September 25, 2023

Air Canada cancels Boeing order for 777 freighters


Air Canada has canceled an order with Boeing Co. for two factory-built 777-300 freighters, opting to pump the brakes on the rapid expansion of its new freighter fleet amid an 18-month recession in airfreight that has sharply slashed the company’s cargo revenue.

Air Canada (TO: AC) said Monday it will no longer take delivery of the 777 cargo jets in 2024. The disclosure was part of an announcement that Air Canada has ordered 18 Boeing 787-10 passenger aircraft. Air Canada said it decided to convert the order for freighters to 787s instead.

No reason was given for the change of heart with the freighters. Air Canada’s press office did not respond to a query about the status of the 777 freighter deal. But the cancellation demonstrates how difficult conditions in the logistics sector are impacting operators and forcing changes in investment plans. It also reflects the strong recovery in international air travel that is expected to continue.

Air Canada said the 787-10s will be used to replace less efficient widebody aircraft, with the first deliveries expected in the fourth quarter of 2025. 

Air Canada currently operates 30 787-9 and eight 787-8 versions of the Dreamliner, with two more 787-9 aircraft scheduled for delivery from a previous order. The 787-10 is the largest model of the Dreamliner family; it can carry more than 330 customers depending on the seat configuration and has 6,187 cubic feet of cargo volume. 

Air Canada Cargo currently operates six medium widebody freighters. Since launching a dedicated cargo airline in January 2022, Air Canada has deployed four used Boeing 767-300 passenger jets retrofitted to carry cargo containers and in May received two production 767-300 freighters directly from Boeing. A conversion house is expected to deliver one more 767-300 by the end of the year. Three more aircraft are scheduled to be converted next year, bringing the fleet to 10 aircraft by the end of 2024.

Air Canada’s cargo revenue declined 33% in the first half of the year compared to the same period in 2022. Other airlines have experienced revenue declines in excess of 50%. Air Canada set a record of $1.2 billion in cargo revenue in 2021, with a 15% decline in 2022 to $935 million. Management opted to invest in a freighter division after experiencing high demand for cargo transport during the COVID crisis, when passenger services were mostly grounded and aircraft were temporarily flipped to cargo duty.

But the air cargo market has experienced a significant decline since the spring of 2022. Airfreight volumes in the first half of 2023 were 8% lower than the prior year, according to the International Air Transport Association, and are currently down 3% year over year as the slide in demand has levels off. The price of shipping goods by air is 40% to 50% less than a year ago, research groups say.

There have been remarkably few casualties from the freight recession so far, but the prolonged downturn in business is beginning to have a deeper impact on capital expenditures. 

Western Global Airlines in August filed for U.S. bankruptcy protection and Cargojet, an all-cargo operator in Canada, is selling three Boeing 777s it acquired in the secondary market with the intention of converting them to freighters. Vietnam Airlines pulled out of a deal with Air Transport Services Group to convert two of its Airbus A321 narrowbody aircraft into freighters. And aerospace companies that specialize in converting aircraft say new orders have dried up this year.

Click here for more FreightWaves/American Shipper stories by Eric Kulisch.


Orders for freighter aircraft slow ‘to a trickle’

New Air Canada freighters help offset declines in cargo revenue

Wait for airfreight recovery could extend well into 2024


The second annual F3: Future of Freight Festival will be held in Chattanooga, “The Scenic City,” this November. F3 combines innovation and entertainment — featuring live demos, industry experts discussing freight market trends for 2024, afternoon networking events, and Grammy Award-winning musicians performing in the evenings amidst the cool Appalachian fall weather.

Source link
In this article:
Share on social media: