Air Canada Grows Freight

Air Canada Grows Freight

Copyright 2004, Traffic World, Inc.

Last week, Calgary became a new point in Korean Air''s North American freighter network - to the benefit of Air Canada.

KAL is routing one of its 747 flights from Dallas/Fort Worth to its home market through the Canadian city. Bob McGowan, KAL''s cargo manager for Canada, said the frequency probably will be stepped up later, depending on demand.

But KAL has no traffic rights to sell the Texas-Canada leg and it is not even going to sell space on the Calgary-Seoul sector. Both of those will be marketed by Air Canada, which also will do the ground handling at Calgary.

According to some observers, KAL moved in primarily to preempt a planned Asiana operation. Its archrival had filed for traffic rights for up to five weekly cargo flights.

KAL''s new stop gives Air Canada some 20 to 25 tons per flight to sell, said Claude Morin, the Canadian carrier''s vice president for cargo. He also noted that his outfit can sell to Asian destinations beyond Seoul.

For Air Canada, this marks the second foray into the freighter market in just over two months. On June 1, it launched four weekly freighter rotations from Toronto to Calgary and on to Vancouver, using wet-leased 727 aircraft from All Canada Express, a Canadian cargo airline that makes most of its income from contract flying for express operators.

Air Canada''s move was prompted by the launch of an identical service - four 727 freighters flights with the same routing - by Cargojet, a domestic freighter airline whose main revenue source also is contract flying for express operators within Canada.

Jamie Porteus, executive vice president of sales and service at Cargojet, said the freighter run was first conceived in April 2003, when Air Canada filed for bankruptcy protection. "Some domestic customers asked us what we could do if Air Canada disappeared. We studied the possibilities and put together a plan but didn''t really do anything with that."

The plan was dusted off this spring when it became clear that Air Canada would replace its widebodies on two daily flights from Toronto to Calgary and another to Edmonton with smaller planes that could not carry pallets.

But Air Canada is not going to abandon that market without a fight and responded with its own freighter operation. Now, two 727s are flying head to head, four days a week, replacing the bellyhold space on three 767s.

This is serious overkill. Both Morin and Porteus agree there is far too much capacity on the route. "It makes no sense," Porteus admitted. "We would just as well operate it for Air Canada, but they have no interest in that."

He said load factors have been 60 to 70 percent heading west and about 50 percent on the backhaul. According to Morin, Air Canada has had load factors in excess of 95 percent eastbound and about 80 percent going west. Air Canada can feed the eastbound leg with traffic from Asia.

The load factors are respectable but margins are another issue. Al Ridgway, president of Vancouver cargo sales agent Air Cargo Trader, says that prices are way downy. "They''re quoting $600 for a Triple A container. That''s unheard of," he said.

But Morin is preparing for his third all-cargo venture. Air Canada''s restructuring to leave bankruptcy protection by the end of September spells doom for the airline''s 747 combis on the routes from Toronto to Frankfurt and London. When the carrier phases out its 747s in the third and fourth quarters, the long haul fleet will consist of A340s (used across the Pacific) and A330s, plus some 767s.

For Frankfurt, a mix of A330s and 767s will give Morin enough capacity for regular demand but he does not want to abandon the main deck market the carrier has built with its combis. Hence, Air Canada will deploy a freighter on the Toronto-Frankfurt route when the combis go, he said.

"We''re looking at flying the freighter three or four times a week," he said. So far, DC-10s, 767-300s and MD-11 freighters are under consideration.

Morin rules out a freighter on the Toronto-London route, however. Demand for main deck space on that sector has been weaker, and there is ample bellyhold capacity available.