Canadian Shipper


Air Canada and Cargojet explore synergies

TORONTO, Ont.–Air mail has opened the door for Canada’s two largest air cargo operators to try working together in a broad range of areas. On November 20 Air Canada Cargo and Cargojet signed a letter of intent to “explore strategic opportunities”.

 The two Canadian carriers are planning to look at a broad range of areas for cooperation with the objective of either generating more revenues or achieving cost savings, remarked Lise-Marie Turpin, vice president of cargo at Air Canada.

This is not limited to commercial activities and could well extend beyond cargo, she added.

Jamie Porteous, executive vice president of sales and service of Cargojet, said that there are 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.

The two sides have talked about possible cooperation over the years but never pursued any of these opportunities, owing to other priorities, Porteous said. The trigger for the formal push to exploit synergies has been the tender process for the upcoming renewal of Canada Post’s contract for air mail transportation. Air Canada Cargo and Cargojet management decided to team up and submit a joint bid.

“This has been the launch pad for the letter of intent to explore synergies,” Turpin said, adding that the postal tender remains the focus of the pair’s joint effort for the moment.

“It is a big undertaking. We want to deal with this first before we explore other possibilities to work together,” she stated. At this point there are no identified priorities, nor a timetable for the development of an agenda., but Porteous mentioned a number of areas where cooperation beyond the postal contract could be fruitful.

One likely scenario is an expansion of the pair’s existing interline arrangement, especially for cargo from Asia landing on the West Coast. With its nightly eastbound flights from Vancouver, the freighter airline could move some of Air Canada’s imports to the interior, Porteous said.

Cargojet has interline arrangements with several Asian carriers. These are not likely to be affected by an alignment with Air Canada, he stated.

Transferring cargo between their flights could allow both airlines to utilize each other’s network and offer their clients destinations served by the other, he continued. There may also be a possibility to mount joint marketing activities or sell on behalf of each other in markets where only one has a presence, he added.

Interlining is not likely to extend to the two carriers’ main hubs. Cargojet’s base is in Hamilton, where the flows of traffic from its express customers converge. Air Canada’s chief hub is Toronto. In October the airline signed a commercial agreement with the Greater Toronto Airports Authority to further develop the airport as a global hub. This is driven by the passenger business, but any developments there would have an impact on cargo, Turpin remarked.

She does not see Cargojet shift any of its flights to Toronto, stressing that the agreement is about exploring synergies, not moving towards amalgamation. The partners have different business models with some overlap that offers possibilities for joint exploration, she said.

On Cargojet’s side there is no intention or desire to fly to Toronto, Porteous said.

One further possibility that he sees is the operation of freighter flights to international destinations, such as Mexico. Neither Air Canada nor Cargojet would be likely to open such a service on their own, but together they might be able to generate enough traffic to make it work, he said.

Air Canada Cargo has no desire to return to the maindeck arena and use freighters, Turpin remarked. Utilizing and feeding a freighter flight by Cargojet to a market like Mexico might be a different matter.