A third hub for Cargolux?

SHANGHAI – Speaking at the Air Cargo China event in Shanghai today, Cargolux CEO Dirk Reich hinted that his airline might move from its current dual-hub strategy to a triple-hub strategy, with the third hub located somewhere in the US.

Two years ago, when Luxembourg-based Cargolux added a second hub in the Chinese city of Zhengzhou, many in the air freight industry questioned the carrier’s chances for success. Zhengzhou might be a major high-tech manufacturing center, but it was not a global trade hub like Shanghai, Beijing, or Hong Kong. Offering charter service to Zhangzhou to pick up pallets of iPhones now and then was one thing, but a hub?

At the time, Cargolux did not have much choice. Establishing a hub in Zhengzhou was part of the agreement under which Henan Civil Aviation & Investment Co (HNCA, a financial vehicle of the Henan provincial government) took a 35% stake in the carrier. But fast-forward to the present, and it is Cargolux that is laughing. Mr. Reich said that just two years after launching its first flight between the Luxembourg and Zhengzhou hubs, Cargolux has now surpassed 100,000 tonnes on the route, with 50,000 tonnes carried in the last eight months alone. And, in addition to the seven weekly 747 freighter frequencies connecting Zhengzhou to Luxembourg, Cargolux operates a further seven frequencies from the Zhengzhou hub, serving Chicago, Milan (home of its Cargolux Italia subsidiary), Kuala Lumpur, and Singapore.

Of course, there is more to Cargolux’s focus on China than just the establishment of a second hub. As part of the stake sale agreement, Cargolux and HNCA have formed a new joint-venture all-cargo airline. The carrier, Cargolux China, which will be based in Zhengzhou, is expected to begin operation next year with three 747 freighters.

While service to Africa, Oceania, and Latin America may be added in the future, Cargolux China’s initial focus will be on the trans-Pacific trade lane. Mr. Reich said China-US routes would account for about 80% of the carrier’s business, with the remainder coming from intra-Asia traffic.

When asked if the Cargolux China would consider a different aircraft type, Mr. Reich quickly brushed the idea off, saying the airline would stick to what it knows, “and that’s 747s.” He added that aside from e-commerce-driven express delivery and integrator operations, he has yet to see a model for the profitable operation of smaller aircraft types. However, he did not discount the possibility of ACMI-leasing other aircraft for operation from the Zhengzhou hub if the need arose.

Cargolux China has not yet received regulatory approval for its proposed schedule, but routes applied for include:

• Zhengzhou-Chicago-Mexico City-Guadalajara-Chicago- Zhengzhou

• Zhengzhou-Mexico City-Guadalajara-Chicago- Zhengzhou

• Zhengzhou-Columbus (Rickenbacker)-Chicago- Zhengzhou

• Zhengzhou-Dallas/Ft. Worth-Los Angeles- Zhengzhou

• Zhengzhou-Singapore-Melbourne-Singapore- Zhengzhou

• Zhengzhou-Tokyo (NRT)-Seoul (ICN)- Zhengzhou

• Zhengzhou-Ho Chi Minh City-Hanoi- Zhengzhou

• Zhengzhou-Ho Chi Minh City-Dhaka- Zhengzhou

• Zhengzhou-Dhaka- Zhengzhou

Turning back to Cargolux’s overall strategy, Mr. Reich showed a map of the world, saying: “If you look carefully, you can already see some future developments. We have Luxembourg as our European Hub, and we have a functioning and growing hub in Zhengzhou.” He then pointed to a circle drawn over the central US, and added, “but we still need something over here to realize our vision of becoming the global cargo carrier of choice.”

He did not provide a timeline for the addition of this potential third hub, or any clue about its location. Our guess would be Chicago (or possibly Columbus), but time will tell.