Cargojet Inc.

Good morning, ladies and gentlemen. Welcome to the Caldwell Jet Conference Call. I would now like to turn the meeting over to Martin Herrmann, General Counsel and Secretary Secretary. Please go ahead.

Good morning, everyone, and thank you for joining us today on this call. With us on the call today are Pauline Dillon and Jamie Porteus, our co-chief executive officers, Sanjeev Meni, our vice president finance and interim CFO. After opening remarks about the quarter, we will open the call for questions. I would like to point out that certain statements made on this call, such as those relating to our forecasted revenues, costs, and strategic plans, are forward-looking within the meaning of applicable securities laws. This call also includes references to non-GAAP measures like adjusted EBITDA, adjusted earning per share, and return on invested capital. Please refer to our most recent press release and MD&A for important assumptions and cautionary statements relating to forward-looking information and for reconciliation of non-GAAP measures to GAAP income. I will now turn the call to Jamie.

Thank you, Marty. Good morning, everyone, and thank you for joining us on the call today. As we've done in the prior quarters, Pauline and I will share our prepared remarks, and then we will open up the call for questions. Exactly five years ago, our Q1 2020 press release noted, and I quote, while the longer-term implications and the full impact of COVID-19 remains unknown, Cargojet is well positioned to successfully support this new environment, both in the short as well as the long run. Since then, we have seen natural disasters like forest fires in western Canada disrupt rail traffic, lower water levels in the Panama Canal cause ship delays, geopolitical conflicts in the Middle East and Ukraine cause disruption in supply chains, and more recently, the further disruption in the retail sector with the arrival of Timu and Shenzhen, where foreign e-commerce retailers ship product directly from China to global destinations, including Canada. So it is only fair to ask, how has Cargojet navigated these major disruptions since COVID? Five years out, our Q1 2025 revenues are more than double the Q1 2020 revenues. Our adjusted EBITDA in Q1 2025 is double the adjusted EBITDA in Q1 2020. Although it is not up to us to comment on the stock price, you can look up what the stock price was in Q1 2020 and contrast it with the performance of CargoJet over the past five years and draw your own conclusions. Once again, we are now facing yet another global supply chain crisis. This time it's tariffs and a global trade war leading to economic uncertainty. And it is worth repeating that CargoJet is very well-positioned to navigate this rapidly shifting global supply chain environment. We believe that with the expected decoupling of North American supply chains, more cargo will enter Canada directly from China and Southeast Asia to mitigate United States tariffs. Canada also lags well behind other industrialized countries in terms of the penetration rate of online sales as a percentage of overall retail sales. Enhanced customer trust, the abundance of options versus physical stores, and the ease of use are all contributing to rapid online shopping growth in Canada. This bodes well for both our domestic and scheduled charter revenue segments. We are actively pursuing new opportunities and remain at the forefront of helping customers adjust to the new global supply chains. The portfolio diversification we started in 2019 has served us extremely well. For example, softness in our ACMI segment during Q1 was more than offset by the growth in our domestic and charter businesses. We continue to be cautious and manage our growth capex very prudently and expect to fully deploy the three additional freighters as soon as they are accepted into operation later this year. As previously announced, we are adding four 767-300 freighters and returning one Lease 767-200 for a net addition of three aircraft. At the same time, CargoJet is not immune to the impact of larger economic cycles, and we are continuing to monitor this rapidly changing economic, political, and inflationary environment, and we can and will adjust our fleet plans accordingly. During economic slowdowns, we have observed that consumers often substitute a higher price product with a value offering. While this has direct implications on how much the consumers spend, it has far less impact on the number of packages being shipped. Instead of purchasing an $80 pair of shoes, consumers may purchase a $50 pair, but the shoes still need to be shipped. Now for some financial highlights for the quarter. Total revenue grew by 8.1% to $249.9 million in the quarter, a record for the first quarter in the history of cargo debt, led by very strong year-over-year growth in both our domestic and charter businesses. Overall block hours flown only increased by 3.3%, and Q1 adjusted EBITDA of $80.8 million grew 3.1% versus the prior year, in line with the expected margin at 32.3%. In terms of our capital allocation strategy, we continue to generate strong operating cash flow of $64.8 million in Q1 versus $80.3 million last year. The variance versus last year was largely driven by non-cash working capital movements. More importantly, we maintained our net debt to adjusted EBITDA leverage ratio at two and a half times as at March 31st, 2025. This is within our stated targets. We achieved this strong leverage ratio despite investing in Growth CapEx and continuing our share buyback program. During the three-month period ended March 31st, 2025, the company purchased for cancellation an aggregate of 272,922 voting shares under the NCIB for a total cost of 32.2 million. We also continue to improve the return on investment capital and our dividend policy remains consistent with previous years. We remain confident that we will continue to identify new opportunities for cargo jet as customers navigate shifting global supply chains. Our direct exposure to US tariffs is very limited and we remain optimistic about our future despite the growing macroeconomic uncertainty that exists today. We will continue to leverage our unique mix of domestic Canada network, ACMI flying, and our all-in charter segments to maximize aircraft utilization and to grow our revenues and to return value to all cargo jet stakeholders. Let me now pass the microphone over to my colleague, Pauline.

