Air Canada drops Shanghai service
China’s boomtown has turned sour for Air Canada Cargo. At the end of June, the airline returned a leased MD-11 freighter to World Airways and scrapped its all-cargo flights between Shanghai and Toronto.
Withdrawing the all-cargo service marks the culmination of Air Canada’s retrenchment on the Pacific. The airline launched Shanghai freighter service in spring 2005 with two leased MD-11s, operating five days a week between the Chinese city and Toronto. Last October, however, the disappointing peak season prompted management to return one MD-11 to World and scale back the other two to three flights a week.
This April brought another step back from Air Canada’s Asian ambitions when the carrier canceled an order for two 777 cargo aircraft. Scheduled for delivery in the second half of 2009, those planes were earmarked mostly for trans-Pacific operations.
A major reason has been the increase in freighter operations between Shanghai and North America. U.S. carriers Polar Air Cargo, UPS and FedEx have used new traffic rights this year to step up their Shanghai flights. Moreover, Chinese carriers are increasingly targeting the North American market.
Since last fall, Shanghai Airlines and Yangtze River Express commenced U.S. flights with 747 freighters, and Jade Air Cargo is poised to start a 747-400 freighter operation from Shenzhen through Shanghai to Vancouver and Houston this month.
Other carrier executives have echoed this assessment.
The increase in freighter service between China and North America has further eroded westbound yields, which were already below cost levels. According to one industry source, some freighters have flown into Shanghai with less than a ton of freight. Some Asian carriers, such as Japan Airlines, have scrapped refueling in Anchorage for flights from the West Coast because of poor load factors.
At the same time, rate levels out of China that had once been high enough to sustain the freighter operations have slipped as capacity has climbed faster than demand. And the absence of traditional surges in demand has exacerbated this development and alarmed carriers. According to Morin, last year’s peak season was woefully late and brief, and the typical spike around the Lunar New Year did not materialize this year. The overall trans-Pacific market has shown some uncharacteristic weakness in recent months.
Under such circumstances, Air Canada is more comfortable running freighters across the Atlantic. While it terminated the deal for the Shanghai MD-11, the airline extended another contract with World Airways for an MD-11 freighter between Toronto and Frankfurt.
