News / Canadian post deal gives Cargojet a rare opportunity to increase its freighter fleet

26/02/2014

Cargojet is preparing for a massive boost of its freighter line-up.

The Canadian all-cargo carrier, which makes the lion’s share of its money from providing overnight linehaul on trunk routes across Canada to the major integrators, is going to add six 767-300 freighters as well as three more B757-200Fs to its line-up.

The expansion, a rare phenomenon for a freighter operator these days, is driven by Cargojet’s successful bid for a seven-year contract with Canada Post worth an estimated C$1bn in revenue.

The deal calls for Cargojet to provide nationwide lift for the postal agency’s traffic, including volumes of Canada Post subsidiary Purolator, the largest express parcel operator in the country.

Taking on this volume, which gets under way in April 2015, requires the cargo airline to ramp up its domestic network capabilities, which currently stand at 12 aircraft, consisting of two B767-200 freighters, one B757-200F and nine B727s. The airline has recently taken delivery of two more 757 freighters, which are earmarked to replace 727s on some major routes when they enter service in May.

Two more 757s are due in the third quarter of this year and another early next year.

“We need to double the size of our overnight network,” said Jamie Porteous, the carrier’s executive vice-president of sales and service. “We will add a combination of 757s and six 767-300s by the end of this year. We now have 12 planes in our domestic network. It will be 21 aircraft.”

In addition, there are 727 freighters on contract to integrators that operate between Montreal and Cincinnati and on the New York-Bermuda route. Eventually these will be retired, but the Canada Post contract will slow down the phasing out of the 727s from the fleet, Porteous said.

Cargojet has been using its 767 and 757 freighters for charter and ACMI work on weekends and during the daytime, such as running weekly freighters for Lot Polish Airlines between Canada and Poland. The expanded fleet will give it much more scope for such activities, but management will not address this before the preparations for the Canada Post contract are done, Porteous said.

Those preparations include beefing up ground handling capabilities.Unlike the previous postal contract, which was won by Kelowna Flightcraft and required flight operations only, the new deal includes a full cargo operation, including handling. Purolator will step away from its handling activities.

“We will have to expand handling at some stations. We will see if we will take it in-house in some markets or expand some handling deals,” Porteous said.

The boost in traffic also necessitates expansion of Cargojet’s facilities at its base in Hamilton. To that end, the carrier has jumped on board an initiative of the Hamilton airport authority to build a C$12 million crossdock facility, for which an RFP went out on 19 February. The carrier has signed a letter of intent to participate in the project and will take half the space in the facility when it is completed. It will then relinquish its current cargo building at the airport.

To improve its chances of winning the postal contract, Cargojet joined forces with long-standing rival Air Canada.

Much of the daytime linehaul of postal traffic will be carried on a Vancouver-Hamilton freighter, with additional lift coming from the belly capacity of Air Canada. The joint bid prompted the two carriers to examine the possibility of co-operation in other areas, which resulted in a letter of intent to “explore strategic opportunities” last November.

Porteous said that there were a variety of operational areas where the pair could work together, such as the freighter airline possibly moving spare parts to service Air Canada’s fleet, which are currently shipped with couriers and other logistic providers, or Cargojet pilots getting training on Air Canada’s flight simulators. However, discussions on this have yet to commence.

The priority so far has been on getting the postal contract, he said.