Thank you, Jamie, and good morning, everyone. The journey Jamie spoke about since COVID has been nothing short of remarkable. We closed 2019 with total revenues of $486 million and ended 2024 with over a billion dollars in revenue. Likewise, 2019 adjusted EBITDA was $156 million, and we ended 2024 with $330 million. The reason I wanted to share this stat with you was to put the journey of CargoJet in context. As we scale the business, added aircraft, pilots, maintenance, and other team members, new routes, and extensive national and international maintenance infrastructure, we have done that while maintaining EBITDA margins and a strong discipline on cost management. The core tenet of our customer focus continues to be on-time performance. Every member of the cargo jet team knows that our priorities are safety and on-time performance. I am very pleased to report that our Q1 on-time performance was 99.1% for the quarter. Managing the hyperactivity period during COVID taught us several lessons. Those lessons have now been put in practice, and we are in a much stronger position to manage emerging supply chain disruptions and trade wars. For example, up until COVID, we had never flown to China. We learned not only how to serve the China market, we developed capabilities to support maintenance, ground handling partners, crew planning, and how to optimize the Boeing 767-300 freighter utilizing Narita Japan as a staging point. When the opportunity came to fly regular China charters, we were ready. This part of our business has proven to be a solid offset to softer global ACMI demand. The emerging dislocation and supply chains will create similar opportunities for cargo jet. Having developed this new muscle, we are now actively looking for new opportunities to serve previously unserved destinations. Cargo jet has become a global leader in the air cargo charter industry, and we are methodically managing our fleet to create capacity and utilization for our new ad hoc charters while increasing the frequency of scheduled charters to China. To support our continued growth, we have also launched an IT and finance transformation initiative to streamline processes, to allow faster turnaround times, to support all aspects of our business with a particular focus on growing ad hoc charters. New talent in finance is looking at streamlining processes that will better result in cost management. With close to 2,000 highly skilled, committed, professional, diverse team members that power CargoJet every day, we are launching a national workforce engagement and support initiative. As a critical infrastructure provider to national and global carriers, our team members are on the front lines 24-7, 365 days of the year. Maintaining strong engagement and supporting our team to deliver the customer products is a top personal priority for Jamie and I. We are extremely proud of the team's contributions and express our heartfelt gratitude for their continued dedication and success while continuously focusing on safety and delivering on-time performance for our customers. Once again, we thank you for joining us this morning. We will now open the lines for questions.

Thank you. We will now take questions from the telephone lines. If you have a question, please press star 1. You may cancel your question at any time by pressing star 2. Please press star 1 at this time if you have a question. There will be a brief pause while participants register for their questions. Thank you for your patience. We will take the first question from Cameron Doxon from National Bank Financial. Please go ahead.

Thanks. Good morning. Just a question about, I guess, the ACMI revenue. You indicated in the MD&A just about how some aircrafts, had been shifted from Asian routes to South American routes, but it's a pretty big drop-off sequentially in the revenue of the ACMI. I just wanted to talk about that change and how you see that ACMI business looking for the rest of the year.

