Dual hub strategy pays off for Cargolux

In 2015, Cargolux carried 889,652 tonnes of freight on its global network, 7.4 per cent more than in 2014 with an average load factor stable at 65.9 per cent, even with a larger fleet and increased capacity.

Air & Cargo Services air cargo Air Cargo Asia air cargo freight Air Forwarding air freight Air Freight Asia Air Freight Logistics air freighter air freighting Air Logistics Asia Air Shipping Asia airlines cargo airways cargo asia cargo news cargo aviation Cargolux Cargolux China Cargolux Italia Dirk Reich IATA Zhengzhou

The Cargolux Group has ended the financial year (and 45th anniversary year) defying an environment of low yields, continued overcapacity and declining volumes, with record levels of tonnage, block hours and crucially, a net profit after tax of US$49 million. The company outperformed not only the market, but also its direct competitors in Europe who, in a number of cases, retired freighters or reduced their air cargo activities.

“It is a sign of our company’s strength that, despite the energy we needed to achieve a CWA [collective work agreement with labour unions] compromise, we managed to achieve a significant boost in our performance and a healthy profit, contrary to most of our European competitors,” says Dirk Reich, Cargolux president & CEO.

“While this excellent result benefitted from a reduction in fuel costs, it is in large part due to the hard work of our people, as well as our strategy and the corresponding measures that we began to introduce in 2014 in order to reduce our costs.”

This past year saw Cargolux push a number of strategic initiatives, including the launch of a speciality product portfolio. As a significant boost of its customer orientation, the new product portfolio continues to build on Cargolux’s existing core competency, pushing global consistency and leveraging on the evolution of its global presence. In doing so, the company increased the share of specialised products in its portfolio, further focusing on industry-specific needs by thinking beyond the flight and responding to the requirements of customers with the expansion of door-to-door service across China.

Business overview
The Cargolux Group in 2015 grew its freight tonne kilometers (FTK) by 8.7 per cent with the carrier now ranking at No. 7 among the world’s cargo operators and the largest all-cargo airline in Europe, according to IATA data. The airline also registered above the average growth rate of IATA’s top 20 air cargo carriers.

In 2015, Cargolux carried 889,652 tonnes of freight on its global network, 7.4 per cent more than in 2014. With 26 B747 freighters at year-end, a mix of B747-400 and B747-8 freighters and the largest fleet in its history, Cargolux achieved a record 114,792 block hours, an increase of 8.8 per cent over the all-time high in 2014.

The average load factor remained fairly stable at 65.9 per cent, even with a larger fleet and increased capacity. The Group’s average market share in 2015 grew to 3.8 per cent.

China focus
For Cargolux’s complementary Chinese hub, Zhengzhou, was a major focus during 2015 the carrier said, with flights increasing to 13 per week by year-end, with the carrier also introducing transpacific services between Zhengzhou and Chicago. By the end of 2015, Cargolux had flown over 65,000 tonnes of freight to and from Zhengzhou.

In early 2016, the Cargolux Board of Directors approved an investment of US$77 million for ‘Cargolux China’, the new joint venture Chinese cargo airline based in Zhengzhou. Cargolux China is expected to start operations in 2017, focusing on transpacific and intra-Asian routes with a fleet planned to grow to five B747 freighters within the first three years of operation.

A new CWA
After 18 months of intense negotiations with labour unions OGB-L and LCGB an agreement on a new collective work agreement for the airline’s Luxembourg-based staff was finally reached on 16 December 2015 and valid for three years. With the new CWA, the partners have achieved a significant improvement in the flexibility and economic efficiency of Cargolux while sending a strong signal for job security and increased competitiveness of Luxembourg as a logistics hub in Europe. Together, all parties have expressed their commitment to move forward, to defend Cargolux’s leading market position in Europe and continue to drive its growth in Asia with the implementation of the dual hub strategy.

“I want to explicitly thank everyone in the Cargolux family for their continued dedication and hard work,” Reich notes. “The long discussions with our social partners have helped us to come out a stronger company with a better comprehension of each other’s needs and concerns. This understanding, this passion for our work, keeps Cargolux at the top of the game and it is due to the little things that every single one of our staff has contributed.”

“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. 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.”

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