Recent movements at Canadian airports to boost their cargo capabilities suggest that the country is a hotbed of air cargo growth.
Workers at Edmonton International Airport began construction in April on a 50,000-square-foot, multitenant cargo terminal, which is scheduled to open next February. As the chief gateway to the Canadian oil sands deposits in Alberta, Edmonton looks poised to enjoy strong growth; rising fuel prices have revived activity in this sector.
“The oil sands are a booming market. Some forwarders choose to put operations there; others choose to drive the cargo two hours to Calgary,” remarks Donna Letterio, managing director for Canada at DHL Global Forwarding. “As the oil sands business continues to develop, I can see Edmonton growing. But until you have widebody lift there, Calgary will dominate this market.”
Edmonton has positioned itself as part of a multimodal gateway concept for Asian cargo in cooperation with the container port of Prince Rupert. In this area, it now faces competition from Prince George airport.
Having extended its runway to 11,450 feet (the third longest in Canada), the Prince George airport authority is now building a 25,000-square-foot, cross-dock building and a large fuel-storage facility. Its objective is to attract freighters en route to or from Asia; the planes would refuel in Canada and load additional cargo.
“Prince George has the closest runway to Asia that can connect to the road and rail system. We can bring in beef from Alberta, [and] seafood and fruit from British Columbia. This is not going to be a major hub, but it can attract some Asian carriers,” says Al Ridgway, the airport’s director of cargo business development.
At the opposite end of the country, Halifax International Airport intends to lengthen its runway to 10,500 feet to accommodate widebody freighters. The airport authority expects cargo to grow between 85 percent and 130 percent during the next 10 years.
Toronto Pearson International Airport, Canada’s premier gateway, attracted a slew of freighter operators during the 2009 downturn, including Lufthansa, Cargolux, Cargoitalia and Lot Polish Airlines. Several of these have since moved elsewhere, but some have remained in place. Last year, Toronto’s maindeck cargo growth was relatively flat, whereas bellyhold traffic went up 24 percent.
Freighter traffic this year has been up 6 percent, while belly cargo growth is in the lower double-digit range, reports John Sharp, the airport’s general manager of air service development. Sharp sees scope for some additional freighter activities — first and foremost to Shanghai.
Nearby Hamilton, which has mainly figured as a hub for overnight express traffic, aims to build on its momentum from 2010; the airport experienced a 14 percent increase in cargo flights last year. Projecting volumes to exceed 500,000 tonnes by 2020, the airport is planning a 60,000-square-foot, multitenant cargo facility.
Some forwarders have misgivings about the airport’s potential, though. “Hamilton works well for charters and express cargo, but forwarders don’t see Hamilton as an alternative (to Toronto) unless you get scheduled airlines there, and I don’t see airlines in a position to support two airports,” Letterio said.
The market is not exactly in line with some of the loftier ambitions among Canadian airport operators. Above all, inbound volumes from China have lagged behind expectations, remarked Brian Pedersen, vice president for airfreight at Kuehne + Nagel. This has not deterred China Southern Airlines from fielding a considerable amount of new capacity in the Vancouver market. In July, the Chinese carrier launched three weekly passenger flights and a twice-weekly all-cargo service with B777F equipment.
“There is not a lot of capacity across the Pacific out of Vancouver, but if you throw in a freighter, that’s a different equation,” Pedersen says.
Besides Air Canada, which has a number of passenger flights from Vancouver to Asia, Cathay Pacific will feel the biggest effects from China Southern’s entry. In addition to Cathay’s double-daily passenger flights to Hong Kong, the carrier slots three freighters a week through Vancouver.
Stephen Wong, Cathay’s cargo manager for the Americas, is unfazed by the new entrant’s foray into Vancouver. “China Southern has a different market segmentation. We are very strong with our intra-Asia and worldwide network coverage,” he says.
Apart from its Vancouver operations, Cathay has a double-daily Toronto-Hong Kong service, plus four freighters a week through Toronto; the freighters stop in the Canadian gateway en route from New York to Hong Kong.
For the time being, the airline has no plans to increase its footprint in the Canadian market, but down the road, its freighter presence there will include B747-8 cargo aircraft.
“We ordered the 747-8 for the North American market. We are now waiting for concrete dates from Boeing for the delivery. Canada will see the -8 freighter, but I can’t say yet when and where,” Wong says.
