Air Canada captured nearly a third of its record US$1.2 billion cargo revenue for 2021 in the fourth quarter, setting the stage for strong performance this year as the company places greater emphasis on freight service.
Fourth-quarter cargo revenue jumped 71% from the prior year to $386 million and more than 2.5 times above the pre-pandemic baseline of 2019 as the carrier took advantage of low passenger traffic to operate dedicated cargo flights, according to results released Friday. During 2020, when it launched the new concept to repurpose aircraft idled by the pandemic, it operated 4,235 passenger freighters. Last year that number more than doubled to 10,217 cargo-only trips. Air Canada (OTCUS: ACDVF) even removed seats from a handful of Boeing 777 and Airbus A330 widebody aircraft to increase utilization for lighter shipments.
On an annual basis, cargo sales grew 63% from 2020 thanks to a 32% increase in volume and a 23% increase in yield enabled by acute market tightness. Cargo sales were up 119% compared to 2019. Cargo-only flights contributed $661 million in revenue during 2021 versus $239 million in 2020.
Canada’s largest airline also demonstrated recovery in its passenger business with operating revenue of $2.1 billion, up 30% from the third quarter and three times more than during the same period in 2020 as an easing of travel restrictions before the emergence of the omicron variant boosted ticket sales. The company ate a $396 million operating loss, a significant improvement from the $787.5 million operating loss in the fourth quarter of 2020.
The quarter’s earnings before interest, taxes, depreciation and amortization exceeded expectations and turned positive, $17.3 million, for the first time in seven quarters.
Passenger capacity increased 26% between the third and fourth quarters, but overall it closed the year 70% below pre-pandemic levels. The major U.S. airlines, by contrast, have not faced the same degree of government travel restrictions and are at about 90% of capacity on domestic routes.
The newfound importance of cargo to Air Canada’s bottom line is reflected in the fact that cargo represented 23% of total revenue last year compared to 3.75% in 2019.
And Air Canada is making a strategic push to further develop its cargo division.
In December, Air Canada introduced its first freighter, a Boeing 767-300 Extended Range converted from the airline’s passenger fleet and initially deployed to help Canadian supply chains overcome flooding in Vancouver. Three more 767 cargo jets are scheduled to enter service in 2022 on the way to an eight-unit fleet. Air Canada is becoming a freighter operator after witnessing the success of its cargo-only passenger flights during the pandemic and determining that freighters enable it to provide more regular service as shipping demand rises.
Air Canada said it plans to phase out the temporarily converted aircraft by the end of 2022 as cabins are reconverted back to a passenger configuration.
Cargo-only flights continue to provide extra capacity. Air Canada Cargo this month is offering up to eight weekly cargo-only flights from Toronto to Incheon airport in Seoul, South Korea, as well as four weekly flights to Narita airport in Tokyo. The passenger division has also added flights to Amsterdam, Geneva and other cities from major Canadian cities, which has the beneficial result of adding belly capacity for shippers.
The cargo division recently increased handling capacity at its Frankfurt, Germany, hub by 35% in preparation for the start of service to the airport by its new Boeing 767-300 freighters later this year. The facility now has 72,600 square feet of space.
During the fourth quarter, Air Canada also started a CA$16 million ($12.6 million) project to expand and enhance its cold-storage capabilities for pharmaceuticals, fresh food and other perishables at its Toronto Pearson International Airport cargo facility.
Other milestones in 2021 include the rollout of an application programming interface for customers to connect their backend systems to enable real-time booking. Air Canada also implemented features to its e-booking tool to include consignee release instructions and shipment information complete with a personalized dashboard.
Last month, Air Canada Cargo announced the appointment of four veteran managers to coincide with the recent introduction of the 767 freighter operation.
Peter Laub was appointed senior director for cargo in the U.S. and Latin America. He previously was vice president of business development at Aloha Air, where he oversaw the introduction of Aloha Air Cargo’s Boeing 767-300 freighters. Janet Wallace was promoted to senior director of cargo transformation with a focus on engineering, quality management systems, education and development, procurement and e-commerce. Milt Fensek, based in Chicago, is the new director of cargo sales in the U.S., and Barb Johnston was named director of cargo operations in Canada.
CEO Michael Rousseau said he expects the recovery in air travel will continue with the phased easing of COVID-related border policies in Canada, beginning Feb. 28, as customers rush to catch up on deferred trips. Under the new policy, fully vaccinated travelers may be randomly selected for testing but will no longer be required to quarantine pending their test results. The government also will no longer recommend Canadians avoid travel for nonessential purposes and international passenger flights will be permitted to land at all designated airports.
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