Good morning, Cameron. Thanks for joining. Thanks for asking the question. I mean, we expected, and I think we talked to everybody in advance of the year, that we expected some softness in the ACMI flying, particularly related to to the global routes that we operate for DHL. We have, just to be clear, we're operating the same number of aircraft that we were contracted to operate in 2024 in 2025. And the only difference in the routes, as you suggest, is the structure of the routes where the customer will routinely, and particularly with DHL, will very routinely, depending on demand in certain geographic locations of the world, will request that we switch the aircraft to higher demand aircraft locations from lower demand locations. It happens fairly regularly, not with the entire fleet, but with a significant portion of the fleet. And the only difference in the revenue this year, again, the number of aircraft has remained constant. The only difference being the routes that the stage length of the routes of those aircraft are flying are lower this year than they were last year, which results in low because revenue is based on typically on the revenue on a dollar rate per block hour that we charge for the ACMI flying with a minimum number of hours per month. So we're still well above those minimums, but we don't get the benefit of the incremental revenue that we enjoy when the aircraft are on longer stage length routes.

Okay, and is your expectation that those aircraft will continue on those same sort of routings throughout 2025?

Yeah, we don't anticipate any reduction in the number of aircraft that we're operating on an ACMI basis for the remainder of 2025. And it remains to be seen on what routes those will be on, whether they're on the existing routes or if demand increases in the latter half of the year, there is the potential we could shift some of those to longer stage-length routes. Okay.

Just secondly, from me, you've indicated that you're maybe seeing some new opportunities emerging, clearly as it relates to some of the pair of chaos we've seen and perhaps direct shipping to Canada as opposed to via the U.S. Can you maybe discuss any specifics of what the opportunities that might be for you on that type of opportunity?

Yeah, one of the I mean, one of the most obvious ones is the increase in frequency that we're flying with our scheduled charter service out of China into Canada, namely into Vancouver, with some extensions into Hamilton with our Chinese customer, which is all carrying traffic for Chinese e-commerce producers like Timu and Chen, particularly Timu, mostly coming into the Canadian domestic market. That's what our customer has focused on. So they're they're not subject to the impact of or any impact on lower volumes into the U.S. because of potential reductions in the minimus or increasing tariffs between the U.S. and China in that case don't apply on the Canadian market. And then we've been leveraging similar to how we leverage the domestic Canadian network with that customer to connect Chinese e-commerce traffic to multiple locations, 16 or 15 other cities that we operate in Canada that we can connect to off the charter flights into Vancouver to our domestic network. We've also leveraged the relationship we have with DHL to allow that customer to connect to DHL's global network of which cargo jet flies many of the aircraft, a good example being we routinely carry traffic out of Vancouver that came in on our charter aircraft, on our aircraft that we operate for DHL through their global hub in Cincinnati onto Mexico City, bypasses the U.S., travels through the U.S., but it's not destined to the U.S., so it's not subject to the same impact. Okay.

Well, that's a great cover. I'll pass the line. Thanks very much. Thanks, Kevin.

Thank you. The next question is from Betty Yang. Can I call Jeanette? Please go ahead.

Good morning, guys. Thanks for taking my question. I'm all for . So my first question is on the sleep plan. Can you elaborate more on how much flexibility you have in your sleep plan just in light of the next economic backdrop right now?

Yeah, good morning, Betty. Thanks for the question. I think you're asking in terms of our overall fleet plan. Our plan, as we stated in the MD&A, is adding four aircraft, net three aircraft this year with one return. But as I noted in my prepared remarks, you know, we always look for options and triggers that we can pull to look at either adding additional aircraft over and above what we currently are planning if demand increases or being able to redeploy those existing aircraft into other areas if demand is lower than we think. So we have several options that we could look at in terms of we have, as an example, we have two aircraft in our 767 fleet that are unique, powered by a certain type of engine, which are Pratt & Whitney engines, which are unique in the fleet. We have engine overhaul coming up on the fleet, including those two aircraft, which is a little bit more cost prohibitive than the rest of our fleet. So we're looking at, you know, is there an option for us to sell those two aircraft in return for another 767 that matches the rest of the fleet? They're both options right now, not something that we definitively looked at, but there are things that we're always considering to mitigate the impact of demands, which is a little uncertain right now.

