how

to create an

inclusive work

environment.

Workforce

satisfaction from 58

reviews.

Required diversity

training for

employees and

surveys to

measure progress

and set diversity

goals. Workforce

satisfaction from 24

reviews.

Required diversity

training.

Contributions to

create

opportunities in

and around the

company.

Workforce

satisfaction from

10.9k reviews.

Not disclosed

whether diversity

training is required

for all employees,

but workforce is

diverse. Workforce

satisfaction based

on 238 reviews.

Not disclosed

whether diversity

training is required

but workforce is

diverse and

meaningful actions

are taken.

Workforce

satisfaction based

on 4.7k reviews.

Diversity & Inclusion 3.0 4.0 5.0 3.0 4.0

Satisfaction1 4.1 4.1 3.7 3.0 3.9

Disclosure

Annual ESG

reports disclose

social activities and

programs

undertaken to

foster a healthy

work environment.

Annual ESG

reports disclose

social activities and

programs

Annual ESG

reports disclose

social activities and

programs with

additional data in

an appendix.

Annually published

reports with

detailed disclosure

on social activities;

however,

disclosure is

scattered.

Annually published

reports with

detailed disclosure

on social activities

with additional

downloadable data

for tracked metrics.

Timeliness 3.0 3.0 3.0 3.0 3.0

Relevance & Specificity 3.0 3.0 4.0 3.0 4.0

Social 3.2 3.5 3.8 3.2 3.5

20Source: Company Filings, Team 4 Analysis

Criteria Cargojet ATSG FedEx UPS DHL

Board of Directors

All members are

independent and

have relevant

experience. High

gender and

moderate ethnic

diversity.

All members are

independent and

have relevant

experience.

Almost all

members are

independent and

have relevant

experience.

Almost all

members are

independent and

have relevant

experience. High

gender and ethnic

diversity.

Almost all

members are

independent and

have relevant

experience.

Independence 4.0 4.0 3.0 4.0 3.0

Experience 4.0 4.0 4.0 4.0 4.0

Diversity 5.0 3.0 4.0 5.0 3.0

Management

Management have

relevant industry

knowledge and

compensation

heavily tied to

performance.

Management have

relevant industry

knowledge with

compensation

below market and

is influenced by

company

performance.

Newer

management team,

but with relevant

industry

knowledge.

Compensation tied

to company

performance vs

market.

Management have

relevant industry

knowledge with

compensation

above market but

tied to company

performance.

Management have

relevant industry

knowledge with

compensation tied

to company

performance.

Experience & Competence 4.0 4.0 3.0 4.0 4.0

Diversity 4.0 4.0 4.0 4.0 3.0

Compensation Structure 4.0 4.0 3.0 3.0 4.0

Shareholder Rights

Currently no

concern as one

class of shares

with 97% owned by

institutions or the

public. However,

there is concern

with the warrant

execution.

One class of

shares with 97%

owned by

institutions,

Amazon, or the

public.

One class of

shares with 92%

owned by

institutions, private

corporations, or the

state.

One class of

shares with

99.04% owned by

institutions, the

state, or the public.

One class of

shares completely

owned by

institutions, private

corporations, or the

public.

Voting Rights 3.0 5.0 5.0 5.0 5.0

Audit Committee

Independent

members familiar

with compliance

requirements.

Independent

members familiar

with compliance

requirements.

Independent

members familiar

with compliance

requirements.

Independent

members familiar

with compliance

requirements.

Independent

members familiar

with compliance

requirements.

Independence 3.0 3.0 3.0 3.0 3.0

Experience 3.0 3.0 3.0 3.0 3.0

Disclosure

Relevant financial

reporting and

human capital are

disclosed, including

impact of

outstanding

derivative

securities.

Relevant financial

reporting and

human capital data

are disclosed.

Relevant financial

reporting disclosed.

Lack of concise

disclosure on

human capital.

Relevant financial

reporting and

human capital data

are disclosed.

