Wednesday, April 21, 2010

Cargolux Release Annual Report As Air Freight Shipping Struggles

Europe's Largest All Cargo Airline now part State Owned
Shipping News Feature

LUXEMBOURG – After what they are calling the most difficult year in the history of air freight, Cargolux, based in the Grand Duchy and the biggest all cargo fleet air carriers on the continent, have issued a concise report as to their recent performance.

With shipping in the sector declining by around 20% last year causing a glut of over capacity the company saw a reduction in fleet utilization and load factors, but, most importantly, a reduction in yields. In 2009, Cargolux tonnage declined by close to 11%, but yields were down by over 26%. The daily average aircraft utilization dropped 6.7% to 14.34 hours. Total block hours for 2009 decreased by 9.3% to 83,102 and tonnage fell by 10.8% to less than 630,000 tonnes.

Freight tonne kilometres where down by 11.3% to 4,800 million while available tonne kilometres reached 6,954 million, a reduction of 9.3%. Load factors declined by 1.6 points to 69%. (All figures include data for Cargolux Airlines International S.A. and Cargolux Italia SpA who lease one aircraft from their parent) the resultant reduction in tonnes sold and the decline in yields resulted in a drop in revenue of 34% to US$ 1.3 billion meaning Cargolux recorded an overall loss of US$153 million.

The group retained its existing fleet of 16 B747-400Fs but lower utilisation equated to the equivalent of having two aircraft on the ground during the months of June and July. In September and October, two aircraft were delivered to UPS in a deal that had been concluded before the crisis hit and was intended to facilitate the planned delivery of new B747-8 freighters in 2009. However, by the time those two aircraft left the fleet, the company actually found a need for more capacity, as the markets began to rebound and they found it necessary to lease in up to three extra craft for the last three months of the year.

Production delays for the B747-8F have pushed the first delivery to Cargolux from 2009 to late 2010 which they view with mixed emotions. On one hand, the delay helped to preserve much needed cash although the company could have well used the added efficiency, lower fuel consumption, higher range and payload to reduce its operating costs.

As a result of the losses incurred and to ensure the survival of the company, a re-capitalization of Cargolux became necessary. In November 2009, the company implemented a restructuring of its capital structure in a two step transaction. First, shareholder SAirlines (part of the defunct Swissair Group) sold its 33.7% stake to Luxair, BCEE, SNCI (all current shareholders of Cargolux) and, as a new shareholder, the Luxembourg State. Cargolux’ shareholders approved the creation of an authorized capital of US$200 million, giving power to the board to issue new shares. A capital injection of US$100 million took place before year-end.

The company has been keen to thank its staff for their support in a difficult year and credited them with accepting revised terms such as part-time work, unpaid leave and early retirement schemes for managing to pass through the crisis without any forced lay-offs among its permanent staff.