In June 7, 2019, Drake unveiled Air Drake, a $185 million Boeing 767 with custom October's Very Own (his personal brand) livery.
At the time of the reveal, news outlets were trying to figure out how Drake – a wealthy but not Musk wealthy celebrity – could afford such a high ticket item.
Then it was revealed that the plane was a gift from a Canadian logistics company called... CargoJet.
Ever since learning about Air Drake, I've wondered "who is CargoJet?", "what do they do?", and "why did they give a $185 million plane to Drake???"
In this Saturday edition of The Peak, you'll learn...
How CargoJet became the #1 freight cargo company in Canada;
The future of CargoJet and why they're a great bet; and,
Yes, why they bought Drake a plane.
This is a wild story of a frenetic immigrant founder and a company that dominates Canadian skies – and who's positioned to grow even bigger over the coming years.
In 1975, Ajay Virmani arrived in Canada from his native India. Like most newcomers, Ajay took whatever odd jobs he could find and started as a window washer at the TD Centre on Bay Street.
He eventually landed his first logistics-related gig at Cottrell Transport, one of the country’s oldest shipping companies. After completing his MBA, he was put in charge of the money losing air freight division with a mandate to turn a profit.
Three years later, the air freight division was turning out $3mil in annual profit.
Cottrell offered Ajay a piece of this business if he stayed on to grow the division but he had bigger plans in mind and left the firm amicably.
Ajay left to start Commercial Transport International Canada which he leveraged to buy Fairstar Cargo Systems. This was his first foray into the business of freight forwarding.
What is Freight Forwarding: The business of helping other businesses ship freight.
Here's an example: Say you're a Canadian maple syrup manufacturer – a freight forwarding business will advice you on how to get your product to the port, which freight liner you should choose, what customs duty you have to pay etc.
In classic Ajay fashion, CTI grew from $0 in 1990 to $20 million in profit and 200 employees in 1995.
That's when Ajay heard from Jim Crane, the freight magnet and now owner of the cheating Houston Astros. Jim wanted his firm, Eagle Global Logistics, to buy CTI and the two agreed on an $80mil price tag – $20mil more than what Ajay asked for.
Ajay stuck around Eagle Global Logistics for a few years to ensure a smooth transition. But Ajay, the consummate entrepreneur, realized he finally had the firepower he needed to build a real empire.
CargoJet Takes Off
CargoJet was started in 2002 when Ajay formally acquired the freight division of insolvent airline Canada 3000.
Here's what they do: CargoJet is a national air carrier for the freight industry. They have a fleet of planes that enables them to provide next-day service to over 90% of the Canadian population.
When Ajay was evaluating the Canadian air freight space at Eagle, he identified that Canadian carriers were consistently late (70% on time performance) and inefficient (carriers only had 3-4 planes).
CargoJet was built to have best in market OTP and a fleet large enough that the carrier could produce economies of scale.
And that's what he did. CargoJet suffered near-bankruptcy after 9/11 and the 2008 financial crisis but Ajay fought his way back and the company is more valuable than ever.
Should you buy CargoJet Stock?
Bull case: The explosion of e-commerce has made CargoJet's same-day delivery capabilities more valuable than ever and recent deals solidify their standing as Canada's most dominant air freight provider:
In August 2009, CargoJet announced a deal with Amazon giving the e-commerce giant rights to buy 9.9% of the company in exchange for $400mil of business over the next seven years.
CargoJet also secured a contract from Purolator worth $1.5 billion for overnight air parcel delivery.
And what about the Drake plane?!?
Whether it's the Kawhi Leonard endorsement deal or Air Drake, Ajay sees his dealings with celebrities as good marketing and a boost to the morale of his employees.
When asked about his celebrity deals, Vijay told the Globe: "No one is going to remember yet another corporate wine and cheese party. Everyone will remember getting a signed bat from José Bautista or a basketball from Kawhi Leonard."
Ajay also described the relationship with Drake as a marketing "win-win" and says “Drake has been a deliverer of value”.
Zoom out: CargoJet and Ajay are a Canadian success story. From nothing, Ajay built an air freight empire that's creating jobs and powering the future of Canadian commerce.