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Features Airlines
Airline Insider-Sept/Oct 05

Air Cargo Traffic Booming; Higher Costs Hit Air Transat; WestJet Sells Last Boeing 737-2005; CanJet Looks at New Aircraft


September 28, 2007
By Brian Dunn

Topics






AIR CARGO TRAFFIC BOOMING

While
passenger traffic has been making a slow but steady recovery after both
9/11/01 and the SARS outbreak in 2003, air cargo traffic has been
enjoying a veritable boom.

Air Canada Cargo for example, raked
in nearly $600 million in revenue last year, a number the division
hopes to double within the next five years. It has identified 12 to 15
international markets for expansion in South America, Europe and Asia.

As
part of its global expansion, Air Canada earlier this year launched an
all-cargo service between Toronto and Shanghai using a leased MD- 11
freighter, bumping frequency from three to five times a week.

The
airline ultimately wants to get back into operating a dedicated fleet
of cargo aircraft instead of relying on the cargo capacity of its
passenger jets. As part of that goal, it has leased two more MD-11
freighters and is looking to acquire additional cargo aircraft.

Air
Canada operated a small fleet of DC-8 cargo aircraft, but pulled out of
that market in the 1990s when it acquired new Airbus and Boeing
passenger aircraft that had substantial cargo-carrying capabilities.

Air
Canada carries about 300,000 tonnes annually, although the domestic
market only represents about 15% of that. Before it got rid of its
fleet of DC-8 cargo aircraft, domestic cargo accounted for 60- 70% of
the total, according to Claude Morin, vice-president of Air Canada
Cargo.

“We’re always looking for more all-cargo aircraft, but
they’re in hot demand, even though it’s hard to make money with high
fuel prices.”

Freighters now account for less than 10% of Air
Canada’s cargo capacity. Morin would like to see that figure climb to
between 30% and 40% so that overall capacity isn’t reduced if some
passenger/cargo flights are cut back like they were to Asia during the
SARS outbreak in 2003.

“On the passenger side, international
traffic is growing rapidly where cargo demand is also growing. For
example, we had no cargo capacity to South America five years ago. Now
it represents close to 5% of our cargo activity.”

Cargojet is
also going great guns, according to Pauline Dhillon, vice-president of
marketing. Formally known as Canada 3000 Cargo, before Canada 3000 went
bankrupt in 2001, Cargojet emerged in 2002 and currently operates 11
Boeing 727-200 dedicated cargo planes each with a capacity of between
50,000 and 60,000 pounds.

Dhillon says Cargojet is the only
domestic operator that has a neutral network, meaning it doesn’t have
its own customers but carries cargo for all the majors such as FedEx,
DHL, UPS plus all domestic freight forwarders. It also has interline
agreements with 11 global airlines and has a codeshare agreement with
Purolator.

“We fly roughly 500,000 pounds of cargo each night
across Canada. We’re operating at 100% capacity east to west and about
70% capacity west to east,” says Dhillon, who estimates Cargojet has a
40 % share of the domestic cargo market with Purolator ranking second.
Its aircraft are owned and operated by Kelowna Flightcraft.

Last
year, Cargojet generated revenue of over $100 million and is listed on
the Toronto Stock Exchange. Future plans call for service to China
using an MD-11 freighter, with a decision on a start-up date being made
early next year.

Founded in 1970, Kelowna Flightcraft operates
21 air cargo aircraft of various sizes, the largest being Boeing 727-
200s and Convair 580s.

In 1976, KFC signed a 10-year renewable
mainline haul contract with Purolator Courier Ltd. and hauls roughly
500,000 pounds a day in the Purolator system and up to 1 million pounds
a day during the peak Christmas shipping season, according to KFC
executive assistant Jennifer Morden.

Air cargo accounts for
roughly 62% of KFC’s gross revenue with the balance coming mainly from
charters and maintenance operations. In addition, it operates the new
Canadian Forces Contracted Flying Training and Support services program
at Southport, Manitoba.

Like Purolator, Morningstar Air Express also has an exclusive contract, only with FedEx Canada.

Founded
in Edmonton in1970 by two Edmonton businessmen as Brooker Wheaton
Aviation Ltd., Morningstar enjoyed rapid growth due to the oil boom
economy in Alberta during the 1970s.

During the mid-1980s, the
company began flying for various courier companies and in July 1990
acquired a contract to initially operate two Boeing 727s nationwide for
FedEx Canada

In January, 1992, the company became Morningstar
Air Express and currently employs approximately 100 people and operates
four Boeing 727s and six Cessna Caravans.

HIGHER COSTS HIT TRANSAT
Like
most carriers, higher fuel prices are hurting the bottom line of tour
operator Transat A.T. of Montreal, but the charter operator doesn’t
expect that hurricanes in the Caribbean or terrorist bombs in London
will have any longterm effect on the company. Britain accounts for 40%
of Transat’s European business. The company’s holdings include Air
Transat and its four Airbus A330s and 10 A310s.

Although the
tour operator is forecasting a profit for its fiscal year ending
October 31, it said higher fuel prices will prevent it from matching
the $72.5-million profit it made in fiscal 2004.

In its first
half ended April 30, Transat recorded a profit of $36.6 million versus
$48.2 million in the same period a year ago. The charter operator also
faced stiff competition during the summer between Toronto and London
from both Air Canada and British Airways.

In June, Transat
signed a charter extension to use WestJet Airlines to fly holiday
customers from 15 Canadian cities to 25 sun destinations; it runs until
October 31, 2007.

WESTJET SELLS LAST BOEING 737-200S
WestJet
Airlines has sold its last 10 Boeing 737-200s to Miami-based Apollo
Aviation Group. The sale includes spare parts, engines and a
pilot-training flight simulator. The airline says the sale is part of
its conversion to newer models of fuel-efficient 737s equipped with
leather seats and live satellite televisions mounted in the seatbacks.

WestJet
operates 44 next generation 737s. The older 737-200s will be phased out
of its fleet by next March as the newer models are phased in.

WestJet
is replacing its 737-200s with 16 new 737s and will take delivery of
five 737-600s, six 737-700s and five 737-800s over the next 12 months.

CANJET LOOKS AT NEW AIRCRAFT
CanJet
Airlines is also in an expansion mode and expects to decide within a
year whether to stick with its fleet of 737s or acquire new aircraft
from Airbus, Bombardier or Embraer.

All types of aircraft are
being considered in the 90/150-seat range, including the Embraer
190/195 and Bombardier’s proposed CSeries.

CanJet plans to
expand its current fleet of 11 aircraft to about 17 in 2007. It
currently operates nine 737-500s and two 737-200s, all leased. The
737-200s are scheduled to be replaced by new 737-500s in the fourth
quarter.


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