News / Cargolux posts $1.6bn record profit but warns of declining market

Cargolux has enjoyed anther year of record results, posting a profit after tax for 2022 of $1.6bn, up from $1.3bn in 2021. Revenues also hit a new high, of $5.1bn, up nearly 15%.

However, block hours fell 1.7%, aircraft utilisation was down 2.3% and load factors fell 3.6 percentage points to 69.2%

In an announcement typical of the cautious style of chief executive Richard Forson, the company said the 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”.

Cargolux noted that 2022 was a game of two halves: H1 was characterised by strong yields and high volumes, but the second half was notable for declining demand and the absence of a peak season.

The carrier also pointed to significant impacts from the continued effects of Covid, as well as 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. The conflict in Ukraine also severely affected supply chains which were already suffering from a lack of raw materials and products. The resulting uncertainty disrupted global commerce and affected the airline’s ability to operate optimally,” it acknowledged.

“The Covid-19 pandemic continued to affect operations worldwide. As sanitary measures eased throughout the year, passenger capacity returned to the market softening demand for cargo space and bringing yields down.”

The carrier said that geopolitical tension continued to affect global trade and it did not see any likelihood of change for the rest of this year, and offered a downbeat outlook (although it’s worth noting that Caroglux is currently engaged in labour negotiations over its new collective contract).

“The return of bellyhold capacity and the emergence of new players in the industry, including multimodal companies, pose a risk of overcapacity in an already declining market,” it said.

Cargolux ended the year with 30 aircraft – 16 747-400Fs and 14 747-8Fs. It noted that the one-type fleet enabled “Cargolux to respond to changing market conditions in a flexible and timely manner” – an advantage it will lose when its new aircraft, ten 777-8Fs, begin to deliver, possibly from 2027.

But losing that benefit comes with another, a more fuel-efficient fleet.

“The pressing questions about sustainability and the increased pressure on airlines to reduce emissions must also be factored in as we face a turning point in the industry,” noted the carrier. “Cargolux will continue to invest in new technology and develop digitalisation to drive the supply chain change and become a leader in sustainable operations.”