Cargolux, Europe’s largest all-cargo airline, achieved its best financial results ever in 2022 with after-tax profit of $1.6 billion, but suggested that geopolitics and an influx of passenger capacity will make it difficult to repeat its performance this year.

Luxembourg-based Cargolux said profits increased nearly 22% on $5.1 billion in revenue, a 14.7% gain year over year, on the strength of first-half volumes and yields. Demand sharply tailed off in the second half of 2022, as it did for the entire sector because of inflation, slower economic growth and high inventory levels.

Cargolux said it was significantly impacted by the closure of Russian airspace and Western sanctions on Russia in response to the invasion of Ukraine, which forced it to make longer flights between Europe and Asia, and increased operating costs.

The privately held company is the seventh largest cargo carrier in the world. It offers scheduled and charter air services with a fleet of 30 aircraft comprising 16 older Boeing 747-400 freighters and 14 747-8s. In October, Cargolux announced a firm order for 10 777-8 cargo jets, the next-generation freighter Boeing plans to start producing in 2027, as replacements for aging equipment.

The company also offers third-party maintenance services for 747s, including lengthy C-Checks, at its hangar in Luxembourg.  

Cargolux said that the ongoing conflict in Ukraine denting global trade and the rapid restoration of long-haul passenger services following the COVID crisis, which is increasing shipping capacity via widebody aircraft, will pressure business more this year. The 2022 downturn led to a 2.3% drop in daily aircraft utilization, which is likely to get worse this year. Freighter flight activity across the industry was down 7.4% during the first three months of the year, according to BMO Capital Markets.

Air cargo volumes were down about 11% in mid-April compared to a year ago, with rates 40% lower.

Cargolux’s shareholders are Luxembourg flag carrier Luxair, Henan Civil Aviation Development and Investment Co. in China and two state-controlled Luxembourg banks. The government of Luxembourg owns 8.3% of the airline.

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