MIAMI — Air Canada’s first freighter aircraft are the most visible manifestation of an aggressive push to grow cargo business, but the airline is also building up airport infrastructure to support higher volumes and more profitable specialty products.
Without efficient ground handling capabilities the extra cargo jets won’t deliver the expected service and revenue.
Air Canada is preparing to expand its Vancouver, British Columbia, cargo terminal in preparation for receiving two 777 factory-built freighters from Boeing that will operate on trans-Pacific routes, said Jason Berry, vice president of cargo, during an interview at The International Air Cargo Association’s trade show here last month.
The upgrade is part of a large program to improve cargo hubs across its network.
Air Canada (OTCUS: ACDVF) currently occupies a stand-alone facility that processes shipments moving on passenger aircraft at Vancouver International Airport. A tenant in an adjacent hangar is moving out and Air Canada will begin work in January on connecting and refurbishing the two buildings.
“We’re in the early stages of just determining flow and process and how do you want it to look. It’s a big commitment for us,” Berry said.
In March, Air Canada completed a CA$16 million ($12.5 million) enhancement of its temperature-controlled facility at the main Toronto hub, which now offers 30,000 square feet of cooler space for pharmaceuticals, fresh food, flowers and other perishable items. The project is the first phase of a $75 million, multiyear investment in the Toronto facility, including new technologies designed to improve processing efficiency.
Air Canada also increased handling capacity by 35% at its Frankfurt, Germany, hub last January ahead of inaugural service by its first Boeing 767-300 converted freighter.
Berry said planning for a “massive” remodel of Air Canada’s London Heathrow cargo terminal is underway.
3rd freighter joins fleet
The airline is celebrating the freighter unit’s one year anniversary.
Last week, the airline’s third 767-300 freighter entered service after Israel Aircraft Industries converted the used passenger jet to carry main-deck containers. The inaugural flight arrived in Atlanta and Bogota, Colombia, according to posts by the company and an airport services partner on LinkedIn. The newest cargo jet also enabled Air Canada to launch dedicated service from Toronto to Dallas.
The carrier is scheduled to take delivery of five more converted freighters plus two production freighters from Boeing next year and receive the 777s in 2024, bringing the freighter fleet to a dozen aircraft.
Air Canada was a major cargo airline decades ago but gradually got rid of its freighters to focus on passenger business.
Management made a strategic decision to restart a freighter airline after generating large returns during the COVID crisis with cargo-only flights that replaced passenger service when travel dried up. The company realized that a dedicated freighter division would enhance the network effect of shipments moving around the world on passenger aircraft, and enable the company to capture more business from growth in Canada’s air cargo market and demand for cross-border e-commerce.
Air Canada’s freighters also serve Miami; Quito, Ecuador; and Lima, Peru, three times per week and Halifax, Nova Scotia, six times per week. From Toronto and Halifax, Air Canada flies three times per week to Madrid, twice a week to Frankfurt, and once a week each to Cologne, Germany, and Istanbul.
Berry called the freighters “seasonality busters” that make importers and exports more willing to ship year-round because transportation is more consistent and reliable.
“These global freight forwarding companies and local customers need a rich network. They don’t want you just for one lane. They want to work with airlines that have a network because that’s actually going to get the scale and we can partner the most together,” he said at Air Canada’s exhibit booth.
The freighters maintain capacity that normally fluctuates on key cargo routes as the airline adjusts the number of passenger flights between the busy summer and slower winter seasons.
“As the only combination carrier in North America we will be less subject to seasonality than any of the major carriers in the United States,” the cargo chief said.
Air Canada’s third quarter cargo revenue was 23% lower compared to last year. Berry stressed that most of the decline occurred because most passenger aircraft repurposed for dedicated cargo operations during the pandemic, including seven large aircraft with their seats temporarily removed, returned to full-time passenger duty as travel demand rebounded.
“We were flying 45 passenger freighters a day before the peak and they’re gone. It’s a good story,” Berry said, adding that cargo revenue is expected to increase next year with more cargo jets in the fleet and the passenger network recovering to near pre-pandemic levels next summer.
“We’re actually growing market share massively in Latin America and Europe. You just can’t offset all the Asia capacity that has left us because we were basically flying double daily into Shanghai with a passenger freighter, flying 10 times a week into Hong Kong. Those are all gone because now they’re back flying passengers,” Berry said.
“We can’t wait until Asia turns back on [for travel following COVID restrictions]. That’s a force multiplier for us because we’ll have cargo coming in across both oceans into our hubs to go then to distribute. And then when our 777s come in 14 months, that allows us some of our own capacity into Asia where maybe our passenger size might not be ready to fly” at 2019 levels.
Berry dismissed the possibility that there may not be enough business to go around in Canada for a larger Air Canada Cargo, as well as expansion-minded all-cargo operator Cargojet and fellow passenger carrier WestJet, which plans to begin flying narrow-body freighters in March.
Overlap is minimal because Cargojet mostly flies point to point for other carriers whereas Air Canada operates a global passenger network on six continents in which 30% of freighter traffic connects to passenger flights to reach many different cities, Berry said.
“There’s plenty of room for both because we do very different things. There’s no selling arm on that side. They don’t sell cargo. It’s just the airplane,” he said.
Click here for more FreightWaves/American Shipper stories by Eric Kulisch.
