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Demand drivers

Strong overall demand, a flexible freighter fleet and a new partnership with Emirates SkyCargo add up to a positive outlook for Cargolux, Europe’s largest all-cargo airline, as Helen Massy-Beresford discovers

As an all-cargo carrier, plying its routes across the globe with a fleet of Boeing 747s, Luxembourg-based Cargolux Airlines stands out against a broader industry trend among major passenger-focused carriers of shifting cargo shipments towards bellyhold capacity. But with demand for Europe’s largest all-cargo airline’s services growing, the flexibility of a freighter fleet is paying off.

“Cargolux has seen very strong demand throughout the year with no ‘low season’, as traditionally experienced by the industry. Our product offerings have been very well received and our close contact with clients and the ability to tailor our services to their – often specialised – needs has helped to consolidate and strengthen our position in the markets,” the airline says. “We have added another aircraft this year, so we have a slight capacity increase and our growth is above that of the market average.”

Cargolux operates scheduled and charter services as well as offering third party maintenance at its Luxembourg hangar. It also has a network of trucking contractors to complete the journey for its shipments and operates from more than 85 offices in over 50 countries worldwide, building on a long history in the cargo industry. Starting operations in 1970 with a handful of Canadair CL-44 freighters, its fleet evolved as it took delivery of the world’s first Boeing 747-400 freighter in 1993 and now the airline operates a 27-strong fleet of Boeing 747-8 and Boeing 747-400 freighters, and is the world’s first operator of the technologically advanced Boeing 747-8F that joined the fleet in late 2011.

The carrier is open to adding to its fleet further. “Based on market opportunities, we may look at additional units from the used market,” Cargolux says.

In 2017, demand has been strong across the network, but with a special focus on routes out of Asia to the US and out of Europe to a variety of destinations, the airline says.

That reflects the experiences of other cargo operators as, after a long slog through a tougher operating environment, players from across the cargo business are seeing signs that better volumes are here to stay. The message the industry wants to portray is getting across (see Seabury Consulting’s analysis, page 44).

“Air cargo’s main advantage lies in its time to market,” Cargolux says. “Although sea transportation has developed, high value products typically go by air. Air cargo typically carries 1% of total world trade volumes but represents around 35% by value.”

When the goods to be transported are vital pieces of equipment or other time-critical cargo, having a strong charter operation helps.

“Charter is an important pillar of our business, we have seen significant growth in demand and revenue in this field over recent years,” Cargolux says. “We have dedicated aircraft for charter capacity and can react very quickly to charter demand. As an airline we strive to keep a healthy balance between charter and scheduled operations. Scheduled operations give us our route network while our charter operation enables us to offer tailor-made solutions for our clients.”

As the sectors driving demand for transporting goods by air have evolved, Cargolux has shifted its attention too, positioning itself strongly in China, where growing e-commerce is increasing the need for air cargo capacity.

Digital research specialist eMarketer predicts retail e-commerce sales worldwide will continue to post solid gains in 2017, rising 23.2% to $2.29 trillion and accounting, for the first time, for one-tenth of total retail sales worldwide. China and the US will combine to account for $1.584 trillion in e-commerce sales this year, making up 69.1% of global e-commerce.

China is not the only high-potential market Cargolux is focusing on – it sees growth potential in Africa, too.

In September and October, it launched weekly services to two new destinations in Africa, adding to the 33 destinations it already serves on the continent: Lubumbashi, the second largest city in the Democratic Republic of Congo and a mining industry hub, „ which also produces textiles, food and beverages;  and Douala in Cameroon, the country’s largest city, its economic and commercial capital, and home to Central Africa’s biggest port, which handles most of the country’s exports, including oil, cocoa, coffee, fruit, metal and timber.

“With its own road feeder services, Cargolux is also able to offer fast and efficient connections to Yaoundé, Cameroon’s capital and second-largest city,” the airline said at the time. “Import commodities for Cargolux include high-tech goods, agricultural products and machinery, while export shipments are mainly perishables; fruit and vegetables for European consumers.”

“Africa has always been and will always be an important market for Cargolux and we are happy to be able to support the continent’s trade lanes to Europe, the United States and Asia, as well as across the Cargolux network worldwide”, said Jonathan Clark, Regional Director Africa for Cargolux.

Adding scheduled all-cargo services four times a week to Ecuador’s capital Quito, from July, also demonstrates the potential Cargolux sees in Latin America, particularly in the flowers and perishables  markets which are driving growth for many air cargo operators present in the region.

The airline’s freighter fleet has one huge advantage over the bellyhold capacity major airlines are increasingly turning to – flexibility, with Cargolux transporting everything from high-value horses to flowers to outsize pieces of industrial equipment.

But if Cargolux is dedicated to operating as a full-freighter airline itself, that does not mean it is bypassing bellyhold capacity entirely. In May, the carrier signed a landmark cargo partnership agreement with Emirates SkyCargo, which allows for the Middle Eastern carrier to use Cargolux’s freighters to complement its own Boeing 777 freighter fleet and for Cargolux to access its partner’s high frequency distribution network through the bellyhold capacity of passenger flights, to over 150 destinations in 83 countries.

“The cooperation with Emirates SkyCargo gives us access to belly capacity on their vast network, while Emirates has access to our main deck cargo capacity,” Cargolux explains. “Handling synergies facilitate seamless movement of cargo between Cargolux and Emirates. Interline agreements between both airlines further strengthen our cooperation and give customers a wider range of services and destinations.

The hub connectivity between Dubai and Luxembourg also contributes to boost the position of both locations as major logistics hubs and distribution centres in their respective regions.”

The partners also recently announced a codeshare agreement which “represents a progression of the operational partnership under which both carriers can now procure cargo capacity on each other’s flights and then offer it to their customers under its own airway bills and flight numbers”, Cargolux says. “In essence, working together enables each partner to offer services they could not provide on their own.”


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