Ready for take-off

by Array

There’s been lots of talk about opening Canada to more foreign cargo carriers. The airports have put the money up, and shippers are all for it. But government policy has yet to catch up, and some in the industry worry that the obstacles are too large to overcome. Deborah Aarts investigates.

Canada’s cargo airports have a lot going for them.

Our airports are modern, with plenty of capacity, special handling capabilities and connections to major highway and rail routes. Almost every one has some sort of cargo project on the go. Geographically, many are situated only a few hours from the US border and closer to Europe and Asia than their US competitors.
On paper, Canada is as well-positioned as any nation to become a hub for international airfreight—and, in so doing, become a much more attractive place for shippers to do business. But the consensus among those in the industry is clear: it’s not. At least not yet.

So what is preventing Canada from capitalizing on its potential?

If you build it…
The past two decades have been a time of tremendous expansion on and around our nation’s runways.

Canadian airport authorities have spent nearly $10 billion on building infrastructure since they took control of local airports from the federal government in the early 1990s. Much of this has been directed towards air cargo facilities.

Calgary International Airport, for instance, has established the YYC Global Logistics Parks, a network of trade parks providing distribution and other value-added services. This has more than doubled the tonnage of air cargo handled at the airport. In anticipation of similar cargo traffic, Edmonton International Airport is dev-eloping Port Alberta, a multimodal gateway anchored by the AirLINKS Business Park and more than 16,000sqm of planned new dedicated cargo apron.
Halifax Stanfield International Airport is preparing to construct a multi-tenant cargo facility, complete with dedicated refrigeration space, in an effort to further accelerate cargo growth.

These examples prove the willingness of airports to build cargo capacity not just through better runways and aprons (although those do help), but also through ground handling facilities. Warehouses, DCs, deconsolidation hubs, Customs clearance houses and other value-added facilities—the prerequisites of international airfreight—are popping up at airports across the country.

“The infrastructure is there,” Jim Facette, president and CEO of the Canadian Airports Council (CAC), tells MM&D. “What we need is to a) tell the world that Canada is open to cargo business, and b) make sure we have a competitive environment here in Canada to make sure we attract cargo traffic.”

Spreading the word
In the past, even as our capabilities have improved, Canada has had a spotty record of promoting itself as a place for international carriers to stop.

“I think it’s an awareness issue, if anything. We need to be more aggressive in letting the rest of the world know that, indeed, the opportunity exists here,” says Jerry Staples, vice-president of marketing and business development at the Halifax International Airport Authority.

The CAC has been at the forefront of an effort to get the word out through a marketing campaign called Cargo Canada. Under the Cargo Canada banner, representatives of 15 cargo-ready airports travel to conventions and trade shows around the world to promote the entire country as an air cargo gateway—not just their individual airports. The initiative is less than a year old, but Facette says it has already garnered a favourable response among international players who previously had no idea of Canada’s capabilities.

Policy problems
These efforts are encouraging, but government policy on air cargo has yet to catch up to the vigour of the industry. And all the infrastructure and
marketing in the world won’t do any good if planes aren’t allowed to land.

There has been plenty of promise. Late in 2006, transport minister Lawrence Cannon delivered a new international air policy called Blue Sky. Blue Sky set out a much more liberalized and competitive climate for air transport, with reciprocal open skies-type agreements as a “primary objective.”

Open skies treaties expand the landing rights of foreign carriers on international routes, essentially creating a new level of service options for the countries that adopt them.

But nearly two years after the policy was released, Canada has only five open skies agreements, including a pre-existing deal with the US. By contrast, the US has 92 such arrangements, including a long-awaited agreement with the European Union reached earlier this year.

The government, for its part, has noted the disparity. A recent report from the federal Competition Policy Review Panel recommended that Canada secure more open skies agreements—with the EU as a priority—as soon as possible, stating that “[i]n practice, Canadian international air policy is still relatively restrictive.”

