CARGOLUX WARNS OF OVERCAPACITY WITH NEW PLAYERS, RETURN OF BELLY HOLD

Cargolux warned of continuous challenges to the air cargo industry this year driven by ongoing geopolitical tensions and slowing global trade.

 

Europe's biggest all-cargo airline said geopolitical tensions and the war in Ukraine continue to affect global trade.

 

"As a key component of the logistics chain, air cargo is directly affected by these issues. It is unlikely that the situation will change in 2023," Cargolux said in a statement.

 

Best year on record

 

The outlook came as the Luxembourgian flag carrier cargo airline also announced that its 2022 performance was the best in its history.

 

"This financial result allows the further strengthening of the group’s Balance Sheet to enable the airline to remain resilient in weathering the expected volatility we expect in the industry," it said.

 

For 2022, Cargolux reported strong yields and high volumes during the first half of the year contributed to the company's strong financial performance.

 

It said a decline in demand in the second semester led to lower volumes and a virtual absence of peak season in 2022.

 

"The market dynamic was significantly affected by the outbreak of the war in Ukraine. The closure of Russian airspace and Western sanctions on Russia impacted flight paths towards the Far East resulting in longer sectors being flown and increased operational costs," Cargolux said, adding that the conflict in Ukraine also severely affected supply chains which were already suffering from a lack of raw materials and products.

 

It added that the resulting uncertainty disrupted global commerce and affected the airline's ability to operate optimally.

 

Cargolux added that the Covid-19 pandemic continued to affect operations worldwide.

 

It noted that as sanitary measures eased throughout the year, passenger capacity returned to the market softening demand for cargo space and bringing yields down.

 

For the full-year 2022, Cargolux saw its revenues hit US$ 5.1 billion, an increase of 14.7% over 2021 and profit after tax reached US$ 1.6 billion, an increase of 21.9% over 2021.

 

Risks of overcapacity

 

Meanwhile, Cargolux warned of possible overcapacity as new entrants join the air freight sector and as belly hold starts to return.

 

"The return of belly-hold capacity and the emergence of new players in the industry, including multi-modal companies, pose a risk of overcapacity in an already declining market," the all-cargo carrier said.

 

It added that the pressing questions about sustainability and the increased pressure on airlines to reduce emissions must also be factored in as the carrier face a "turning point" in the industry.

 

"Cargolux will continue to invest in new technology and develop digitalization to drive the supply chain change and become a leader in sustainable operations," it said.

 

At the end of December 2022, the total fleet of 30 aircraft comprised sixteen Boeing 747-400 freighters (10 B747-400Fs and 6 B747-400ERFs) and fourteen Boeing 747-8 freighters.

 

The carrier said this uniform fleet enables Cargolux to respond to changing market conditions in a flexible and timely manner.