Cargolux profit shrinks as volume rises

Cargolux profit shrinks as volume rises

Cargolux has struggled to be profitable since 2011.

Cargolux posted a sharply reduced profit and lower revenue in 2016 even as traffic at Europe’s largest all-cargo airline increased more than twice the global market growth rate.

The Luxembourg-based carrier’s profit fell to $5.5 million from $49 million a year earlier as revenue slipped to $1.7 billion from $1.86 billion.

Traffic, measured in freight tonne kilometers, grew by 10 percent against an estimated market increase of 3.8 percent, boosting Cargolux’s market share to 3.9 percent.

The results were “excellent” in a year dominated by “worryingly low yields, fierce competition, and overcapacity,” according to Richard Forson, Cargolux president and CEO.

The airline’s fleet of 26 freighters — 14 747-8s and 12 747-400s — transported 964,131 tonnes in 2016, an 8.4 percent rise on 889,652 tonnes in the previous year, and lifted the load factor to 66.8 percent from 65.9 percent.

Cargolux posted all-time record results in an “extremely good” fourth quarter peak season, transporting more than 96,000 tonnes in November alone when the daily aircraft utilization rate reached 16.74 block hours, second only to November 2013 when its freighters flew an average 16.85 hours per day.

The carrier developed operations to and from Zhengzhou, which has surpassed Shanghai as its largest hub in mainland China, with services to and from its Luxemburg hub complemented with two way trans-Pacific flights to Chicago.

Traffic to and from Zhengzhou grew to over 105,000 tonnes in 2016 from 66,000 tonnes in the previous year.

Cargolux, in which China’s HNCA group has a 35 percent stake, has struggled to post profits in recent years apart from the $49 million booked in 2015, which was largely due to a sharp fall in fuel prices and the congestion in US West Coast ports that prompted shippers to switch to air cargo.

Profits of $3 million in 2014 and $8.4 million in 2013 were preceded by losses of $35.1 million in 2012 and $18.3 million in 2011.

Forson last year revealed the company is undertaking a strategic review that could lead to some “hard” decisions as it competes with “extremely aggressive” rivals in a market that has seen steady declines in freight rates.

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