On Thursday, a new and challenging chapter will be opened in the manifold history of Europe's largest all-cargo carrier. Then a Boeing freighter 747-8 will kick-off linehaul services between Luxembourg and Zhengzhou in inner China.
This link is more than just an additional route Cargolux is adding to its wide-span network. The Zhengzhou mission, if operated commercially successful, might become a turning point to the positive for Luxembourg's beleaguered flag carrier. During the initial phase, two roundtrips between Luxembourg and Zhengzhou will be offered the market. However, the carrier is eager stepping up these services to four each week as of July latest. The flights are conducted via Baku on the eastbound sector and Novosibirsk on the way back because of rather cheap fuel prices there.
Multiple hub strategy
Wide-spread rumors indicating the carrier’s aim to establish a dual hub system, on the European side Luxembourg’s Findel Airport and in China Zhengzhou Xinzheng International, are rejected by Dirk Reich, Cargolux’s shortly appointed CEO. Says the manager: "Zhengzhou is an important new destination that offers increasing business opportunities complementing our flights to and from China, not more and not less."
Instead of a dual hub strategy he rather speaks of a multi-hub system, CV has set up and continues doing so, because “our aim is further growth in many markets.”
In this respect Dirk reminds that his airline is conducting seventeen flights per week to Hong Kong, twenty to Baku in Azerbaijan, ten to Chicago each week, and so forth. These operations will not be reduced because of the Zhengzhou services, the former Kuehne + Nagel manager assures, as some industrial players might have expected. Instead “we intend to gradually add new routes to our network and increase some of the frequencies at existing trade lanes,” he announces.
In a nutshell: Zhengzhou will not cannibalize any other services conducted by Cargolux.
Ambitious development plans
Nevertheless, CEO Reich admits that this location in central China, half way between Shanghai and Beijing, is playing a decisive role for his airlines' future growth strategy. Why? Mainly because of two reasons: Firstly the takeover of 35 percent in Cargolux’s shares by Henan public investor HNCA and secondly the multiple efforts the city is putting into developing Zhengzhou to a fast growing multi-modal logistics and industrial hub. “So we are not only at the right place but have also set foot at the right time to capitalize on this emerging economic trend.”
Vital road feeder services
This expectation might be filled with life in future. In today’s reality, the masses of exports expected to be flown out of Zhengzhou by Cargolux need to be trucked from distant production centers to the airport. “There exists meanwhile a dense network of road feeder services stretching as far as Chongqing or Wuhan but also includes the trucking of many shipments from Shanghai to Zhengzhou,” he says. This, because the air freight rates ex Zhengzhou are still competitive, beating those demanded at some other Chinese cities.
Meanwhile, Cargolux has set up an office in Zhengzhou, attracting some employees and mechanics that were based in Hong Kong up to now. “We are looking for additional local staff,” says Reich. In case of a lasting shortage, stakeholder HNCA will temporarily provide professional assistance, he states.
Zhengzhou’s aim to becoming one of China’s leading hotspots for production and multi-modal transports is strongly supported by the city’s rulers and Henan’s provincial government. To attract cargo airlines, forwarding agents, and foreign investors in general Henan subsidizes their activities both financially and also by offering them some other privileges like cost-efficient real estate to settle, favorable rental contracts and other benefits.
The result of this farsighted policy can be seen in many ways, also in aviation, proven by the meanwhile fourteen carriers serving the place, including Cargolux. Since their number is expected to grow, the city decided to build a second runway at Xinzheng International. “Physically it’s there already, but final work has still to be completed, so the inauguration ceremony will have to wait for a couple of weeks.”
Regional supplier or worldwide acting carrier?
Part of this long-term policy was also the move taken recently by Henan Civil Aviation & Investment Company (HNCA) to becoming a 35 percent shareholder in Cargolux, investing €167m in the airline. A deal that was not applauded by all CV managers, as the resignation of VP Sales Robert van de Weg and VP Ops Peter van de Pas illustrate. In the meantime, however, the dust within Cargolux seems to have been settled, enabling Reich and his team taking on their normal duties.
In contrast to some critics Reich sees great opportunities evolving from the Sino-European cargo cooperation. “They intend to grow, so do we. This matches nearly perfectly,” he says. To him, these starting conditions and strategic aims are entirely different from the intentions of Cargolux’s former stakeholder Qatar Airways. “This carrier wanted us to become its regional appendix, operating feeder services to supply tonnage for filling the main and lower decks of QR’s intercontinental fleet.”
After the Zhengzhou flights have been established both in tonnage and financially, Cargolux together with partner HNCA might take the next step: transpacific operations. “We are very confident to obtaining the traffic rights,” he indicates the long reaching political arm of CV’s state investor. Reich even speaks of flights between Zhengzhou and destinations in Africa standing somewhere on his agenda and enabled by door opener HNCA. Then, at the latest, Xinzheng International will become one of the carrier’s main global hubs.