In the fourth quarter, Air Canada grabbed nearly a third of its record US$1.2 billion cargo revenue for 2021, laying the groundwork for a solid performance this year as the company places a bigger emphasis on freight service.
According to data announced Friday, fourth-quarter cargo revenue increased 71 percent from the previous year to $386 million, more than 2.5 times more than the pre-pandemic baseline of 2019. This was due to the carrier taking advantage of low passenger traffic to operate dedicated cargo flights. It flew 4,235 passenger freighters in 2020 when it introduced a novel strategy to repurpose aircraft idled by the epidemic. Last year, the number of cargo-only journeys more than doubled to 10,217. Air Canada (OTCMKTS: ACDVF) even removed seats from a few Boeing 777 and Airbus A330 widebody planes in order to maximize utilization for smaller shipments.
Cargo sales increased by 63 percent year on year from 2020, thanks to a 32 percent increase in volume and a 23 percent improvement in yield facilitated by acute market constraints. Cargo sales increased by 119% year on year. Cargo-only flights generated $661 million in revenue in 2021, compared to $239 million in 2020.
Canada’s largest airline also demonstrated recovery in its passenger business, with operating revenue of $2.1 billion, up 30% from the third quarter and three times higher than the same period in 2020, as travel restrictions were eased prior to the introduction of the omicron variant, boosting ticket sales. The corporation suffered an operating loss of $396 million, a considerable improvement from the $787.5 million operating loss in the fourth quarter of 2020.
For the first time in seven quarters, profits before interest, taxes, depreciation, and amortization (EBITDA) exceeded forecasts and turned positive, totaling $17.3 million.
Passenger capacity increased by 26% between the third and fourth quarters, although it still ended the year 70% below pre-pandemic levels. The big US airlines, on the other hand, have not experienced the same level of government travel restrictions and are operating at approximately 90% capacity on domestic flights.
Cargo’s greater importance to Air Canada’s bottom line is evidenced in the fact that it accounted for 23 percent of total revenue last year, up from 3.75 percent in 2019.
In addition, Air Canada is undertaking a strategic drive to expand its cargo operation.
Air Canada debuted its first freighter, a Boeing 767-300 Extended Range adapted from the airline’s passenger aircraft and initially deployed to assist Canadian supply chains in overcoming flooding in Vancouver, in December. Three more 767 cargo planes are slated to enter service in 2022, bringing the fleet to eight units. After seeing the effectiveness of its cargo-only passenger flights during the epidemic and finding that freighters allow it to provide more regular service as shipping demand develops, Air Canada is becoming a freighter operator.
Air Canada has stated that the temporarily modified aircraft will be phased out by the end of 2022 as cabins are reconverted back to passenger configuration.
Cargo-only flights continue to add capacity. This month, Air Canada Cargo is operating up to eight weekly cargo-only flights from Toronto to Seoul’s Incheon airport, as well as four weekly flights to Tokyo’s Narita airport. The passenger division has also increased flights to Amsterdam, Geneva, and other cities from major Canadian cities, which benefits shippers by increasing belly capacity.
The cargo business has increased handling capacity at its Frankfurt, Germany, hub by 35% in preparation for the arrival of its new Boeing 767-300 freighters at the airport later this year. The facility presently has a total area of 72,600 square feet.
During the fourth quarter, Air Canada also began a CA$16 million ($12.6 million) investment at its Toronto Pearson International Airport cargo facility to extend and improve its cold-storage capabilities for medicines, fresh food, and other perishables.
Other goals for 2021 include the release of an application programming interface that will allow customers to connect their backend systems to enable real-time booking. Air Canada has enhanced its e-booking tool with consignee release instructions and shipment details, as well as a customizable dashboard.
Air Canada Cargo announced the appointment of four veteran managers last month to coincide with the recent launch of the 767 freighter service.
Peter Laub has been named senior director of freight in the United States and Latin America. He formerly served as Aloha Air’s vice president of business development, where he handled the introduction of Aloha Air Cargo’s Boeing 767-300 freighters. Janet Wallace has been promoted to senior director of cargo transformation, where she will be responsible for engineering, quality management systems, education and development, procurement, and e-commerce. Milt Fensek, located in Chicago, has been appointed as the new director of cargo sales in the United States, and Barb Johnston has been appointed as the director of cargo operations in Canada.
According to CEO Michael Rousseau, the recovery in air travel will continue with the partial relaxing of COVID-related border rules in Canada beginning Feb. 28, as consumers hurry to catch up on postponed travels. Fully vaccinated tourists may be randomly picked for testing under the new policy, but they will no longer be obliged to quarantine until the results of their tests. The government will also no longer advise Canadians to avoid unnecessary travel, and international passenger flights will be able to land at all recognized airports.
