Air Canada has canceled an order with Boeing Co. for two factory-built 777-200 freighters, opting to pump the brakes on the rapid expansion of its new freighter fleet amid an 18-month recession in airfreight that has sharply slashed the company’s cargo revenue.
Air Canada (TO: AC) said Monday it will no longer take delivery of the 777 cargo jets in 2024. The disclosure was part of an announcement that Air Canada has ordered 18 Boeing 787-10 passenger aircraft. Air Canada said it decided to convert the order for freighters to 787s instead.
No reason was given for the change of heart with the freighters. Air Canada’s press office did not respond to a query about the status of the 777 freighter deal. But the cancellation demonstrates how difficult conditions in the logistics sector are impacting operators and forcing changes in investment plans. It also reflects the strong recovery in international air travel that is expected to continue.
Air Canada said the 787-10s will be used to replace less efficient widebody aircraft, with the first deliveries expected in the fourth quarter of 2025.
Air Canada currently operates 30 787-9 and eight 787-8 versions of the Dreamliner, with two more 787-9 aircraft scheduled for delivery from a previous order. The 787-10 is the largest model of the Dreamliner family; it can carry more than 330 customers depending on the seat configuration and has 6,187 cubic feet of cargo volume.
Air Canada Cargo currently operates six medium widebody freighters. Since launching a dedicated cargo airline in January 2022, Air Canada has deployed four used Boeing 767-300 passenger jets retrofitted to carry cargo containers and in May received two production 767-300 freighters directly from Boeing. A conversion house is expected to deliver one more 767-300 by the end of the year. Three more aircraft are scheduled to be converted next year, bringing the fleet to 10 aircraft by the end of 2024.
Air Canada’s cargo revenue declined 33% in the first half of the year compared to the same period in 2022. Other airlines have experienced revenue declines in excess of 50%. Air Canada set a record of $1.2 billion in cargo revenue in 2021, with a 15% decline in 2022 to $935 million. Management opted to invest in a freighter division after experiencing high demand for cargo transport during the COVID crisis, when passenger services were mostly grounded and aircraft were temporarily flipped to cargo duty.
But the air cargo market has experienced a significant decline since the spring of 2022. Airfreight volumes in the first half of 2023 were 8% lower than the prior year, according to the International Air Transport Association, and are currently down 3% year over year as the slide in demand has levels off. The price of shipping goods by air is 40% to 50% less than a year ago, research groups say.
There have been remarkably few casualties from the freight recession so far, but the prolonged downturn in business is beginning to have a deeper impact on capital expenditures.
Western Global Airlines in August filed for U.S. bankruptcy protection and Cargojet, an all-cargo operator in Canada, is selling three Boeing 777s it acquired in the secondary market with the intention of converting them to freighters. Vietnam Airlines pulled out of a deal with Air Transport Services Group to convert two of its Airbus A321 narrowbody aircraft into freighters. And aerospace companies that specialize in converting aircraft say new orders have dried up this year.
(Correction: The Boeing 777 freighter is based on the 777-200 passenger version. An earlier version of this story said it was a 777-300 design.)
Click here for more FreightWaves/American Shipper stories by Eric Kulisch.
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Eric Kulisch
Alec, good fact check. I’ve updated the story to reflect the -200.
Eric Kulisch
Benjamin, the article is accurate. Air Canada did switch its freighter orders to 787 passenger jets, but it ordered a lot more passenger jets. It’s newsworthy that Air Canada is ditching the order for the freighters. The air cargo market isn’t conducive right now, so Air Canada is getting out of the freighter.
Benjamin G
Very misleading headline and entry. They CONVERTED and EXPANDED their order. Airlines do this ALL THE TIME and switch around planes/models/variants. This article needs to be changed and updated with an apology from the writer & editor. Very negative headline and Yiu have to read down to FIND OUT THE TRUTH that ACTUALLY Air Canada is EXPANDING their relationship with Boeing and buying a special, larger model and variants from Boeing that costs much more than the previous order and is a seal of approval from a nahor airline for a new model that hasn’t even been certified just yet. Ridiculous what Y’all “journalism” these days and use negative clickbait for attention. No wonder people trust “alternative news/media” more these days.
ALEC JURGELEIT
Just a correction, there are no factory built 777-300 freighters. The freighter is a 200.