Cargolux orders another 747-8F

As Cargo Facts predicted, Luxembourg-based all-cargo carrier Cargolux placed an order for an additional 747-8 Freighter from Boeing, bringing its total order for the type to fourteen, of which nine have so far been delivered. This is an interesting move, to say the least, and can be seen in two different ways…

On one hand, 2013 turned out to be a better year that Cargolux expected, with volumes and revenue increasing as the year wore on. In addition, the terms of the recent sale of a 35% stake in Cargolux to Henan Civil Aviation Development and Investment Company (HNCA) require the carrier to soon start four-times-weekly service to Zhengzhou, with frequency increases built into the contract. So, with the current fleet profitably occupied on existing routes, more capacity will be needed to serve the new route. On top of this is the fact that 2013 saw the beginning of a reversal of several years of stagnant or falling demand for air freight. With economic growth looking likely to continue in the US and EU, Cargolux obviously believes demand for air freight will also continue to grow. No surprise then that the company said of the new order: “It will support the airline’s growth on the back of an expected increase in cargo volumes fueled by a recovery in world trade growth and improved business confidence.”

On the other hand, there is no shortage of industry observers (including some top-level Cargolux execs) who see the terms of the HNCA deal as folly, and predict that the commitment to serve Zhengzhou will spill red ink all over Cargolux’s books. If that prediction is accurate, then adding another expensive freighter seems like a dangerous move. Cargolux has eleven 747-400 freighters, some of which were to be retired as the remaining four 747-8Fs on order were delivered. Why not just hang on to them, and avoid the risk of adding capacity in a time when the industry is already plagued by too much capacity and other carriers are downsizing their freighter fleets?

Interestingly, however, Cargolux appears to believe that the overcapacity situation may work in its favor. In a recent comment on the fact that combination carriers like Air France-KLM, IAG Cargo, and others were reducing their freighter fleets because abundant belly capacity was rendering freighters uneccessary, Cargolux interim CEO Richard Forson was quoted as saying “Yes, they have the belly-hold capacity available but, within their total network, they will want to provide a complete service to their customers. This may also require main-deck freighter capacity.” Something that Cargolux will be in a position to provide for them… particularly if it orders another 747-8F