Air Canada

Air Canada sees opportunity in cargo

Air Canada expects to operate 100 all-cargo flights each week through the end of 2020

It plans to convert the first two Boeing 767 aircraft to freighters starting next year

Air Canada cargo
Air Canada plans to convert convert older Boeing 767 aircraft to freighters, pending negotiations with pilots (photo: Brett Ballah).

Tearing a page from its past, Air Canada announced bold plans Monday to expand into the cargo market.

Airline executives said they saw opportunity to grow thanks to e-commerce, using its own converted Boeing 767 aircraft. Air Canada decided to retire the type from passenger service as a result of the COVID-19 pandemic.

“We are very excited to be taking the Air Canada cargo business to the next level with our entry into the e-commerce world with our partners,” said Lucie Guillemette, Air Canada’s Chief Operating Officer. “Our objective is to grow cargo revenues using our existing fleet by providing specialized e-commerce service delivery. Our goal is to drive end-to-end value through enhanced technology, dynamic pricing and transparency across the delivery supply chain.”

Though Air Canada routinely carries cargo in the bellies of its aircraft, this would be the airline’s first foray into freighter service since the mid-1990s.

Cargo has been one of the few bright spots through the COVID-19 pandemic. All-cargo airline Cargojet reported profits of more than $58 million in the third quarter, almost double what they were the year before.

A strategic shift

Some of Canada’s main cargo hubs have also seen growth in recent months. DHL is building a massive 200,000 square foot facility at Hamilton International to handle an expected surge in cargo traffic. And Winnipeg International reported almost two per cent more cargo flights over the summer.

In April, Air Canada announced plans to take the seats out of seven wide-body aircraft. Instead, it filled their passenger compartments with boxes of essential medical supplies. Weeks later, it added Dash 8-400 aircraft to the mix.

The move was only temporary, executives said. But it was enough capacity to fly 3,000 cargo flights in just six months. Until the end of the year, Air Canada expects to fly 100 cargo flights a week. That is expected to contribute $850 million to Air Canada’s bottom line in 2020. Cargo revenues were up 22% between July and September, compared to last year.

Air Canada cargo
Cargo fills the passenger cabin of an Air Canada Boeing 777 (photo: Air Canada).

“We were the first airline globally to remove seats from aircraft to enable cargo capacity in the passenger cabin,” said Guillemette. The airline took seats out of four Boeing 777s and three Airbus A330s to double cargo capacity on select flights. It has also used Boeing 787s on cargo-only flights.

Guillemette said the airline is exploring converting some of its now-retired Boeing 767 aircraft to freighters. The first two aircraft could be converted next year.

“Those would be permanent conversions,”said Air Canada Chief Executive Officer Calin Rovinescu. “Meaning we would be getting into the freighter business, which obviously is an important step for Air Canada.”

The initiative could radically reshape Canada’s cargo market.

Responding to growth

“We haven’t yet completed all our plans,” said Michael Rousseau, Air Canada’s Chief Financial Officer. He will succeed Rovinescu as CEO in February when Rovinescu retires. “We have the opportunity to convert a couple in 2021 and test the market.”

An Air Canada Douglas DC-8. The last freighter version was retired in 1994 (photo: Air Canada).

Air Canada has not owned all-freighter aircraft since the last Douglas DC-8 left the fleet in 1994. If flew six cargo DC8s between 1983 and 1994.

“Most of our operation thus far has been in the international sphere,” said Rovinescu. “We know that there are opportunities in the domestic sphere. We’ve been approached by several players. We will assess that in the fullness of time.”

The global pandemic has accelerated a shift to online shopping. Statistics Canada reported online sales hit $3.9 billion in May, a staggering 110% increase from May 2019. The trend “has the potential to change the structure of the retail trade industry in Canada,” the agency said.

Air Canada is moving to take advantage of the trend, using spare aircraft for which it no longer saw any other use.

“When you couple a large passenger aircraft network with a dedicated freighter network, in that environment, it doesn’t have to be a very, very large dedicated freighter network,” said Rovinescu.

A 200,000 square foot cargo terminal terminal is under construction at Hamilton International Airport August 19, 2020 (photo Twitter/@flyyhm).

Challenges remain

A potential roadblock remains that could derail Air Canada’s plans.

“Our pilots have scope on all flying that Air Canada does, including cargo flying, freighter flying,” said Rovinescu. He’s hoping to negotiate a deal with pilots to accept lower wagers, or different working conditions to make cargo flights profitable.

“We would look to have rates that are more competitive with cargo carriers,” he said.

“Air Canada was in the freighter business twice in the past and neither of those two circumstances were particularly appealing successes,” said Rovincescu. “Especially with the opportunity that arises with the fewer number of widebodies in circulation and the ecommerce opportunity, we think that the right kind of deal with the right kind of cost structure would make sense.”

The Air Canada Pilots Association did not respond to a request for comment.

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