Air Canada finally transitioned to full recovery from the pandemic during the third quarter, behind its U.S. peers, with the help of record cargo revenues.
The Canadian carrier on Tuesday posted CA$366 million ($291 million) of revenue from cargo operations, aided by the continued heavy use of passenger aircraft as dedicated freighters. Cargo sales were more than double the level during the third quarter of 2019. Air Canada (OTCUS: ACDVF), for the first time, surpassed CA$1 billion ($795 million) in cargo revenue for the first nine months of the year.
Air Canada’s cargo performance lagged that of United Airlines (NASDAQ: UAL) and American Airlines (NASDAQ: AAL) , which achieved $519 million and $332 million in revenue, respectively. It beat Delta Air Lines (NYSE: DAL), which brought in $262 million. The U.S. majors are larger than Air Canada, but they also had virtually ceased using passenger freighters by the third quarters because they were operating again in traditional passenger mode as travel demand increased.
During the quarter, traffic and yield increased by 59.3% and 6.4%, respectively, compared to the third quarter of 2020. A total of 2,101 cargo-only flights were operated in the third quarter of 2021 and represented revenues of $183 million or 50% of cargo revenues in the quarter.
Year-to-date through September, traffic and yield increased by 30.7% and 21.2%, respectively, compared to the same period in 2020. Air Canada operated a total of 7,720 cargo-only flights that represented 59% of cargo revenues during the period. Demand for air cargo services remained strong at the end of the third quarter of 2021, it said.
Air Canada has made cargo a more strategic part of its business since the start of the pandemic with the use of passenger freighters, removing seats for cabin loading in seven widebody jets, launching a freighter division and refurbishing older passenger aircraft to carry pallets on the main deck, expanding the refrigerated warehouse in Toronto, and releasing an application programming interface for customers to directly connect their systems to Air Canada’s cargo reservation system.
The first of eight Boeing 767 freightesr is scheduled to be delivered by conversion specialist Israel Aircraft Industries by the end of the year.
During the first quarter of 2022, Air Canada will return some of its passenger freighters to full-time passenger duty, but the increase in international flying will provide much more belly capacity, offsetting the loss in dedicated cargo space, Chief Commercial Officer Lucie Guillemette said on an analysts’ call.
Overall, Air Canada cut its operating loss by more than half to $289.5 million and generated net cash flow of $121.7 million on 66% lower passenger capacity compared to 2019. Positive cash flow was much higher than expected as passenger demand improved.
Air Canada’s recovery was stymied by lengthier and stricter travel restrictions imposed by the Canadian government than U.S. carriers had to deal with at home. Canada finally reopened the border to Americans Aug. 9. Since Sept. 7, fully vaccinated foreign nationals have been allowed to enter the country. The airline followed by resuming service to the U.S., as well as many international destinations.
The positive direction for air travel prompted Air Canada to proceed with the purchase of two Airbus A220-330 aircraft that it previously intended to cancel. It also reached an agreement with Boeing to accelerate delivery of four Boeing 737 MAX jets this quarter.