Cargolux is the largest cargo airline in Europe. It operates an all-Boeing 747 fleet between 90 destinations globally. Strengths include its reliability and expertise in cargo handling. Operating from Luxembourg airport provides direct motorway connections in Europe. However, weaknesses include higher operating costs of older 747-400Fs versus newer 747-8Fs. Opportunities exist in forecast cargo market growth in Asia and from e-commerce. Threats include competition from passenger belly cargo and higher fuel prices impacting its four-engine fleet.

1. JosephThompson21232533
Cargolux: SWOT Analysis
Cargolux is the biggest all-cargo airline in Europe. Flights started in November 1969, with the
airline flying ad-hoc and charter flights from Luxembourg using a Canadair CL-44. In
September 1970, the first scheduled Cargolux flight went to Hong Kong. In 1973, Cargolux
purchased its first jet aircraft – the Douglas DC-8, and then in 1977 its first Boeing 747.
During the 1980s, Cargolux struggled financially, hit hard by the global rise in fuel prices. A
program of measures was initiated at the end of 1982 to strengthen the company by
restructuring its financial basis and organisation. It was the launch customer for both the
747-400F and the 747-8F, and now operates a fleet consisting entirely of these aircraft
types. (Cargolux, 2015)
Cargolux now flies to 90 destinations in over 50 countries, including both major hubs such as
Hong Kong and New York, and smaller airports such as Xiamen and Calgary. It has its head
office at Luxembourg Findel Airport in Sandweiler, Luxembourg. Cargolux has more than 85
offices in over 50 countries. Its shareholders today are Luxair (35.1%), HNCA (35%), BCEE
(10.91%), SNCI (10.67%) and the Luxembourg State (8.32%). The largest shareholder (Luxair)
is the flag carrying airline of Luxembourg, and operates scheduled services to destinations in
Europe, North Africa, the Mediterranean and Middle East with additional charter and
seasonal services. Cargolux is not listed on the stock market, and is not part of any major
cargo airline alliances, stating it ‘prefers to conclude route alliances with best positioned
partners at various gateways, providing a direct advantage for all airlines and clients
involved’. In 2013, Cargolux employed 1224 people in Luxembourg, and a further 1606
worldwide. (Cargolux, 2015).
One of Cargolux’sBoeing747-8F
aircraft landing.(Cargolux,2015).

2. JosephThompson21232533
Strengths:
Cargolux has established itself as a high-quality, reliable air cargo carrier. Cargolux’s proven
expertise means it can handle all kinds of cargo, including live animals, perishables and
outsized freight. Their staff are highly trained in providing the best possible handling of its
customers’ shipments. Over the years, creative concepts and a constant drive for quality
have earned Cargolux a number of awards, including the ‘Best All Cargo Airline’ award that
the company received for four consecutive years by the readers of the trade magazine Air
Cargo News. (Cargolux, 2015).
Cargolux does not just operate cargo flights. As part of its operation, it also offers third-
party maintenance services at its maintenance hangar in Luxembourg, which is capable of
holding two aircraft. The company is specialised in Boeing 747 line and hangar maintenance
up to and including C-Checks. It also offers a range of maintenance services and can work on
other Boeing aircraft, including the 737, 757, 767 and 777. (Cargolux, 2015).
Luxembourg is main hub of Cargolux’s worldwide flight operations and European road
feeder services. Luxembourg airport offers uncongested air space and a modern
infrastructure. With a large warehouse capacity and annual cargo transit capacity of 950,000
tonnes, the Luxair CargoCenter is the 8th largest air cargo hub in Europe. Customers passing
through Luxembourg benefit from direct connections to the European motorway network,
allowing fast transport to all major European cities. Shipments avoid the congested
metropolitan areas of the larger European airports and reach their destination faster.
(Cargolux, 2015).
Cargolux operates services to 90 destinations in over 50 countries on all 6 continents. It has
recently added Zhengzhou in China and Cairo in Egypt to its network. Cargolux also
supplements its network through Joint Venture Agreements with other airlines. The most
recent example of this is a Joint Venture Agreement with Oman Air. This will enable Oman
Air and Cargolux to jointly access new destinations and will also contribute to the
development of Oman’s logistics hub. In addition, it enables Oman Air to expand its cargo
operation. Furthermore, the agreement will provide Cargolux with access to the belly
capacity of Oman Air’s fleet and create new opportunities for freight transportation from
Oman’s modern facilities. It is also anticipated that the Joint Venture will deliver significant
benefits for the economy of the Sultanate of Oman. (Cargolux, 2015), (airlineroute.com,
2014).
Cargolux ranked 7th amongst the world’s cargo carriers at the end of 2014, and is the largest
all-cargo airline in Europe. In 2014, the company sold 828,658 tons of freight, nearly 10%
more than in 2013. Revenues grew by 10.1% to US$ 2,098 million. Freight ton kilometres

