After surge: Challenges to Canada’s air cargo future

The Canadian air cargo industry is witnessing a steep decline after a period of extraordinary growth during the pandemic. Air cargo operators like Air Canada , WestJet and Cargojet capitalized on the increased pandemic demand by expanding cargo operations or adapting passenger aircraft to carry freight. However, as global trade patterns stabilize and travel returns to normal, the air cargo sector in Canada is fac ing reduced demand, economic pressures and operational challenges, leading to significant contraction. Figure 1 - Freighter route map by operator

Source: Cargo Facts analysis of flight radar data from September 28 - October 4, 2024 Pandemic growth , adaptation

During the pandemic, Canadian airlines played a critical role in maintaining supply chains, especially for personal protective equipment and other essential goods. Passenger airlines like Air Canada and WestJet quickly pivoted to cargo operations, converting passenger planes into makeshift freighters, or "passenger freighters."

Air Canada, for example, saw cargo contribute nearly 44% of its total revenue in 2020, compared to pre-pandemic levels of 4% to 7%. After pivoting, Air Canada operated over 4,000 passenger freighter flights in 2020 . Cargojet, a Canadian dedicated cargo carrier, seized the opportunity to expand its fleet and routes, capitalizing on unprecedented demand for e-commerce and parcel deliveries.

According to Statistics Canada , Canadian airlines in 2021 transported over 1 million tonnes of goods, a significant increase from 920 ,200 tonnes in 2019. This surge was spurred by the need to move high-value goods quickly amid supply chain bottlenecks. But as the world gradually returned to normal, with international travel resuming and supply chain issues easing, the air cargo market cooled .

Post- p andemic d ownturn

By 2023, air cargo volumes in Canada had dropped by over 10% fro m pre-pandemic highs , settling below 900 ,000 tonnes . WestJet, which had launched a promising freighter network in 2023, suspended freighter services by mid-2024, citing economic pressures and reduced profitability.

The airline had leased four Boeing 737-800 freighters, hoping to serve a niche market between overnight express and international long-haul cargo services. However, with demand falling and the market becoming saturated with capacity, WestJet's freighter ambitions faltered.

Two 737-800 converted freighters are in long-term storage and the other two are operating daily charter service for Cargojet between Newark International Airport in New Jersey and Bermuda.

In an August interview with Freightwaves , Kristen de Bruijn , WestJet’s executive vice president of cargo, said that the two in storage are parked at Halifax Stanfield International Airport (YHZ) . H owever , according to FlightRadar24 , a live flight tracking website, C-FAWJ (MSN 35502) has been parked at John C. Munro Hamilton International Airport (YHM) since it last flew Fe b. 7 . Mean while , C-GWJE (34685) has been parked at Windsor International Airport (YQG) since March 24 .

C-FJWS (MSN 34686) and C-FTWJ (MSN 32904) are trading off operating between the United States and Bermuda on behalf of Cargojet. Cargojet is allowed to operate from the U.S. to Bermuda because it has clearance to operate from Bermuda’s civil aviation regulator, which negotiated the route with the DOT.

WestJet has also walked away from what appeared to be a lucrative contract for Mexico-based startup airline Awesome Cargo . Under the arrangement that began in December 2023, WestJet freighters carried two-way traffic between Los Angeles and Awesome’s terminal at Felipe Angeles International Airport (NLU), just outside of Mexico City, where it could be transferred to and from Awesome’s A330 freighters and continue across Latin America.

WestJet leases the four 737-800 freighters from BBAM Aircraft Leasing and Management , WestJet has made no indication that they will try to return these aircraft earl y. However, with companies like Amazon continuing to expand despite headwinds , one wonders if there may be a ACMI contract to be had for these aircraft.

Air Canada, despite initially optimistic plans, has also scaled back its cargo operations. The airline launched a dedicated fleet of six 767-300 freighters but parked two new factory built 767-300s in April of this year due to insufficient demand. The aircraft , C-GXHI and C-GXHM , were ferried to Kansas City International Airport (MCI) on April 16 .

Additionally, Air Canada canceled orders for freighter conversions, a decision that resulted in a $14.5 million payment to IAI , which hit the books in the first quarter , months before it was announced publicly. It also canceled plans to acquire two Boeing 777-200 freighters, signaling a major shift in strategy as cargo revenues shrank 27% in 2023.

Despite the pullback in dedicated freighter operations, Air Canada is optimistic that it will be able to offer its customers significant capacity due to increasing belly capacity on its passenger fleet. With the delivery of new Boeing 787-10 aircraft starting in late 2025 — each offering 6,722 cubic feet of belly cargo capacity that en able s them to carry 40 AKE unit load devices — the airline plans to maintain its cargo presence , albeit in a more flexible and less capital-intensive way.

Cargojet: Exception to the rule

While WestJet and Air Canada have scaled back, Cargojet has taken a different approach. As Canada’s dominant cargo carrier, Cargojet continues to expand its fleet and operations, benefiting from strong e-commerce demand. The airline services major clients like Amazon, DHL and Canada Post , and has successfully navigated the downturn in the broader air cargo market. By restructuring its fleet and network, Cargojet increased its charter business to a record $15 million in 2023. Cargojet’s results for Q2 2024 were strong, with revenues climbing to $171 million from $152. 5 million a year ago .

Cargojet’s decision to cancel its acquisition of Boeing 777 freighters, similar to Air Canada's move, reflects changing market conditions. The airline has opted to focus on more cost-effective aircraft like the Boeing 767-300, which is better suited for the types of regional and domestic express services that make up the bulk of its operations .

The route that seems to fit a 777 is t he carrier ’s w ork with Great Vision HK Express , which provides logistics services for Chinese e-commerce merchants and recently added a fourth weekly trans-Pacific flight between Hangzhou Xiaoshan International Airport (HGH)

and Vancouver International Airport (YVR) via Narita International Airport (NRT).

Economic f actors , g lobal c ompetition

The broader economic environment has also contributed to challenges facing the Canadian air cargo industry. Rising interest rates, inflation and reduced consumer confidence have slowed demand for imports and exports. Statistics Canada reports that the amount of cargo loaded and unloaded at Canadian airports decreased by 2.6% in 2023.

Global competition is affecting Canadian carriers as ocean freight recovers from delays, drawing demand away from air cargo. This trend extends to major U.S. and European airlines, with American , Delta , Air France-KLM and Lufthansa reporting double-digit cargo revenue declines.

Despite these challenges, e-commerce is growing in North America and Asia, where online sales still have room to expand. Cargojet’s work with Amazon and its trans -P acific expansion highlight the resilience of niche players, even as the overall market contracts .

Future o utloo k

The future of the Canadian air cargo industry will require strategic recalibration as the global economy stabilizes and inflation eases. Growth opportunities may emerge in high-value, time-sensitive goods, but carriers must balance capacity with demand, as a return to pandemic-level booms is unlikely. The industry is contracting , with cargo volumes down .

Despite these challenges, air cargo remains vital for global trade, especially where speed and reliability are essential. Canadian carriers will need to prioritize flexibility, cost-efficiency and targeted growth to navigate the post-pandemic market.

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