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Cargojet shares soar after awarded Canada Post domestic air cargo contract

MISSISSAUGA, Ont. - Shares in Cargojet soared Wednesday following news the Toronto-area company has been awarded a multi-year contract to provide domestic air cargo services to Canada Post and its Purolator division.

By mid-day, Cargojet (TSX:CJT) shares were up more than 22 per cent, or $3.24, at $17.60 on the Toronto Stock Exchange. Earlier in the morning, it had reached as high as $19.25.

The cargo carrier, based in Mississauga, Ont., says projected revenues from the contract are estimated to be approximately $1 billion during the initial seven-year agreement, based on projected volumes.

After that, the agreement can be renewed for a maximum of nine years.

Cargojet says the contract includes Purolator's national air cargo network, and it plans to expand and enhance its domestic overnight network to handle the additional volumes.

"Cargojet and the Canada Post Group of Companies will work together to provide Canadians with world-class and flexible air cargo services in today's changing business environment," said Ajay Virmani, president and CEO of Cargojet.

Jacques Cote of Canada Post said Tuesday that customer demand is shifting from mail to parcel delivery due to online shopping.

"This move will drive operational efficiencies, lower our transportation costs and help ensure our parcel delivery remains competitive from a cost and reliability perspective," Cote said.

Walter Spracklin with RBC Dominion Securities Inc. said the deal will enable Cargojet to optimize its current fleet.

"With a near doubling of anticipated revenue and margin leverage, we see this contract win as driving a significant increase in CJT share price — with potential for further upside," Spracklin wrote in a note.

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