And, Betty, just to add to Jamie's point, you know, with the aircraft types that we have, we're able to, you know, replace a 767 with a 757 depending on demand and volumes.

Thanks for sharing that. And just secondly for me, on block hours, you guys, the block hours were essentially flat year-over-year this quarter despite very strong corporate revenue growth and even accounting for an improved efficiency performance. Does this imply, like, a mixture-high finititious improvement in yield?

Yeah, I think what it really demonstrates is, as we've said many times, is sort of the resiliency of our business and the uniqueness of the, you know, the three independent business segments that we operate and how, as I noted in my prepared remarks, how softness in the ACMI that we saw in the quarter was is more than offset by increased flying. We had increased – oh, you're absolutely right. Our block hours in the quarter were relatively flat. We flew about 17,000 block hours in the quarter, which was very similar to last year. But the mix of those hours was down significantly on an ACMI basis. It was up probably 10% or 12% on the domestic overnight network to support the 16% revenue growth we saw in the domestic sector. And obviously it was up significantly on the charter business, both on ad hoc, which was more than double what we did last year, and certainly the Chinese flying, which we didn't have in the first quarter of last year at all. But that mix helped us offset the softness in one segment by the strength in the other two.

Thanks a lot. I'll pass the line. Thank you. Next question is from Walter Sprocklin, BC Capital Markets. Please go ahead.

Yeah, thanks very much, Operator. Good morning, everyone. So, good morning. On your CapEx plan, I guess it can, you've already disclosed your new fleet change and aircraft ads. Is there any change at all, though, in guidance that you had provided previously on your maintenance CapEx and growth CapEx breakdown for 2025?

Hi, Walter. Sanjeev here. No, we are fairly consistent with what we have provided after the year-end in that course. As of now, there is no change in our forecast either in maintenance capex or in growth capex. We still are continuing with the purchase of four aircraft and return of our one leased aircraft and maintenance capex around $160 to $180 million that will be spent during this year. Perfect.

And in terms of the new aircraft coming on, Jamie, I don't know if you have an update on when you expect them to come in and and when they come in, when the next one comes in, I guess, and does it get deployed immediately onto ACMI and we'll see a lift in ACMI, or are you deploying that elsewhere? Just curious so that we model kind of the ACMI pickup or the revenue pickup from the aircraft as they come in.

Yeah, our aircraft are scheduled to come in May. One is almost ready and will be deployed in service on May 7th. Other one is expected to be deployed on May 27th so basically both aircrafts will be deployed in the month of May they can just move to a little bit on they can be little bit delay on their deployment but as of now that is the target the third aircraft which is a factory converter we are planning to leave it to 21 years as it arrives all the processes are in place And we are just waiting for the year after that.

Perfect.

And just to add, Walter, to Sanjeev's note, to note that the first aircraft that comes in in May is really to replace the leased aircraft that were returning around the same time. So there's no positive, you know, there's no revenue impact on that. You won't see any impact on revenue until the second half of the year.

And that will go mainly into ACMI is where we'll see that revenue come in? Correct. Okay. Okay. So you mentioned your buyback. Any change in strategy on buyback? Is it your intention to kind of complete the remainder of your authority? Just any views there?

As of now, there is no change in our strategy. We have an NCIP open until November. We will see our fund availability and how the market reacts, and we will take our decisions accordingly. We are very conscious of our net debt to EBITDA ratio as well. So considering that, we will take decisions as and when we feel it's in fit. Perfect.

The last question, going back to a prior question, is that – and you answered it, Jamie, with regards to mix and the type of revenue that led to a real – even though your block hours stayed the same – your revenue was up quite a bit, meaning your revenue per block hour took a meaningful increase, 16% year over year. As we look to the rest of the year, do you expect that mix to revert back to where it was before? In other words, that revenue per block hour, should we model it coming back down? Or do we keep the – because if we keep our volume estimates intact – and slap a 15% growth on our revenue per block hour, it leads to a pretty big lift in revenue. I just want to make sure that are you expecting that mix to kind of lift now that we're seeing in the revenue per block hour to stay steady for the rest of the year seasonality there, but stay steady similar to prior seasonality, or do we see it kind of step back down?

