Kelowna Flightcraft readies for jump into crowded North Atlantic market
May 17 will mark the entrance of a new operator into the transatlantic air cargo market. It will also bring in scheduled lift on freighter aircraft, with a DC-10 cargo plane running four days a week between Toronto and Brussels.
The new kid on the block is no novice to flying freighters. Kelowna Flightcraft looks back on 45 years of business. Until this spring it operated the overnight air network for Canada Post and Purolator, which has now been taken over by Cargojet.
Canada Post’s new tender requirements introduced an element of surplus capacity marketing that Kelowna was not set up to do, so management realized that it had to explore new avenues if it wanted to continue flying its freighters. The subsequent examination of potential markets led to the identification of a Brussels-Toronto routing as the core sector for the new operation.
The North Atlantic has been a crowded market, but Kelowna’s research indicated solid demand out of Europe to Canada, says Bryan Akerstream, director of business development.
This tallies with the experiences of Cargojet with its freighter service from Germany. “We always had strong and consistent demand from Cologne,” reports Jamie Porteous, executive vice president of sales and service.
Most inbound volumes from Europe are flown into Toronto, notes Akerstream. With little capacity to move freight further inland, some of this ends up being trucked to US airports to be flown to its Canadian destination, he adds.
This is where Kelowna’s domestic legs come into play. It intends to run twice-daily flights with Boeing 727 freighters to the Maritimes (the airport in the region has yet to be determined), and there will also be a link to Vancouver.
Freight forwarders have often complained about a lack of maindeck capacity to Europe, which has forced them to truck cargo to gateways south of the border that have freighter flights across the Atlantic. Over the years there have been attempts to run freighters from Toronto to Europe, but lack of demand has frustrated these efforts.
It does not help that there is an abundance of lift out of US airports. Rich Zablocki, vice president for the Atlantic trade lane at CEVA Logistics, has seen “some pockets of hope into Europe”, pointing first and foremost to Germany, but overall there no huge demand for maindeck lift to Europe, he says.
Due to the abundance of capacity, airlines have been “super competitive” in their pricing, he adds. “It is hard to make money with freighters on the transatlantic (sector),” he concludes.
The capacity glut has been exacerbated by Asian airlines that route some of their US freighters back to their home markets via Europe rather than return across the Pacific. That way they can pick up cargo from Europe to Asia, so their transatlantic leg serves to position the aircraft and is typically sold at rock bottom rates. This has increased the downward pressure on yields, says Achim Martinka, vice president for the Americas at Lufthansa Cargo. The German airline has tried to counter this by selling its network beyond Germany, a measure that has yielded some success but has its limits, he adds.
Kelowna is looking to the Maritimes to feed seafood, especially lobster, to its Brussels flights. “A lot of lobster gets trucked now,” observes Akerstream.
The Maritimes have seen a procession of freighter operators launching flights to Europe and quietly abandoning the route after a while. Cargojet has been going for two years now, but with gaps during the summer. This year it intends to operate without any hiatus, says Porteous.
The seafood market has been challenging, he remarks. Volumes fluctuate from day to day, affected by a variety of factors, such as adverse weather conditions. This has led to a vicious cycle, where erratic loads have forced carriers to abandon their service, which made shippers reluctant to shift their exports to new entrants, lest they find themselves without capacity if the new operation founders.
Kelowna is looking to feed some of the seafood exports from the Maritimes to Asian airlines. To some extent, this could happen over Toronto, but the airline is also planning to start a flight from Toronto to Vancouver and on to Anchorage to connect with Asian freighters. Southbound they could carry cargo from Asia.
Besides the challenges in the Maritimes, Porteous has doubts about the choice of the DC-10 for a transatlantic route. The aircraft consumes more fuel than 767 or more modern freighters, concedes Akerstream, but it worked for Kelowna at the high fuel price level of a year ago, he notes. Moreover, the carrier’s DC-10s are fully paid for.
“Even at belly freight rates we have a viable network,” he comments.
In any case, the DC-10s will test the waters to establish if there is a viable market. Then Kelowna can make adjustments and go for another type, depending on the size of demand, he says.
For a few years Cargojet ran a B767 freighter between Warsaw and Toronto on behalf of LOT Polish Airlines, supplementing LOT’s belly lift on its passenger service on the route. The venture came to an end last year, when LOT replaced its 767 on the sector with a B787, which has more cargo capacity.
This year Cargojet has flown a freighter for LOT on the Warsaw-New York sector, but there are no aspirations for a year-round operation. “We will not operate during the summer. We will resume late in the summer up to Christmas,” Porteous says.