Air Canada (TSX: AC) confirmed Friday that it plans to convert several Boeing 767-300 Extended Range aircraft to pure freighters to take advantage of expected airfreight growth and announced the appointment of Alaska Airlines veteran Jason Berry to lead the cargo division.
Air Canada is the first carrier since the outbreak of the coronavirus pandemic to opt for a hybrid fleet, furthering its reputation for innovation. The exact number of aircraft and the timeframe for conversions remains to be determined, spokeswoman Johanne Cadorette said.
The move into all-cargo aircraft was made possible by the Air Canada Pilots Association (ACPA), which agreed to amend the existing labor contract to allow the airline to operate dedicated cargo aircraft, according to Air Canada. Cargo pilots typically earn less than their passenger counterparts. The new deal enables Montreal-based Air Canada to have lower pay scales for cargo pilots so it can compete with freighter operators.
Airlines flipped more than 2,500 aircraft into temporary cargo service after the coronavirus pandemic devastated passenger traffic and idled much of their fleets, but those airplanes are expected to be pulled back to their original role once people start traveling again in greater numbers.
Repurposing passenger aircraft this year has proven extremely lucrative for passenger airlines, with overall industry yields up more than 40% because the overall shortage of cargo capacity coincides with high demand for COVID-related medical supplies, foodstuff and other goods. To date, Air Canada has operated more than 3,500 cargo-only flights globally, including with four Boeing 777-300ER and three Airbus A330 planes with seats removed to transport cargo in the cabin.
The decision to become a combination carrier like Lufthansa and Emirates is noteworthy because operating freighters is more complex than simply carrying cargo in the belly of passenger aircraft.
Most passenger airlines are skittish about getting into pure cargo operations because the market tends to be volatile, with periods of strength followed by stretches of weak volume that make it difficult to get a return on investment for specialized aircraft and equipment. Delta Air Lines, for example, got rid of the Boeing 747 freighters it received from its 2008 acquisition of Northwest Airlines.
Air Canada tipped its hand about launching a freighter fleet in its third-quarter earnings call with analysts earlier this month. Officials said they believe the huge growth trend in e-commerce will drive airfreight growth in the years after the pandemic. Boeing recently forecast that projected e-commerce will be a major driver of 4% annual growth in air cargo volumes for the next 20 years.
“Air Canada and Air Canada Cargo have pivoted quickly to new and unique commercial opportunities in response to evolving market conditions over the past 11 months, and Air Canada was the first airline globally to transform aircraft and double freight capacity by removing seats to enable cargo transport in the passenger cabin,” said Chief Commercial Officer Lucie Guillemette in a statement. “We now operate up to 100 international, all-cargo flights weekly, and with ACPA’s recent ratification on cargo operating arrangements, we are planning the conversion of several owned Boeing 767-300ERs recently retired from passenger service to all-freighter aircraft, which will position Air Canada to continue growing its cargo business across the global supply chain.”
Air Canada possesses 30 of the midsize Boeing aircraft, 25 of them from its budget subsidiary Air Canada Rouge. The 767s are well-suited to cover trans-Atlantic routes, as well as North America and parts of South America.
Converting passenger planes to a cargo configuration requires extensive engineering modifications, such as reinforcing the floor beams to support heavy cargo, installing a main deck cargo door and installing a rigid metal barrier behind the cockpit to protect against sliding loads.
Meanwhile, Air Canada said Berry will become vice president of cargo, effective Jan. 1. The position has been empty since Tim Strauss left in August to lead Miami-based all-cargo carrier Amerijet. Managing Director Vito Cerone has led Air Canada Cargo on an interim basis for the past three months.
Berry is currently president of Alaska Airlines’ subsidiary McGee Air Services, which provides ground handling, aircraft grooming, airport mobility and check-in and gate services. He led Alaska’s cargo business from 2012 until June 2019.
He will take over one of the most innovative passenger airlines in the world, especially when it comes to cargo operations. In addition to adding all-cargo operations and being the first to strip seats from passenger planes, Air Canada is expanding into drone delivery and is using artificial intelligence to support decision-making.
“Jason’s entrepreneurial approach combined with his solid air cargo background is well-suited to operationalize these commercial opportunities and lead the strategic direction of our cargo business to optimize the growth of e-commerce while leveraging Air Canada’s fleet and global reach,” Guillemette said.