Air Canada on Friday reported first-quarter results that included a 40% drop in cargo revenue to CA$238 million ($177 million), primarily driven by less throughput in the Pacific market after the airline returned planes to passenger service that were temporarily deployed for cargo-only purposes during the pandemic.
Air Canada’s (OTCUS: ACDVF) cargo sales were also lower because of a 13-month airfreight recession that has seen shipping rates tumble more than 40% with weak demand and has afflicted all airlines. The decline was on the high end compared to most airline peers that registered cargo revenue declines in the 30% range. United Airlines (NASDAQ: UAL) and American Airlines (NASDAQ: AAL) saw cargo revenue fall 37% and 38%, respectively, during the quarter and Korean Air revenues sank 51%.
The decline was partially offset by increased freighter operations to Central and South America and to Europe. At the end of the first quarter, Air Canada Cargo had four Boeing 767-300 converted freighters versus one in the same 2022 period.
Cargo sales at Air Canada also slumped 40% in the fourth quarter of 2022 as the global downturn took hold.
Meanwhile, two new 767s directly purchased from Boeing arrived this month at Air Canada’s main hub in Toronto but are still being prepared for commercial service.
An Israeli airframe maintenance company will reconstruct one more of the medium-widebody aircraft this year for Air Canada. Barring production delays, Air Canada Cargo by the end of the year will have seven freighters in commercial operation.
The cargo division in May also began weekly freighter service to Punta Cana, Dominican Republic, and added two weekly flights to Miami and Atlanta and one to Liege, Belgium, a destination that came online in February. Basel, Switzerland, opened as a freighter destination on April 20.
The freighter division’s network also includes Dallas; Mexico City and Guadalajara, Mexico; Quito, Ecuador; Lima, Peru; Bogota, Colombia; Frankfurt and Cologne, Germany; Barcelona, Spain; and Istanbul.
The creation of a cargo airline within the company is viewed as a way to diversify revenue streams and gain business by funneling shipments from limited freight routes onto the wider passenger network to give shippers access to many destinations.
Overall, adjusted earnings before accounting measures of US$306 million and revenue of US$3.6 billion came in well above consensus estimates amid strong demand across all passenger segments. Adjusted earnings showed a US$412 million improvement from last year, although the company listed a US$12.6 million operating loss. It said advance ticket sales indicate robust booking activity for the remainder of the year.
Air Canada last week raised its 2023 guidance thanks to stronger traffic, higher fares and lower fuel costs.
Other cargo developments
In February, the cargo divisions of Air Canada and Emirates agreed to expand interline options and block space agreements, giving customers more choices on each other’s networks. Emirates is one of the largest cargo carriers by volume.
Air Canada Cargo this week unveiled a revamped website that features a new way to search its schedules, an interactive map and an improved shipment tracking tool.
Last week, it flew to the United Kingdom a Royal Canadian Mounted Police horse gifted to King Charles for his coronation.
Air Canada pilots recently voted to merge their union with the much larger Air Line Pilots Association, International.
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Air Canada’s freighter investments weigh on cash flow
Twitter: @ericreports / LinkedIn: Eric Kulisch / [email protected]
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