Canadian shippers with express delivery needs will have more air cargo capacity to choose from this summer when WestJet, the country’s second-largest passenger airline, launches its stand-alone freighter division.
WestJet plans to take delivery in Calgary, Alberta, of its first used Boeing 737-800 aircraft converted for cabin cargo within a week and have two aircraft in revenue service by July 1, or sooner, Charles Duncan, executive vice president of cargo, told FreightWaves.
Operating from a base at Toronto Pearson International Airport, WestJet Cargo intends to start with limited charter work, transition to regular, scheduled flights between major cities within Canada and eventually blend in ad hoc charters and transborder flying to the U.S. and Caribbean, especially on weekends and other off-peak periods, he explained.
The carrier is in discussion with many potential customers, including integrated parcel logistics companies.
“There’s a lot of excitement about these aircraft in the market” because of the hub’s location near big warehouses in Toronto, high-frequency routes, the ability to transfer cargo with WestJet’s international widebody jets, and their ability to serve smaller markets that can’t support a widebody freighter, Duncan said.
The virtual shutdown of passenger travel during the pandemic raised cargo’s profile for passenger airlines like WestJet, which operated cargo-only flights with Boeing 787 passenger jets for several months because of extraordinary demand for COVID-related medical equipment and other commodities. But shifting supply chain and passenger airline dynamics because of the crisis, plus the relentless rise of e-commerce orders, prompted WestJet to expand into all-cargo operations.
WestJet initially will take a conservative approach to utilizing the 737-800 freighters to make sure it can deliver reliable, on-time performance.
“We don’t want to overstretch the fleet” until the pilots, warehouse operators and route planners get more comfortable and experienced with the airframe, Duncan said.
The carrier is on track to receive two more reconfigured freighters by the end of the year, but WestJet has even bigger cargo ambitions.
“Our plans and commitments at this point are for four aircraft and we’ll see how they perform. I’m bullish on adding quite a few more after that,” Duncan said.
WestJet joins other passenger airlines – Air Canada, Air Belgium, SmartLynx (Latvia), Sun Country, Lufthansa CityLine, Mesa Airlines, Air Wisconsin and Indian low-cost carrier Indigo – branching out to all-cargo operations to diversify their revenue streams, especially after the pandemic downturn, and take advantage of e-commerce demand.
Many passenger airline executives eschew freighters out of fear the next down cycle that could undercut returns in aircraft investments. The new breed of carriers figure they can make up for reduced cargo on passenger flights and generate economies of scale by operating the same type of aircraft in both passenger and cargo realms because they have the pilots, spare parts and maintenance capability in place, said Mark Diamond, vice president at Strategic Aviation Solutions International.
Last week, WestJet Cargo announced an expanded partnership with GTA Group, which provide ground handling for the freighters at the Toronto hub and help to market their capacity. GTA currently processes cargo carried by WestJet passenger aircraft.
The 737-800s are well suited for regular “milk runs” because they can be quickly filled and are more fuel efficient than older aircraft, enabling carriers to economically make multiple trips. The company will try to break into a domestic express market dominated by Cargojet.
Start-up airline within an airline
The next step for WestJet Cargo is to get regulatory approval from Transport Canada to register the converted freighters and add them to the airline’s operating certificate. Duncan said maintenance crews will also make some final modifications to the aircraft.
He declined to disclose which leasing company WestJet is using, or who is performing the structural changes to the aircraft, other than to say the overhaul facility is tied to Boeing (NYSE: BA).
A passenger-to-freighter conversion is a complex, highly regulated process that involves stripping the cabin interior, blocking out windows, adding cross beams and reinforced wingboxes to support heavy containers, cutting in a wider cargo door, and installing a roller system to assist with maneuvering pallets. Retrofitting a 737-800 through Boeing can cost $5 million to $6 million, and lease rates currently run about $180,000 per month, according to aviation analysts.
Duncan said teams have spent 18 months preparing for the freighter launch. The technical operations group is focused on making sure cockpit systems are compatible with those in the rest of the fleet, while flight operations focuses on training.
WestJet will use the same pool of pilots for the freighters as well its passenger fleet.
The new business requires extensive coordination on everything from airport transfer facilities to parking spots on the ramps to customer service because there will be much more cargo volume than in the past, according to Duncan.
WestJet is also swapping out its IT system for cargo because it was ill-equipped to handle the freighter throughput and was past due for an upgrade. A new cargo management system from SmartKargo, which several industry professionals say is geared to facilitate e-commerce shipments, is being implemented and will roll out in parallel with the freighters, the cargo chief said.
SmartKargo was recently adopted by Miami-based Amerijet and is used by several midsize passenger airlines such as Brazil’s Azul, Alaska Airlines (NYSE: ALK) and Hawaiian Airlines.
Some cargo aviation analysts caution that too many converted freighters like the 737-800 are being ordered and that supply could overwhelm demand in the coming years, depressing rates. But many logistics professionals say air cargo growth is positioned for strong, if somewhat slower, growth because of online shopping and concerns about the reliability of passenger services for cargo.
Market capacity is part of the reason WestJet is starting out small, with its first freighter division of four converted 737-800 aircraft later this year.
“It’s certainly something we’re monitoring. We don’t want to get so many that we contribute to an overcapacity problem,” Duncan said.
“In our forecasting and modeling we assume yields come down, but we do expect demand for air cargo to continue to grow, largely because of e-commerce. We don’t see that slowing down or reverting back to pre-pandemic levels,” he added. “We’re a long way from overcapacity, but if we’re making long-term investments it’s something we’re mindful of.”