Canada's rocky cargo landscape
Canada has weathered the global downturn markedly better than its neighbor to the south, but that has not insulated its air cargo market from turbulence. Jamie Porteous, executive vice president of sales and service at Cargojet, says the domestic market stabilized recently after a marked downturn in the latter half of 2011. “The domestic peak last year was almost non-existent, although customers had projected a peak,” he recalls.
In response to the adverse conditions, Cargojet rationalized its network to drive down costs. One B727F aircraft that came to the end of its lease term was returned to the lessor. This was not purely a reflection of Cargojet’s domestic business, which consists, to a large extent, of overnight line-haul flights for the integrators. The carrier’s nightly freighter to Toledo, Ohio, was scrapped when DB Schenker pulled the plug on its overnight airfreight service in North America.
International markets have been no better than Canada’s domestic arena, although there are a few bright spots. Lise-Marie Turpin, managing director of cargo at Air Canada, says South America has been kind to the Canadian cargo market. “We are just limited by our capacity. In the summer, we fly 767 aircraft instead of the 777,” Turpin says, adding that management is looking to bring a 777 back earlier in the fall because of cargo demand.
The North Atlantic, on the other hand, has been painful for carriers. The lack of activity on trade lanes between Europe and Canada, says Paul Nugent, senior director and general manager of cargo at Air Transat, is a key problem. “The strength of the Canadian dollar does not help with exports, and too much capacity is putting downward pressure on yields. Imports are stabilizing somewhat,” he says. Due to the uncertainty, Nugent reports that he’s seen some shippers move freight to ocean carriers.
Somewhat ironically, Canada’s maritime provinces on the Atlantic coast emerged as a hotbed for freighter activity in this challenging market. Within barely four months, two freighter services to Europe kicked off from the Maritimes. After Icelandair launched a weekly B757F run from Halifax over Reykjavik to Liege last December, Cargojet followed with a weekly 757F operation from Moncton to Cologne. This has since come down to one operation. After the Icelandair flight came to an end, Cargojet shifted its Canadian departure point to Halifax. The flight now goes to Brussels — a larger market for seafood exports from eastern Canada — and is ferried over to Cologne to pick up European exports to North America.
According to Cargojet’s Porteous, demand from Cologne has been strong, whereas loads were not as heavy as hoped for out of Moncton. “The problem is that seafood shippers are not prepared to commit 100 percent of their traffic to a freighter out of the Maritimes and give up their allocations on Air Canada [out of Montreal]. They have seen too may freighters come and go. On the other hand, we need a full load commitment,” he says. The Greater Moncton Airport Authority, which had been a major driver behind the establishment of the service, found it could no longer sustain its support at the original level.
Cargojet’s presence in eastern Canada has grown considerably in the wake of UPS’ expansion in the area, which made a significant investment in infrastructure, facilities and staff in Atlantic Canada. This enabled Cargojet to set up a regular overnight freighter operation to the region. “That was one gap we had in our domestic overnight network. We didn’t really have a connection from eastern Canada to western Canada,” Porteous says.
The return of one 727 freighter to the lessor aside, the carrier’s fleet has remained flat.
Down the road, management is looking to replace the 727s with 757 cargo aircraft, when more feedstock becomes available. “The 757 is a little larger, but we think it is the right aircraft,” Porteous says. Cargojet management is currently evaluating the B767-300, which would give the airline more range for international operations than the pair of 767-200Fs it is currently using.