Cargojet to pass large pilot wage increase onto customers

Canadian freighter operator Cargojet plans to recover the substantial increase in costs stemming from a new five-year contract with pilots through productivity gains and by raising rates on customers that ship goods on its domestic overnight network and rent planes for international transportation. The collective bargaining agreement, which was finalized by an arbitration award late last month, calls for a 53% increase in wages over the contract’s term, including an immediate 26% bump retroactive to July 1, followed by annual increases of 5% over the following four years. It’s a huge raise in wages, but one that Cargojet ( TSX: CJT ) management acknowledged was necessary to bring its pilots up to industry standards, while providing operational stability for the company and its customers through continuation of a no-strike, no-lockout provision. “As customer agreements come due, we will look to pass these costs through. Many of these conversations have begun,” said CEO Pauline Dhillon last week on a conference call with analysts to discuss the company’s second-quarter earnings.