I think, Walter, it's a little early for us to be able to predict the balance of the year. I mean, we were very pleased and somewhat surprised with the demand growth on the domestic business in the first quarter. As you know, 16% growth in the first quarter year over year is somewhat unprecedented for us. Again, as I noted in my prepared remarks, it's definitely an indication. It's been driven by e-commerce growth in Canada. Clearly, when we reviewed our first quarter results and talked to customers, the feedback that we're getting from all of them is e-commerce demand in Canada as more and more retailers are improving their online platforms. And as I mentioned in the prepared remarks, the product offering and the ease of use is increasing. Whether that's sustainable and continues for the balance of the year, we certainly hope it does. I think it's a little premature now based on you know, the uncertainty around the economy overall and inflation and consumer spending and how that translates. So I think we're going to take the more cautious approach for the balance of the year.

Yeah, I'm just going to echo what Jamie said there, Walter. You know, it's hard to predict volumes for the rest of the year at this point in time with the current backdrop of tariffs and the economic uncertainty.

Yeah, I guess, you know, there's not many freight transportation companies showing 16% growth and... And I guess you're not seeing any major customer indication saying that was a one-off in the first quarter, you know, brace it to come down in the second. You're not telling us that you're seeing any major shift in customer reservations on your block hour system. but you're just not in a position to say it's going to stay for the rest of the year given the uncertainty.

Yeah, I think you're absolutely right, Walter. I think there's so much uncertainty that nobody has that answer to that specific question. Perfect. Okay. That's all my questions. Thanks very much. Thanks, Walter. Thank you.

Thank you. The next question is from Alice Lee from CIDC. Please go ahead.

Hi. Thanks for taking my question. The first question I have is on labor costs. So we know that it's down year over year, and we know that it was due to adjustment in share-based crew incentive costs and lower crew training costs. So we're just wondering how much of this was specifically due to a lower training cost, and is the Q1 labor cost per headcount a good run rate for the year?

Yeah, good morning, Alice. Thanks for your question. Thanks for joining us. Yeah, no, we definitely saw an improvement, as we noted last year. We saw a spike in our overall labor costs in the early part and middle of last year, certainly as we took on the additional China flying, and particularly with our crew costs. But I believe in the quarter, our crew costs came down about 12%, which is what we anticipated. And we said we thought we would see that spike in overall labor costs in 2025 come down and normalize through the first half of 2025, which is what we're beginning to see.

And to add to that one, yes, your comment on share-based comp, that since our share price dropped from $107 to $82, part of incentive program to pilots are based on share-based DSUs. So they have been revalued at a lower level, and an adjustment was made to the account. So that also affected crew costs.

Great, thank you. And another question I have is, with WestJet exiting the cargo market, have you seen any changes in how this has impacted the competitive environment?

No, we didn't even see them enter the cargo market, so them departing the cargo market has really not had any impact on us.

Right, okay, thanks. And the last question is, looking back, I don't think we've ever seen a Q1 domestic revenue up. quarter over quarter. Is there anything you'd call out that drove this performance? I know you mentioned increase in e-commerce. Is there anything else?

No, I think that's primarily right. It's our best record first quarter revenues and sequentially over a good quarter over the fourth quarter of 2025 as compared to previous years. But the two biggest drivers were the 16% increase in domestic revenue that we saw during the quarter and and, of course, the impact of the doubling of our ad hoc charter business quarter over quarter as we continue to be successful in winning new business in that sector, and, of course, the scheduled charter business from China, which we didn't have in Q1 of 2024. It started in May 10th of 2024. It was the first flights.

Great. Thank you. I'll pass the line.

Thank you. The next question is from David O'Kemple, Cromac Securities. Please go ahead.

Thanks. Good morning, everyone. I just wanted to circle back firstly here on Cam's question on ACMI. Just on the shorter route to South America, are these at a lower margin than the international routes, or should we be thinking about them still in the low 30% range?

