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Air Canada Cancels Plans for Freight Fleet Expansion

Air Canada Cancels Plans for Freight Fleet Expansion

In an attempt to adjust its fleet to market conditions, Air Canada announced it would cancel its freight fleet expansion plans by foregoing the conversion of two Boeing 767-300 passenger aircraft into cargo freighters. Learn more about this story here.

Air Canada announced it would be canceling its freight fleet expansion plans. In an attempt to adjust its fleet to market conditions, it forewent the conversion of two Boeing 767-300 passenger aircraft into cargo freighters.

This was disclosed in its recent quarterly earnings report, which included a one-time expense of US$14.5 million due to canceling production reservations with Israel Aircraft Industries. In its first-quarter earnings report, the airline said, “This capacity adjustment decision resulted in a one-time operating expense of $20m recorded under other expenses in the first quarter of 2024.”

Air Canada Cargo, the airline's cargo division, had planned to own 10 cargo jets but cancelled orders for an additional two freight aircraft. Its freight fleet currently includes eight Boeing 767-300 freighters—six of which are converted passenger jets, and the other two are factory builds. At the end of 2023, the division had seven aircraft; an eighth was added in the first quarter of 2024.

According to the airline's management, Air Canada plans to add 18 Boeing 787-10 widebody jets to its fleet by late 2025. These jets will have a greater cargo capacity than many of the planes it currently operates, enabling the airline to meet the growing air freight demand.

Adjustments in investment strategies are evident among all cargo carriers in response to the recent freight market downturn, as other companies have recently canceled or paused their plans to expand their freight fleet. Canada’s Cargojet decided not to purchase eight used Boeing 777s and convert them to freighters. Similarly, Miami-based Global Crossing Airlines temporarily halted its plan to add Airbus A321 narrowbody freighters to focus on its passenger business. Amerijet, another Miami-based cargo airline, recently returned six newly leased Boeing 757-200 freighters.

In terms of financial performance, Air Canada has shown resilience in the cargo sector, managing a slower decline in cargo revenues compared to its industry peers. It recorded a 9% year-on-year decrease in cargo revenues during this year’s first quarter compared to the same period last year. Air Canada’s revenues also dropped by 27% in 2023, although increased operations of purpose-built freighters in Air Canada Cargo's business partially offset this decline.

Air Canada has outperformed many North American and European carriers in limiting cargo revenue decreases. During the first quarter of 2024, American Airlines and Delta Air Lines saw their cargo revenues drop by 15% and 16%. European carriers such as Air France-KLM and Lufthansa reported declines of 16.5% and 17%. In contrast, Avianca, a leading South American airline, reported an 8% decrease in cargo revenue year-over-year.

With its headquarters in Montreal, Air Canada Cargo was established only two and a half years ago to capitalize on the growing demand for air freight services. However, increases in its domestic, U.S. transborder, and Pacific cargo revenues were insufficient to offset a 28.7% decrease in its Atlantic cargo revenues.

This is not the first time Air Canada Cargo has canceled its plans to expand its freight fleet. In September 2023, the company cancelled an order for two new Boeing 777-200 freighters due to reduced airfreight demand following the two-year air transport boom caused by COVID-19.

At Cole International, we offer freight forwarding as part of our services to streamline your import process. If you have questions or need assistance with your air-shipped imports, please get in touch with one of our trade professionals

This story first appeared on Freight Waves

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