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Air Canada Sees 'Strategic Advantage' For Its Cargo Business In Canadian Hubs

Published on Aug 23 2021 12:30 PM in General Industry tagged: E-Commerce / Cargo / Air Canada / Air Freight

Air Canada Sees 'Strategic Advantage' For Its Cargo Business In Canadian Hubs

Air Canada sees a "strategic advantage" for its cargo business in Canadian hubs such as Toronto as shippers seek to bypass logjams at some US gateways.

Lifted by e-commerce demand, cargo-only flights emerged as a lifeline for carriers during the pandemic when commercial traffic slumped.

Half of air cargo normally travels in the belly of passenger jets.

While North American airlines are reducing all-cargo flights as passenger traffic rebounds, that shift is more gradual in Canada due to a slower easing of travel restrictions.

Cargo remains important for Canada's largest carrier, accounting for 43% of second-quarter revenue, even as it restores passenger flights, a company executive told Reuters.

"We [cargo] were a single-digit piece of the business before COVID. We hope to be a bigger part of that in the future," Air Canada's vice president for cargo, Jason Berry, said in an interview, without providing a target.

Air Canada's ambition comes as international air cargo volume hit its strongest first-half growth since 2017, airline trade group International Air Transport Association (IATA) said. But staffing shortages and space constraints have exacerbated congestion at hubs like Chicago's O'Hare International Airport and at some US ports.

US railroad operator Union Pacific Corp recently warned that bottlenecks at west Coast ports have spread East, impacting some inland terminals, including Chicago.

Bypassing Congestion

Air Canada, which trucks cargo arriving at Toronto Pearson International Airport to its facilities in Chicago and New York, could appeal to freight forwarders seeking alternatives like secondary US airports to bypass the congestion, said Brandon Fried, executive director of the Airforwarders Association.

"Many of the airports in the US in particular have ramped up quickly, and with that rapid growth there has been operational challenges. We’re seeing congestion, massive lines and wait times to recover product at major gateways," Air Canada's Berry said.

"We have our own facility in Chicago with our own employees, while a lot of our competitors are suffering because the US has seen such a quick rebound that there is a lot of struggle for manpower down there," he said.

"With our own facilities we can control our own destiny and effectively bypass much of the disruption. We believe we have a strategic advantage in our Toronto hub, actually all of our hubs: Vancouver, Toronto, and Montreal."

Keeping employees to handle cargo, as opposed to contracting out such tasks, helps airlines have more control over service and workforce when there is a labor shortage, said Stan Wraight, president of Montreal-based Strategic Aviation Solutions International (SASI).

Air Canada's services could be competitive on time against carriers that fly indirectly to O'Hare, said Wraight, of SASI, which advises airlines, airports and financial organizations on air cargo logistics.

However, the Canadian carrier would lose advantages in efficiency against airlines that offer non-stop direct service to Chicago, he said.

"Competitors of Air Canada with direct flights are on the ground and unloading cargo a day earlier," Wraight, whose company has previously done work for the carrier said.

Shawn Richard, vice president for global air freight at SEKO Logistics, said the company has increased its volumes with Air Canada, which he said can save two to three days' time.

SEKO, a US-based global logistics and freight forwarding specialist that also uses certain US carriers, would increase business with Air Canada if the "situation deteriorates," Richard said.

Cargo Surge

O'Hare has processed nearly 1.3 million metric tonnes of cargo through the first half of 2021, a near 50% surge from a year ago, according to the Chicago Department of Aviation (CDA).

Soaring shipments, "challenge O'Hare's cargo ramps, both airside and landside," but the CDA is taking steps to alleviate congestion and expand cargo facilities, a spokeswoman said by e-mail.

Berry said Air Canada's introduction of new converted Boeing 767 freighters this year will help its business even as it draws down cargo-only flights on widebody passenger jets from roughly 285 a week during the second quarter to around 125 flights a week later this year.

Freighters, equipped with pallets and a main deck cargo door, are easier to unload than "loose-loaded" passenger planes that moved cargo onto the main deck during the pandemic, Wraight said.

Berry said that the return of fully vaccinated American travelers to Canada this month will also help cargo.

"We know that means more airplanes flying into the US and that opens trade lanes for the globe to feed into and out of the US on our network," Berry said.

News by Reuters, edited for Hospitality Ireland by Conor Farrelly. Click subscribe to sign up for the Hospitality Ireland print edition.

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