Cargojet Airways (W8, Hamilton, ON) has deferred the conversion of four B777-300(ER)s planned for its in-house operations and sold two of them to reduce capital expenditure as recessionary concerns grow.

"As part of our previously stated diversification and growth strategy, Cargojet undertook to add B777 long-range fuel-efficient aircraft to our fleet to expand international reach, strategically enhance our domestic network and broaden capability for long-range charters... A total fleet of eight B777s were planned with the first four to be deployed with DHL Express as part of Cargojet strategic agreement, and with the remaining four to expand our international reach. The four aircraft earmarked for DHL will continue conversion, but the recent forecast for the slowing global economy will curtail our capital expenditure. We deferred taking delivery of the final four B777 freighters while maintaining full access to our conversion delivery slots," Chief Financial Officer Scott Calver said during a quarterly investor call.

The sale of the two B777-300(ER)s netted USD53.5 million for the airline.

The Canadian cargo specialist secured four B777-200(LR)s for conversion by Mammoth Freighters for its DHL operations. In turn, the four -300(ER)s were to be converted by Israel Aerospace Industries for the airline's in-house services. Calver stressed that the airline only acquired three -300(ER)s, of which two have now been sold and one was deferred last year. He added that Cargojet still has the option to sell the third -300(ER).

Cargojet retains the "optionality" for its original conversion slots between 2024 and 2026 "should the economic climate turn positive earlier than expected", Calver stressed. The airline expects that the feedstock market for second-hand B777s will remain strong as more passenger airlines transition to newer aircraft. As such, it expects to have no problems securing new aircraft for conversion when it revives its expansion plans.

"When we say we are cancelling it, we [mean] we are selling the feedstock, but we are maintaining the current conversion slots. So, we are still in the market should things improve," Chief Executive Ajay Virmani added.

"The impact of the CAD320 million Canadian dollars to CAD400 million (USD235-295 million) deferral to our 2023 growth capital expenditure spend will be a net reduction of approximately CAD100 million to CAD125 million (USD74-92 million), and it could be slightly higher if we sell that last feedstock," Calver said.

The four -200(LR)s for DHL operations are scheduled to redeliver to Cargojet between the first quarter of 2024 and the first quarter of 2025. Three of the ex-Delta Air Lines aircraft are already under conversion at Fort Worth Alliance airport, while the fourth remains in storage at Victorville, according to the ch-aviation fleets module.

The airline's fleet currently comprises fourteen B757-200(PCF)s, three B767-200(ERBDSF)s, four B767-300ER(BCF)s, and fourteen B767-300ER(BDSF)s.