New Air Canada freighters help offset declines in cargo revenue

August 11, 2023

Air Canada on Friday reported a 24% decline in second-quarter cargo revenue, a performance better than most international peers that was aided by the deployment of four additional Boeing 767-300 freighters during the past year.

Canada’s largest passenger airline launched its own cargo airline in early 2022 and now has six cargo jets in the fleet. Two were directly purchased from the Boeing factory and four are former passenger jets converted by a specialty engineering firm to transport shipping containers in the main cabin. The freighters allow Air Canada (TO: AC) to target markets where there is a need for consistent capacity or where seasonal passenger flights might not operate. At the same time, the broader passenger network allows the cargo division to connect to the freighters at key hubs and serve more customers.

Cargo revenues declined 24% year over year to $53.7 million (CA$72 million) on a mix of lower volume and lower yield, Air Canada said. One reason for the decline is that Air Canada was still using a handful of passenger aircraft as temporary cargo planes in the trans-Pacific and has since returned them to full passenger operations. The decline was partially offset by increased freighter operations to Central and South America and to Europe.

Cargo revenues in the first six months of 2023 declined $232 million or 33% from the same period in 2022.

Air Canada set a record of $1.2 billion in cargo revenue in 2021, with a 15% decline in 2022 to $935 million.

Air Canada expects to receive one more 767 this year after Israel Aerospace Industries completes the hull conversion. The target is for 10 767 freighters by 2025, with two production freighters from Boeing scheduled to arrive next year.

In May, Air Canada Cargo operated its first cargo flight to Punta Cana, Dominican Republic, and now flies there once per week. It also added a fourth weekly freighter flight on Aug. 5 to Mexico City. Other Latin America destinations include San José, Costa Rica; Bogota, Colombia; Lima, Peru; Guadalajara, Mexico; Quito, Ecuador; and San Juan, Puerto Rico.

Air Canada recently enabled Emirates SkyCargo customers to electronically book interline cargo shipments to Canada via European gateways and is expanding the direct booking capability on Emirates flights across its global network. The new feature is aimed at shippers in west Asia, the Middle East and Africa and is part of a broader collaboration between the airlines.

The entire air logistics sector experienced sharply lower cargo sales and operating profits during the second quarter from 2022, the latest stage in a 16-month slide in shipping demand resulting from slower global economic growth and trade, as well as retailers still working off excess inventories. Several Asian airlines with dual passenger and freighter divisions saw cargo revenues drop more than 50% or 60%. Lufthansa Cargo said its air logistics sales plunged by half during the quarter. Revenue shrank 37% to 40% for the big U.S. carriers and about a third at Air France-KLM and British Airways.

Companywide, Air Canada beat expectations with $894 million in earnings before accounting and tax adjustments thanks to strong travel demand and the return of more international flying following pandemic limits.

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