Add Canada’s WestJet to the growing list of passenger airlines creating all-cargo fleets to grab a piece of the booming e-commerce market and diversify their business.
On Wednesday, Calgary-based WestJet announced it will acquire a small fleet of converted Boeing 737-800 freighters and begin dedicated cargo service to support the needs of freight forwarders, shippers and other Canadian firms amid robust demand for air transport.
The privately held company plans to start service with four of the narrowbody aircraft during the second quarter of 2022. The aircraft will fly under the WestJet name for a wide range of potential customers rather than as a contract carrier for a large express delivery company, a common arrangement in the industry, Charles Duncan, WestJet’s executive vice president of cargo, told American Shipper.
Cargo has been a small line of business for WestJet during its 25-year history, but it began moving more freight seven years ago when it added Boeing 767 widebody jets and, later, 787s. Primary commodities it transports under the main deck include lobsters, seafood and cherries. Before next summer the carrier expects to have 10 787s in its fleet flying to long-haul international destinations.
During the pandemic, WestJet operated cargo-only flights with some of the 787s, including a regular route between Toronto and Gatwick Airport in the U.K. Last month the route began to accept passengers again, while still carrying cargo.
The decision to go deeper into cargo was influenced by the extraordinary growth in e-commerce, which is driving more volume to the air cargo sector and creating a need for more aircraft that can quickly shuttle packages to cities for delivery to businesses and consumers. It also comes at a time when passenger business turned to a trickle for nearly a year due to COVID travel restrictions.
Globally, air cargo demand has fully recovered from the economic crater caused by COVID. The International Air Transport Association now forecasts air cargo demand for 2021 will increase 13% from last year and be 2.8% above the 2019 total.
Duncan said the 737-800 freighters will focus on domestic routes but also be used for transborder and Caribbean service.
WestJet is seeing growth in cargo demand overall, “but what’s changed exponentially is e-commerce. We think that’s going to continue,” Duncan said. “And these freighters will enable us to very efficiently serve new markets that aren’t being served by larger freighters today.”
E-commerce sales are surging in Canada, just as they are in the U.S.. Retail revenue from online sales in Canada is expected to grow from $25.3 billion in 2019 to $33 billion by 2024, according to Statista.
The carrier wants to grow its all-cargo fleet beyond four aircraft, but will first evaluate the revenue performance of the initial tranche, Duncan said.
Negotiations are underway with several aviation leasing companies, which will provide the used passenger aircraft and send them out to be converted into freighters through Boeing (NYSE: BA). The manufacturer has three licensed partners in China and a new one coming online next year in Costa Rica. The maintenance shops tear out seats, cover windows, reinforce the main cabin floor, add a rigid barrier in front of the cockpit and a wider door, and install a motorized cargo handling system for pallets, among a multitude of changes.
“We’ll be the first operator in Canada of a 737 Next Generation freighter. We think it creates a nice niche for us in terms of operating during off-peak hours where it would be challenging to fill a 767, as well as flying to smaller markets that don’t have enough demand to fill a 767,” Duncan said.
WestJet already operates dozens of 737-700 and 737-800s, so the transition to the freighters will be easy because the pilots and maintenance crews will be familiar with the aircraft, he added.
Other reasons behind the choice, according to the company, were the 737-800’s fuel efficiency and flexible payload capability. It can carry up to 52,800 pounds and fly up to 2,025 nautical miles.
The biggest challenge likely will be finding conversion slots at the engineering shops doing the work because of the high number of orders from express carriers and lessors.
Crazy for cargo
In the past 18 months, several airlines have expanded beyond carrying cargo in the hold of passenger aircraft to operating their own fleet of all-cargo planes as a way of capitalizing on robust growth in air cargo from e-commerce and the pandemic.
Air Canada is launching a dedicated freighter service this fall. The fleet will eventually consist of eight older 767-300 passenger jets that the carrier planned to discard and went through a cargo overhaul.
Leisure carrier Sun Country (NASDAQ: SNCY) last year began flying 737-800s under the control of retailer Amazon (NASDAQ: AMZN). Regional carrier Mesa Airlines (NASDAQ: MESA) also began operating 737-400 freighters for DHL Express (DXE: DPW) last year, and Latvian carrier SmartLynx this month began flying an Airbus A321 converted freighter for DHL in Europe.
Even ocean carriers are joining the party. French container line CMA CGM this year started its own cargo airline with four large A330-200 aircraft.
The A321 entered the market late last year. Only a handful of the planes are in operation so far, but aviation experts say the plane has excellent characteristics as a replacement for old Boeing 757 freighters and challenger to the 737-800 in the regional, short-haul market. One of the A321’s advantages in the narrowbody category is its ability to accept palletized cargo in the lower hold.