Relevant financial

reporting and

human capital data

are disclosed.

Financial Reporting 3.0 3.0 3.0 3.0 3.0

Human Capital 3.0 3.0 2.0 3.0 3.0

Governance 3.7 3.6 3.4 3.7 3.5

Overall 3.5 3.4 3.8 3.6 3.6

Appendix 19: Management’s Bios

Name & Position

Years of

Industry

Experience

Background

Jamie Porteous

Co-CEO 38

Jamie served as CJT’s Chief Strategy Officer prior to being appointed as a co-CEO in

January 2024. Jamie has been with CJT since its inception but began his career in cargo

at Air Canada.

Pauline Dhillon

Co-CEO 23

Pauline started her career at CJT in 2001 and served as CJT’s Chief Corporate Officer

prior to being appointed as a co-CEO in January 2024.

Scott Calver

CFO 18

Scott was the CFO of Trimac Transportation prior to joining CJT as its CFO in May 2022.

He has over 19 years of experience in transportation and logistics and held financial roles

in the manufacturing sector.

Overall ESG ratings are calculated with Environment and Governance weighted at 40% each and Social weighed at

20%, due to the relative importance of the categories to businesses in the industries examined. CJT does not lag in

any one area compared to peers but does not lead either. CJT’s ESG does not create any cause for concern.

21

Name & Position Since Prior Board

Experience? Background

Dr. Ajay Virmani 2005 Yes

Dr. Virmani has served as the President and CEO of CJT since inception, and

recently entrusted Jamie Porteous and Pauline Dhillon to be co-CEOs of the

company starting January 1, 2024. He has served as a Director of CJT’s Board

since its IPO in 2005 and had a 97.57% approval by shareholders in 2022. Dr.

Virmani currently also serves as a Director on the Board of TD Bank.

Arlene Dickinson

Chair of the Audit

Committee (AC)

2018 Yes

Arlene has served on CJT’s Board since 2018 and had a 95.17% approval by

shareholders in 2022. She is the Founder and Managing General Partner of

District Ventures Capital, Founder of District Ventures Accelerator, and CEO and

sole owner of Venture Communications Ltd., with extensive experience working

with Canadian brands. Arlene has also served on numerous public and private

boards, but currently hold no other public company directorships.

Mary Traversy 2023 Yes Mary was appointed as a Director in 2023. She spent 35 years at Canada Post,

retiring in 2019, and served as the Chief Operating Officer prior to her retirement.

Paul Godfrey

Chairman of the Board

Chair of the Corporate

Governance Committee

2009 Yes

Paul has served on CJT’s Board since 2009 and had an 82.17% approval by

shareholders in 2022. He currently serves as Founder and Special Advisor to the

CEO and Board of Postmedia Network, where he previously served as Executive

Chairman until 2022 and CEO until January 2019. Paul had served on the Board

of and as the CEO of several other organizations since 1964. He has served on

the Bragg Gaming Group Inc.’s Board since January 12, 2021.

John Webster

Chair of the

Compensation &

Nomination Committee

2005 Yes

John has served on CJT’s Board since its IPO in 2005 and had a 76.71% approval

by shareholders in 2022. He also has been the President and CEO of Scotia

Mortgage Corporation since 2006, and the President and CEO of Maple Trust

Company since 1989 prior to its acquisition by the Scotia Mortgage Corporation.

John has been the CEO and COO for regulated financial institutions for over 30

years, overseeing internal and external audits as a member of senior management

and as a board member. He does not hold other public company directorships.

Appendix 20: Board of Directors’ Bios

Sanjeev Maini

VP Finance 19

Sanjeev served as CJT’s Corporate Controller prior to his role as VP Finance and was the

interim CFO for CJT from June 2021 to May 2022.

Paul Rinaldo

Sr VP Fleet Management

and Support Services

35 Paul has over 33 years of experience in aviation management for major Canadian carriers,

including Wardair Canada and Air Transat. He joined CJT in April 2003.