No, David, there's no real difference. The only difference is in the number of block hours. A typical ACMI, without getting into the detailed structure of our customer contracts, but a A traditional ACMI contract is structured with a customer based on an aircraft type the customer requires that we price out typically on a rate per block hour with a minimum number of block hours, similar to our domestic network in some ways, but with a minimum number of block hours per month that the customer needs to pay for that provides us with the return that we require for the investments we've made in the aircraft. And then the customer determines the route that that aircraft flies. So if, you know, typically, ACMI contracts are based on anywhere, a minimum anywhere from 200 to 250 block hours per month. If the customer chooses to put it on a route that flies exactly that number of months, those are the type of returns that we would – margins that we would get on that business would be typical to what we've historically got. We get the benefit in high demand when there's – global air cargo demand is at a premium or at a heightened level, and customers are geographically at a higher level. and the customer requires the aircraft to fly on a route, let's say, from North America to Europe or North America to Asia, which are a long stage-length route that may generate 300 or 400 block hours per month, we get the incremental revenue. There's no change in the rate. There's no discount for more hours or higher rate for lower hours. We get the benefit of the incremental hours on the higher route. And we've had that happen in the past. We haven't. We've never been given credit for the incremental revenue when we're flying the longer stage routes, but when demand changes as it has and the customer changes the aircraft, fortunately, we don't reduce the number of aircraft that we're operating, like other cargo carriers may have experienced. When the customer changes it to a lower or a shorter route, which is still above or at or above the minimums, we're still protected, but you see less incremental revenue, but the margins are similar.

product, that is very helpful, Colin. And then just a last one for me. When you guys are thinking about the potential new routes to previously unserved markets, is that something you guys could service with your existing fleet as you kind of rejig the network, or does it actually require converting some of the airframes that you have into cargo freighters?

No, we're using the current frames that we have. There's no difference there. That's why we want to cross-utilize the

the fleet that we have and a good example just to add to pauline's comments on that would be the you know the experience that we've had recently in the last year with our china flying we didn't take on that that flying by going out and acquiring additional aircraft to do it we did it with the existing capacity the existing infrastructure the existing fleet that we had and then once we we were able to build that business up from as you remember when we announced that last year was for a Three frequencies per week on a three-year agreement, we rapidly grew to five or six frequencies. And to get us to the seventh frequency and with the commitment from the customer, you know, that's the only point where we would add aircraft to accommodate that growth.

I guess at what point would you have to increase your volumes again? to the point where you would actually have to ask them to add freighters? Is it 5%, 10%?

Just trying to get the... No, I think we were very good at demonstrating in 2024. Going into 2024, where we weren't adding any aircraft to our fleet, and we were very confident that we could grow the revenues 10% to 15% in each of our revenue segments, which we clearly demonstrated we had the capability. I think we grew in excess of that using the existing fleet. And that really led us into the decision to invest in further aircraft acquisitions to enable us to continue to grow at those levels. So we're very confident, you know, but not saying that we're going to grow at that level. But the first quarter is a very good example. The fact that we were able to grow 16% of the domestic business and more than double our charter business, we did that with the existing fleet. You know, part of the capability was offset with the lower block hours that we were flying on the ACMI business. But we're very confident that we can grow. I'm not saying that we're going to grow our business at those levels for the balance of the year. considering the environment that we're in, but we're very confident that we could with the existing fleet.

Yeah, we have the right fleet, and we have the ability to utilize the fleet as required and needed by customers, and for the growth that we're experiencing, as Jamie pointed out.

Thanks, Pauline. Thanks, Jamie. I'll hop back in, too.

Thank you. The next question is from James from TD Cohen. Please go ahead.

Thanks very much. Good morning, everyone. I just want to return, actually, to Walter's question on the revenue per block hour. And I know you kind of indicated, obviously, in this environment, it's really tough to think about the rest of the year. But the 16% year-over-year increase, if we are thinking forward, I assume a component of that is simply kind of annual price increases and then the balances. is based on higher loads on the aircraft. Is that the right way of thinking about that? And just so that we can then make our own assumptions on those two fronts sort of through the balance of the year to kind of think about the trend.

Yeah, no, our pricing increases are through the contract year. They're not necessarily at the beginning of the year.

But on a year-over-year basis, then there would be pricing increases as part of that 16% increase, I assume.

Sure, yeah. If everything stayed constant, we'd get 2% to 3% CPI inflation increase on all of our major contracts, typically on the anniversary date of the agreement, which obviously we purposely ensure that there are different times of the year that they don't expire on December 31st, as an example. But we're seeing incremental growth in demand.