Canada does have approximately 75 bilateral agreements governing flyover, in-transit and landing rights with other nations. These are relatively simple agreements between two countries and are thus easier to negotiate than open skies, which require a tremendous amount of back-and-forth security and standards
discussions. But Facette notes that Canada’s pursuit of bilaterals has skewed towards passenger travel, meaning that nations with great cargo potential are sometimes overlooked because they have low passenger volumes.

The trouble with trans-shipment
The federal government has attempted to bridge the gap between bilaterals and open skies by granting more airports permission to perform trans-shipment. The trans-shipment program allows international freighters to move through approved airports enroute to third countries without bilateral agreements. In theory, this allows shippers to load and offload cargo through traditionally inaccessible air channels.

This year alone, the government has approved airports in Prince George, Vancouver, Abbotsford, Toronto, Moncton and Halifax for the program. They join airports in Mirabel, Hamilton, Windsor, Gander, Winnipeg, Edmonton and Calgary.

“That program essentially gives airports a lot more flexibility to allow international cargo to move between Canada and third countries, so that it moves more freely and gets around some of the bilateral agreements,” says Federica Nazzani, general manager of Windsor Airport, which launched one of the first trans-shipment programs in 1993.

But some in the industry question the usefulness of trans-shipment. There is speculation that, since only some airports in Canada can do it, the program creates confusion among foreign carriers, who might prefer a country with a more uniform policy.

Wilma Clarke, director of leasing and operations at Vista Cargo Terminal Inc, one of two multi-tenant air cargo terminal buildings at Toronto’s Pearson International Airport, is one of the skeptics. In the past, her company has had to turn away business from foreign carriers with viable business plans for Toronto stopovers because their countries did not have bilateral agreements with Canada. Clarke acknowledges that Pearson’s recent approval for trans-shipment might help, but thinks that without a more comprehensive national open skies regime, foreign carriers without bilaterals will tend to stay away.

“There’s a long way between full open skies and where we are today. Today, we are very, very restricted,” says Clarke. “I’m not saying full open skies would be the best place either, because you’ve got to look afte
r making sure you have enough business for your national airlines to stay intact. But we could certainly improve on where we are today by allowing the airlines that knock on the door and want to come in to do it!”

Other clouds on the horizon
Even if Canada implemented open skies tomorrow, there’s no guarantee international cargo traffic would increase. A few worrying clouds on the horizon also warrant attention.

One is the high price of fuel. Jets consume a tremendous amount of it, and carriers worldwide are starting to feel the crunch. Recent data released by the International Air Transport Association (IATA) showed the first decline in international air cargo freight traffic since 2005, with much of the blame pinned on expensive oil.

The high Canadian dollar is another obstacle. Some, including Clarke, feel this is more of a problem than fuel prices, particularly for traffic between Canada and the US.

“If our Canadian dollar is hovering around 90 or 92 cents to [the US] dollar, then it’s a comfortable spot for cargo here. If it’s on par, there’s really no advantage.”

Shippers who rely on airfreight are watching these developments with a close eye. Scott Gibson, logistics project manager at AstraZeneca Canada, is one of them. Airfreight has long been the company’s preferred mode for shipping high-value pharmaceuticals in from overseas markets. He would love to see Canada open its air channels—and the competitive rates and alternate avenues of import that would ensue—but is prepared if it does not happen.

“We’re quite concerned about capacity, in terms of making sure there are enough cargo airplanes coming into Canada,” he says.

“If we can’t get the flights, we’ll have to look at other options.”

Blue skies ahead?
Given the issues at play, it seems it may be some time before Canada becomes the preferred destination for international carriers. But the obstacles are not insurmountable. The federal government is reporting that negotiations for an EU-wide open skies deal are progressing. The Canadian dollar has settled a bit below par (for the time being, at least). And those pushing for liberalized skies in the True North are committed to making it happen.

Says Facette: “I think if we really spent the time focusing on what needs to be done…and if we properly position it with the federal policy-makers, long-term we could really take cargo’s potential in Canada quite a bit further than it is today.”