Cargolux Bucks the Trend

Luxembourg’s flag carrier flew high in 2015, shown by the outstanding financial and operational figures presented shortly before the Easter holidays. They are only an intermediate result in the airline’s mid-term strategy in becoming one of the largest group of freight carriers worldwide under the common logo of Cargolux.

Cargolux’s Jumbo freighters transported 890,000 tons last year, an all-time record for the company  -  source: hs
Cargolux’s Jumbo freighters transported 890,000 tons last year, an all-time record for the company - source: hs

It can be assumed that some champagne corks popped at Cargolux’s headquarters last Thursday right after the management had made the 2015 results public. According to their release, the net profit soared to $49 million, making a huge leap of an amazing $46 million compared with 2014. Operating surplus was up 33.6 percent to $334 million. By transporting 890,000 tons, up 7.4 percent y-o-y, Cargolux reached a new all-time record in 2015. Freight Ton Kilometers (FTKs) leapt 8.7 percent and block hours of the carrier’s then 25 Boeing 747-400F’s and 747-8Fs (meanwhile 26 aircraft) achieved a new height, up 8.8 percent totaling 114,792 hours – becoming one major factor for bettering the fleet utilization even further.
Simultaneously, Cargolux’s turnover went south by 14 percent to $1.86 bn, mainly as consequence of reduced fuel surcharges caused by lowered oil prices. However, this hasn’t obviously harmed the yields achieved.

Outpacing the general market
When looking at the broad picture it can be assumed that the carrier has outperformed the market that according to IATA grew only a meager 2.2 percent worldwide in 2015. This is all the more remarkable since Cargolux had to overcome major hurdles last year. Firstly, the harsh global competitive conditions and the ongoing overcapacity putting enormous pressure on the rates. Also, the carrier’s lengthy quarrel with Luxembourg’s conservative LCGB union over working conditions of the pilots and the cockpit crews fierce opposition to relocate Cargolux freighters to daughter Cargolux Alitalia for cost saving reasons and to secure the lucrative northern Italian market. This didn’t make things easier for the management. Further, the departure of leading executives was anything but helpful to the airline, neither were the constant objections expressed by part of the staff towards the Zhengzhou plans aimed at setting up a major hub in China and increase frequencies on the route Luxembourg-Zhengzhou. These and some other obstacles the management had to tackle in 2015, trying to find solutions to secure the success of the business as a whole. This seems to have worked out quite well as proven by the traffic results.

From dual hub operations …
On the supply side, Cargolux (CV) added a number of specialized products to its portfolio, including offering door-door services within China.
Operationally, flights between Luxembourg and Zhengzhou were gradually increased last year, as determined in a commercial pact agreed between Cargolux and its Chinese 35 percent shareholder Henan Civil Aviation & Investment Company (HNCA). Currently they total 13 per week, with transpacific operations linking Zhengzhou and with Chicago added to the network.
For setting Cargolux China on track, Cargolux’s Board of Directors approved a tranche of $77 million some weeks ago. This cash injection together with the money contributed by local Chinese stakeholders should enable the newcomer to be airborne sometime in 2017. Operations will start with three Jumbo freighters, while two more are supposed to join the fleet within the following next three years, provided, all goes according to plan.
More on this China project will be revealed during the upcoming trade show Air Cargo China from 14–16 June this year, Cargolux Chief Dirk Reich told CargoForwarder Global.

… to a multiple hub strategy
His mid-term strategy aims at becoming an airline group with Cargolux as the common logo, based on major gateways all around the world.
“Spreading our wings for a global reach underlines our vision of being the Global Cargo Carrier of Choice and supports our strategy to grow our activities from a single hub in Luxembourg to multiple hubs and gateways in Zhengzhou, Milan, Hong Kong and Chicago,” states Dirk. The CEO goes on to say: “We will continue to expand our network and, with Cargolux China getting primed for take-off, we go wherever our customers want us to go, be it with Cargolux Airlines, Cargolux Italia or, in the future, Cargolux China.”

Heiner Siegmund

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