3. JosephThompson21232533
grew by 11.2% to 6,364,260 and the load factor reached 66.9%. Cargolux had a global
market share of 3.7%. (Cargolux, 2015).
Cargolux currently operates 11 B747-400Fs and 11 Boeing 747-8Fs, with one more on order.
Furthermore, Cargolux was the launch customer for the B747-8F. The first aircraft of this
type joined the fleet in October 2011.The B747-8F offers significant benefits in terms of
increased payload, reduced fuel burn as well as noise and emissions reductions. The average
fleet age of the Cargolux fleet is 7.9 years. This is better than the industry average, with
Lufthansa Cargo having an average fleet age of 12 years, and DHL Air UK 25.8 years.
(planespotters.net, 2015).
Weaknesses:
Cargolux has very active pilot unions. The most recent dispute was over Cargolux’s decision
to transfer 25 of its pilots to its Italian offshoot – Cargolux Italia – which operates as a
separate airline with a separate Air Operating Certificate (AOC). Its pilots also have a
different contract, earning less money and flying different routes. Both the OGBL and LCGB
unions have expressed disapproval that Cargolux Italia continues to operate one dry-leased
747-400F under its own AOC, despite the fact that EU rules state it could use Cargolux’s
Luxembourg AOC. The unions have recently entered talks with sister airline and shareholder
Luxair, and strike action is expected. (Lennane, 2014).
Another dispute between Cargolux and its pilot unions is over the number of crew duty days
per year. Cargolux made a request to raise the number of available crew duty days to a
minimum of 200 per year, up from 186. Pilot representatives declined to move forward on
this demand and still show a strong resistance without an alternative offer. The number of
200 crew duty days is still lower than the industry average, and Cargolux Italia crews work
236 days per year. (Cargolux, 2015).
The costs of operating the older Boeing 747-400F are considerably higher than those of the
747-8F. In terms of fuel, the 747-8 costs $29.29 less per nautical mile than the 747-400F,
and can also carry a much larger payload. Also, although the two aircraft types look almost
identical, a pilot cannot hold a license for both aircraft simultaneously, reducing operational
flexibility. (axlegeeks.com, n.d.)
Another drawback of operating an all-Boeing 747 fleet is that due to the sheer size of the
aircraft, Cargolux are either unable to fly into certain smaller airports, or have to pay excess
charges. This means that in some cases they are restricted to using large, congested
airports. (Wragg, 2007)

4. JosephThompson21232533
Opportunities:
After three years of stagnation, the air freight market is forecast to expand. World air cargo
traffic is forecast to grow by an average 4.7% per year over the next 20 years to reach a total
of more than twice the number of revenue tonne-kilometres Overall, world air cargo traffic
will increase from 207.8 billion RTKs in 2013 to 521.8 billion in 2033. (Boeing, 2014).
The most growth is expected in East Asia, particularly domestic China, at 6.7% per year.
Cargolux currently flies to 14 destinations in the Far East, with 5 being in China – Beijing,
Hong Kong, Shanghai, Xiamen and Zhengzhou being the most recently added. Infrastructure
at these airports and other airports across China is being significantly improved to cope with
the predicted growth. The Asia–North America and Europe-Asia markets will also grow
slightly faster than the world average growth rate and strong growth is also expected in the
Latin America-Europe and Middle East-Europe markets. (Boeing, 2014), (Cargolux, 2015).
E-commerce is the fastest growing retail market in Europe. In 2015, overall online sales are
expected to grow by 18.4%. This rise is represented globally. These are mostly sales of
transportable goods such as books, DVDs, clothing and larger goods. These goods will
require delivery, and this is something that Cargolux could benefit majorly from, increasing
their load factors and revenues. (retailresearch.org, n.d.).
Over the past 25 years, the aviation industry has become more and more deregulated.
Airspaces that are currently deregulated include North America, Europe, and most recently
Southeast Asia. The most important aspect of deregulating airspace sectors is the guarantee
of the third, fourth, fifth, and seventh freedoms of the air, which are:
-Third and fourth freedom rights: The right to fly from an airline’s home country to a foreign
country, and vice versa, without government approval.
-Fifth freedom rights: The right to fly between two foreign countries during flights
originating or ending in an airline’s home country.
-Seventh freedom rights: The right to fly between two foreign countries while not offering
flights to an airline’s home country.
Of most interest to Cargolux are the fifth and seventh freedoms, as they mean that routes
do not all have to include Luxembourg (the country in which Cargolux is registered) if the
freight market is not viable. If the domestic Chinese market were to be deregulated, this
could be a major opportunity for Cargolux. (aseanbriefing.com, 2015).

5. JosephThompson21232533
Threats:
There are many other all-cargo carriers operating similar services to Cargolux both inside
Europe and internationally. Competitor all-cargo airlines include Lufthansa Cargo, DHL and
FedEx with its European network. Competition is based on factors such as capacity,
frequency and number of destinations. Also, most airlines carry cargo in the belly hold of
their passenger aircraft; in fact it is estimated that more than 50% of global air cargo is
transported this way. With the passenger market expanding quicker than the cargo market,
this could potentially take business away from Cargolux. (Popescu, 2010)
By 2025, it is forecast that the price of oil will increase to $103.6 per barrel, almost double
what it is today. This is likely to increase further beyond 2015. This will affect all airlines, but
could be particularly damaging for Cargolux due to the fact that all of their aircraft have four
engines. The airline also operates a fleet of vehicles. Higher fuel prices are likely to have a
direct impact on Cargolux’s profit margin. (knoema, 2015)
The growing popularity of the internet may have its benefits, but recently email and other
forms of electronic messaging have almost completely replaced the postal letter. If this
substitution of traditional postal mail with digital alternatives continues to increase, cargo in
the form of mail will be more or less wiped out, resulting in lower revenues for Cargolux.
(DataMoniter, 2007)
While having only one main type of aircraft in its fleet has many operational advantages,
there is a risk that if a problem were to develop with a number of that type of aircraft,
whether within Cargolux or another airline, Boeing could ground the entire worldwide fleet
of those aircraft. This is very unlikely; however it did occur with the Boeing 787 Dreamliner,
an aircraft with which the Boeing 747-8F has a number of similarities. If this were to occur, it
would be unlikely that Cargolux could continue to operate. (scientificamerican.com, 2014)
Cargolux’saircraft
can be loaded
throughtheir
noses.(Cargolux,
2015).

6. JosephThompson21232533
References
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