Over and above that. Okay, great. Thank you. And then my second question, just again, coming back to crew costs and thinking about crew costs per block hour, we talked about them year over year, but we think about them on a sequential basis down almost 20% versus the fourth quarter. And correct me if I'm wrong, but the share price change in the fourth quarter was somewhat similar to the first quarter. So I'm assuming that the impact of share-based comp maybe wasn't that different between the two. So with that in mind, and again, please correct me if I'm wrong on that, but that sequential decline was quite significant there. Do we attribute it then to, again, less overtime and more productive pilots that maybe have been in training and are now generating revenue? And then do we think about Q1 as sort of a new baseline from which to work forward on? I realize there are seasonal differences in sort of crew costs per block hour, but is this a new baseline to think about?

Well, you know what? December Q4 is traditionally, as you stated, our peak period. It's when we have the most flying. You know, we do additional charters, as you're aware, for various customers. So obviously there's a lot more overtime in Q4, not just with pilots but right throughout the organization. We are looking at Q1. We have released more pilots to the line. It's something, an initiative that we undertook last year. But, you know, just as fast as you hire pilots, you lose pilots. It's an ever-changing door. Do we see the same for the rest of the year? Again, it'll really depend on the economy, if there's more charters, where the charters are going. Q1 is not a run rate for crude costs. We should look at it that way.

Okay. Thank you very much, Colleen.

Thank you. Once again, please press star 1 if you have a question. The next question is from Radhi Hassan from Paradigm Capital. Please go ahead.

Good morning. Thanks for taking my question. Just a quick one on the flights from China. Can you just comment on how many were flown during the quarter? Was it per week? Was it six? I think that was what it was in Q4.

No, it was – I don't think – we don't – necessarily disclose the exact number of flights we fly or the next number of revenue by customer. But we were coming out of 2024 in the fourth quarter when we were flying five or six frequencies per week. We probably averaged four or five, excuse me, in the first quarter. We were down slightly. February was soft because there's a two-week gap during Chinese New Year where we were down to our three frequencies per week. but we expect to be back up in the second quarter to six to seven frequencies per week. Okay, thanks.

That's all I had. I'll pass along.

Thank you. The next question is from Steve Ensign from Raymond James. Please go ahead.

Yeah, guys, thanks for the time. I just want to go back to the demand question. Again, they've been asked a few different ways, but I think many of the big changes we've seen in the supply chain have really occurred over the past seven to eight weeks. Has there been any notable detection of demand change across your network over this more recent period relative to the quarter?

Sorry, go ahead. Sorry. It's very hard to pin down the demand. You know, I mean, the global climate is changing every day. Tariffs are changing every day. Again, you know, it's what we stated earlier. We're watching, like everyone else, we utilize our aircraft and our fleet regularly. as needed, we step in and do any charters that we can. But we don't, we can't predict what the next quarter is going to look like or the remainder of this quarter based on demand and market tariffs.

Okay, that's fair. And maybe just asking another previous question another way. There's been a lot of talk about pull forward volumes ahead of tariffs. I recognize you're not directly exposed to those given your destinations, but we did see a lot of changes domestically in the manufacturing footprint and a bunch of other things with Canadians preparing to move product across the border in advance. Is there any pull-forward benefit, do you think, in the quarter, like, you know, customers moving in?

No, certainly not on the domestic side, Steve. I think the domestic growth we saw in the quarter was all related to, you know, increasing e-commerce demand and purchasing by Canadian consumers. You know, the only area that we've seen, you know, we do some scheduled, not scheduled, but ad hoc charters for automotive, for the automotive industry that we've seen, you know, increased activity in the quarter from South and Central America into the U.S., which are auto parts that they're building inventories in advance of the tariffs. But that's really, it's really not a material part of the overall business.

Yeah.

Okay, we're good. We see the time.

Thank you. There are no further questions registered at this time. I would now like to turn the meeting over to Colin Dillon.

Thank you, Operator. Thanks, everyone, for joining us today. Appreciate you making the time. Have a great rest of your day.

Thank you. The conference has now ended. Please disconnect your lines at this time, and we thank you for your participation.