Shane Workman

Sr VP Flight Operations 31

Shane has over 30 years in the aviation industry and over 13,600 flight hours. He was an

executive at Swoop, Sunwing, Enerjet, and joined CJT in August 2022.

George Sugar

Sr VP Regulatory

Compliance

22 George held management and supervisory positions at other airlines and was the Chief

Pilot for CJT since 2002 prior to his current position he began in January 2006.

Gord Johnston

Sr VP Strategic

Partnerships Sales

30 Gord has over 30 years of commercial aviation industry experience, including at American

Airlines Cargo and Air Canada Cargo, prior to joining CJT in 2005.

Leo Cordeiro

Sr VP Maintenance and

Engineering

35 Leo has over 35 years of experience in the aviation sectors, including 30 years with Air

Canada and Air Canada Express. He joined CJT in 2019.

Vito Cerone

Sr VP Sales and Customer

Experience

33

Vito has over 31 years of experience in the aviation industry, including over 31 years with

Air Canada. He was the VP for Cargo Sales and Commercial Strategy at Air Canada

Cargo prior to joining CJT in September 2021.

Appendix 21: References About Us. Cargojet. (2024, January 9). https://cargojet.com/about-us/

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Airways Mag. (2023, March 8). https://airwaysmag.com/country-highest-female-pilots/#:~:text=According%20to%20the%20International%20Society,of%20pilots%20worldwide%20are%20women.

Annual Reports. DHL. (n.d.). https://www.dhl.com/global-en/home/our-divisions/supply-chain/about-dhl-supply-chain/annual-reports.html

Daily Spark, Apollo Global Management (2023) https://apolloacademy.com/the-daily-spark/

E-Commerce & Logistics. IATA. (2023, November 13). https://www.iata.org/en/programs/cargo/cargo-operations/e-commerce-logistics/

ESG Risk Ratings. Morningstar. (n.d.). https://www.sustainalytics.com/esg-rating/cargojet-inc/2000226976

ESG Scores. LSEG (n.d.). https://www.lseg.com/en/data-analytics/sustainable-finance/esg-scores

Financials Page. Cargojet. (2023, November 7). https://cargojet.com/financials-page/

Glassdoor. (n.d.). https://www.glassdoor.ca

Investor Relations. Air Canada (n.d.). https://aircanada.investorroom.com/shareholder-meetings

Kulisch, E. (2022). Canada’s 3 largest airlines make big push in cargo. FreightWaves. https://www.freightwaves.com/news/big-3-canadian-airlines-bulk-up-on-cargo

Latin America E-Commerce Market Projections, 2023-2026. Americas Market Intelligence (2023, November 31). https://americasmi.com/insights/latin-america-e-commerce-market-projections-2024/

LinkedIn. (n.d.). https://www.linkedin.com/

Lin, Y. (n.). Ecommerce as a Percentage of Retail Sales by Country. https://www.oberlo.com/statistics/ecommerce-as-a-percentage-of-retail-sales-by-country

S&P Capital IQ. (n.d.). https://www.capitaliq.com/

SEC Filings. ATSG. (2024, January 3). https://www.atsginc.com/investors/reports-and-filings/sec-filings

SEC Filings. FedEx. (n.d.). https://investors.fedex.com/financial-information/sec-filings/default.aspx

SEC Filings. UPS. (n.d.). https://investors.ups.com/sec-filings

StatsCan (2023), https://www150.statcan.gc.ca/t1/tbl1/en/tv.action?pid=2010005603

Stephenson, Amanda. (2023). Amazon’s first Canadian wind farm project to be located in Alberta. The National Post. https://nationalpost.com/news/canada/amazon-first-canadian-wind-farm-project-alberta

Tan, C. (2024). DHL Air Freight State of the Industry – December 2023. DHL. https://lot.dhl.com/air-freight-state-of-the-industry-december-2023/?view=1,

Source: Company Filings