Cargojet Inc. is seeing stronger e-commerce activity across its Canadian network, particularly in secondary markets where changing store footprints and inventory strategies are altering how merchandise reaches consumers.
The Mississauga-based air cargo carrier says domestic demand remained strong into July, with Chief Executive Officer Pauline Dhillon pointing to e-commerce as a key driver.
During Cargojet’s second-quarter earnings call, Dhillon linked changing shipping patterns in secondary markets to the closure of Hudson’s Bay stores. She also pointed to retailers holding more inventory in warehouses rather than at individual stores.
Cargojet expects its domestic business to remain strong through the third and fourth quarters. The company’s observations provide a view into how changes in Canada’s physical retail landscape are flowing through to the logistics networks connecting centralized inventories with consumers.
E-Commerce Demand Growing in Secondary Markets
Cargojet’s domestic overnight network forms the foundation of its business, moving time-sensitive shipments across Canada for major logistics companies, retailers and e-commerce customers.
Asked about domestic trends and expectations for the remainder of 2026, Dhillon said July had been strong and that the company continued to see growth.
“It’s probably driven by e-commerce,” she said, before pointing to a change Cargojet has observed in secondary markets following the closure of Hudson’s Bay stores.
Dhillon said the company has seen more B2C activity in those markets, while retailers are carrying less inventory locally and moving more merchandise through warehousing. Cargojet is consequently seeing an increase in e-commerce shipments into secondary markets.
The comments do not establish that spending previously captured by Hudson’s Bay has shifted directly online. Former Bay customers have numerous physical and digital alternatives, while many former department-store spaces are being repositioned for new retailers.
Instead, Cargojet’s network is showing increased reliance on direct fulfilment in markets where the physical retail landscape has changed. The growth also extends beyond Cargojet’s largest customers, with Dhillon saying increasing e-commerce activity is coming from the company’s mid-market customers.
Hudson’s Bay Closures Changed Canada’s Retail Map
Hudson’s Bay entered 2025 with roughly 80 department stores across Canada before financial difficulties led to creditor protection proceedings and the liquidation of its remaining locations. By June 2025, its department-store network had disappeared.
The closures removed a major source of fashion, beauty, home and general merchandise from communities across Canada. They also left large vacancies at dozens of shopping centres.
Landlords have since been working to subdivide, redevelop and re-lease the former stores, often bringing multiple tenants into spaces previously occupied by a single department store.
Cargojet’s comments offer another perspective on that transition. Consumer demand for merchandise previously available through Hudson’s Bay did not disappear with the stores.
Centralized inventory and direct fulfilment allow other retailers to reach those consumers without maintaining the same breadth of merchandise locally. That may be particularly relevant in secondary markets, where fewer physical alternatives can increase the importance of distribution networks connecting consumers with inventory held elsewhere.
Retail Inventory Shifts Toward Centralized Distribution
The shift described by Cargojet reflects the growing role of centralized inventory in retail distribution. Retailers can hold merchandise in distribution and fulfilment facilities until an order is placed rather than moving the same breadth of inventory into individual stores in advance.
Large retailers increasingly combine physical stores, distribution centres and dedicated fulfilment facilities within broader omnichannel networks. Stores can themselves serve as fulfilment points, making physical and digital retail parts of the same inventory system.
Cargojet’s observations are notable because of where it is seeing additional activity. Secondary markets generally have fewer stores and smaller pools of locally available inventory than Canada’s largest metropolitan areas.
Parcel and freight networks can therefore play a particularly important role in getting merchandise to consumers when products are not stocked nearby.
The broader Canadian parcel market is also preparing for continued e-commerce growth. Canada Post says the Canadian e-commerce market is projected to double over the next decade, making parcel delivery its key growth opportunity.
The Crown corporation has nevertheless lost considerable parcel market share amid increased competition from global carriers and lower-cost delivery companies offering faster and more flexible service.
Cargojet’s Domestic Business Continues to Grow
Cargojet’s domestic overnight network generated $104.9 million in second-quarter revenue after excluding the year-over-year impact of fuel-price pass-throughs. That represented an increase of 3% from the same period in 2025.
Management described the domestic overnight business as the foundation of Cargojet and an essential part of Canada’s supply chain.
Overall revenue reached $275.8 million during the quarter, while adjusted EBITDA increased to $87.3 million from $80.2 million a year earlier. Excluding the impact of higher fuel prices, Cargojet generated $250.1 million in revenue, up 5% year-over-year.
The company also generated $56.2 million in free cash flow during the quarter, compared with a $72.5 million cash outflow a year earlier.
Cargojet operates across domestic overnight delivery, charter operations, hybrid ACMI services, interline freight and international operations. Its domestic network connects major Canadian markets, while relationships with international carriers and logistics companies bring additional shipments into the system.
Cargojet Becomes More Selective on Pricing
E-commerce growth is occurring as Cargojet becomes more selective about the freight it accepts and the prices it charges.
Executive Chairman Ajay Virmani said the company has been focusing on the “quality of revenue,” including yield management. That includes moving away from freight that does not require Cargojet’s time-sensitive service or generate sufficient returns.
Dhillon offered a more colourful description of the strategy.
“We recognize that we’re the best steakhouse in the city, we’re not going to charge keg pricing anymore,” she said.
Cargojet is reassessing pricing across routes, lanes and customer groups while examining dimensional factors and aircraft utilization. Dhillon described e-commerce as “certainly surging” and identified mid-market customers as an area of increasing activity.
The strategy means stronger demand for fast fulfilment does not necessarily translate into lower logistics costs. Cargojet is seeking greater returns from its premium overnight capacity while improving utilization of aircraft already in its fleet.
Higher Labour Costs Could Flow Through to Customers
Cargojet is also facing higher costs under a new five-year collective agreement with its pilots. Effective July 1, pilots received a 26% wage increase, followed by annual increases of 5% over each of the subsequent four years through June 2031.
The agreement includes productivity changes, including moving the baseline from 15 to 16 working days per month. Cargojet estimates the changes will provide approximately 6,000 additional crew days annually, helping offset part of the wage increase and reducing overtime requirements.
Management said it intends to pass additional costs through to customers where possible. Charter, ACMI and certain mid-market pricing can be adjusted more quickly, while increases tied to longer-term customer contracts will take more time.
Canadian Retail Distribution Continues to Shift
Cargojet expects its domestic business to remain strong through the second half of 2026, supported in part by continued e-commerce growth.
Its experience provides another view into the changes occurring behind Canada’s retail landscape. Hudson’s Bay’s departure removed stores that had supplied merchandise to consumers across the country, while retailers more broadly continue to adjust where inventory is held and how orders are fulfilled.
Cargojet says those changes are particularly visible in secondary markets, where it is seeing increased B2C activity and e-commerce shipments. The trend adds another dimension to the transformation already taking place inside former department-store properties as Canada’s physical retail and distribution networks continue to evolve.