Korean Air, which has twice-weekly freighter runs in addition to its daily passenger flights on the Toronto-Seoul sector, is looking at the possibility of adding a third weekly frequency, but there has been greater need for capacity in other sectors of its network, according to Bob McGowan, general manager of cargo sales for eastern Canada.
Westbound traffic, which has been fairly strong, received a boost from lively demand for animal shipments, namely pigs to China and Korea and cattle to Central Asia. Korean livestock was largely wiped out by an outbreak of hoof and mouth disease last year, McGowan says.
The transatlantic market was relatively strong through the first half of the year, according to Canadian airline executives and forwarders. However, the advent of summer brought signs of slower momentum, just as capacity began to soar with the introduction of the summer timetable.
“In July, we’re seeing the impact of the extra capacity that has come into the market,” says Lise-Marie Turpin, managing director of Air Canada Cargo.
Air Canada has increased frequencies on the Copenhagen and Brussels routes and re-launched seasonal service to Athens, Barcelona, Madrid and Dublin. The airline’s ability to step up capacity is hampered by the stagnation in its fleet, however, with the delivery of B787s still some time out. In March, Boeing announced yet another delay in the schedule, which puts the arrival of the first of the Canadian airline’s 35 787s in the second half of 2013.
Under the circumstances, the airline is not thrilled with the clamor from Emirates and Qatar Airways for expanded traffic rights in the Canadian market. The last thing Air Canada wants to see is the two Middle Eastern carriers go up to daily flights out of Toronto, tapping into flows to India and beyond. The issue has led to a diplomatic row between Ottawa and Dubai, but so far the Canadian authorities have held the line on market access for Emirates and Qatar Airways.
Pedersen would welcome more choice, particularly flights on a daily basis rather than three days a week. However, he is more concerned with lift to Latin America, which has been short of demand. “A twice-weekly freighter to Latin America would be nice,” he says.
Earlier on, Air Canada deployed a mix of B777 and 767-300 aircraft on its Latin American routes, but the 777s have largely shifted to other sectors. With the reduction in lift headed to the southern hemisphere, the carrier has concentrated on traffic out of its home market, but it could easily carry additional freight from overseas destinations if it had more space.
“We’ve had traffic from Asia to Latin America, and we’re seeing demand for transits over Toronto. We could fill 777s with cargo from Asia and Europe to Latin America,” Turpin says.
Canadian leisure airline Air Transat is trying to build up Latin American as well as transatlantic traffic through Punta Cana and Cancun, two destinations it serves with ample capacity. It runs up to 40 flights a week to the Mexican airport in the winter.
“We can link with European carriers, and we can sell South America in cooperation with South American carriers,” says Paul Nugent, senior director of cargo.
The airline’s cargo capacity has expanded considerably through the addition of A330s to a fleet that previously consisted entirely of A310s. Nine A330s have now come on board, and two more are due before the end of the year. These planes have been chiefly deployed on the dense longhaul sectors like London, Paris, Athens and Istanbul. The Turkish city is the latest addition to the schedule, but only on a seasonal basis. Paris and London, on the other hand, have become year-round destinations, where the capacity increase through the A330s has pushed up cargo revenues sharply.
The onslaught of lift with the advent of the summer season has begun to put downward pressure on yields, as airlines are fighting for market share, Nugent reports. He intends to counter this in part by honing a cold-chain product and other special offerings.
Air Canada Cargo spent much of the past two years overhauling its product portfolio. For the most part, the effort was about sharpening product definitions, but it also generated a new service last year. Having previously targeted the pharmaceutical industry and other customers who need temperature-controlled service with its AC Cool product, the airline developed two separate offerings called AC Absolute and AC Pharmacair.
Featuring express processing and active temperature control containers that can regulate ambient temperature within narrow ranges, the former is aimed at high-value healthcare traffic, while Pharmacair is a more basic solution using passive cooling technology.
For all the concrete changes happening in Canada, new security requirements still represent a huge unknown. Carriers and forwarders are bracing themselves for a major shift in their operating environment.
The implementation of the 100-percent screening mandate for bellyhold cargo in the United States and noises from the Transportation Security Administration about extending this to freighters have prompted some suggestions that Canada could emerge as a transit point for cargo that would otherwise go through U.S. airports. Nugent, however, does not expect such a scenario.
“I think security will come full-force everywhere eventually,” he comments. “Sooner or later, we will be in a 100-percent screening mode in Canada.”