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CargoJet Takes Off

And the whole industry is noticing


September 28, 2007
By Ryan Kennedy

297-cargoEx-Toronto Raptor Vince Carter is world-renowned as a high-flying
slam-dunker in the National Basketball Association, so when he appeared
as a guest of a Canadian shipping company from Mississauga, Ontario, it
surprised quite a few people.

But it was no surprise to Ajay Vermani.

Vermani
is the CEO and president of CargoJet, and Carter was representing his
company. “Our message was that it’s a slam-dunk to work with CargoJet,”
said Vermani.

CargoJet, a cargo-only airline, is the product of
years of re-starts, buy-outs and most importantly, Vermani’s vision of
a shipping network for freight forwarders and companies such as DHL and
Federal Express that have had trouble with Canada’s vast geography and
sparse population.

The idea seems so simple – an airline
dedicated to cargo for the Canadian market – but as Vermani noted, “It
was never taken seriously. Cargo was always being treated like a poor
second cousin.” Now, that poor second cousin is the impetus behind
CargoJet’s unprecedented success, and the industry is taking notice.
This year saw the company garner its third-consecutive Shipper’s Choice
Award from Canadian Transportation and Logistics magazine, the only
Canadian company to receive the accolade from the trade publication,
and Vermani believes the sky’s the limit for the company’s future.

The
Shipper’s Choice Award is an especially important benchmark, as 1,200
shippers were surveyed on areas such as on-time performance,
competitive pricing, problemsolving, customer service and value-added
services, sectors where CargoJet exceeded expectations.

In the
world of shipping, the difference between keeping a customer and losing
one is whether packages get to their proper destination on time.
Vermani has set a standard of near-perfection. “Our target was to
provide 98% performance, and we did it,” he noted.

The back
story of CargoJet is a fascinating example of finding a niche in the
sometimes harrowing world of Canadian commercial aviation.

Officially,
CargoJet was born in February 2002, but its lineage goes back much
further. In fact, CargoJet is a rebranding, and no less than the eighth
incarnation of the company. Vermani noted that nearly everyone who has
flown a plane in this country has tried to build a cargo operation, but
never with the success needed to sustain viability – Air Canada tried,
Canada 3000 took a stab at it, as did a cadre of smaller airlines, but
no one could ever get over the hump.

Vermani, who spent 20 years
in the freight-forwarding business, obviously kept track of this array
of failed start-ups. “We were always dealing with ownership changes,”
Vermani said of his freight-forwarding days. So, buying 50% of Canada
3000’s cargo fleet in 2001, he launched CargoJet in 2002, at which
point the other 50% was purchased.

Why has CargoJet survived
where other big fish died? “Businesses fail for two reasons,” Vermani
noted: “Undercapitalization and bad management.” Confident of his own
management abilities, Vermani needed only to worry about the former.
However, CargoJet has found capital sustainability.

The main
problem with cargo shipping in Canada is that the big boys from the US
couldn’t justify the costs of running their own planes across the Great
White North, but they still had a lot of packages that needed to be
moved around there. CargoJet fills that niche.

While many
sectors of aviation have taken body-blows in recent years, Vermani
believes trends are skewing toward air shipping. “People don’t like to
hold inventory or build warehouses,” he said. Technology favours the
friendly skies, as internet commerce becomes more and more prominent.
“If you order a new computer, you want to get it as soon as possible,”
Vermani said.

And security concerns after 9/11 have put
commercial airlines that also carry cargo in a bind. Vermani noted that
with x-rays and closer inspection of cargo on commercial flights,
delays of 24 hours or potentially more could keelhaul a cargo if a
customs agent detects something funny in the hold – whether or not it
has anything to do with the cargo. A problem with a passenger’s luggage
could hold things up as well.

Vermani truly enjoys the business
game. He constantly speaks of market corrections, ready to pounce on
one if it can help his company. CargoJet currently runs narrow-body
aircraft, but Vermani hasn’t ruled out widebodies – if there’s a market
correction on their prices.

Like a good poker player, Vermani is
determined to make the moves that he wants to make, when he wants to
make them. He doesn’t throw on routes for their own sake. “If it
doesn’t make money, we don’t do it.”

With that in mind, CargoJet
is looking to expand into more international markets in the near
future. The past six months have seen CargoJet gain 80 new customers,
and expansion and acquisitions are definitely not out of the question.
Destinations such as South America, Europe and the Far East are all on
Vermani’s radar.

Then there’s his other venture, StarJet.

A
separate company from CargoJet, StarJet focuses on first-class
specialty flights. Major league baseball franchises such as the New
York Yankees and Toronto Blue Jays have been StarJet customers, as have
the Canadian Football League and Professional Golf Association. Private
citizens and corporate groups have also chartered the company for the
Master’s golf tournament in Augusta, Georgia, and Prime Minister Paul
Martin has also enjoyed StarJet’s services.

StarJet’s fleet of
Boeing 727-200s are in a 60-seat luxury configuration, featuring
leather seats, club seating sections and seven plasma-screen TVs, which
is why professional sports teams have been such a good fit so far. For
Vermani, the side project was a no-brainer when he realized that he had
all the employees and avionics teams on the ground already; fixed costs
meant StarJet would be a great boon for the company. “It’s like owning
a restaurant that serves lunch and dinner, and you say, ‘let’s add
breakfast’,” Vermani said, noting that his goal was to have a
specialty-flight airline that could cater to the customer. “A certain
wine, a certain meal at a certain time,” he said.

CargoJet’s
fleet of 10 B727- 200s carry an average floor bearing weight of 255
pounds per square foot and can take a maximum load of 61,428 pounds.
The freighters have a combined lower and aft lower compartment space of
890 cubic feet. The company ships more than 500,000 pounds of cargo
throughout the country every business night.

In the end, despite
all the marketing wizardry, Vermani is quick to spread the credit
around to all his staff for CargoJet’s success. All 450 employees are
shareholders in the company, and Vermani likes to project a team-first
attitude. “There’s no place for egos here,” he said. “Roll up your
sleeves and get the job done.”