HK connection plays key role in fortunes of cargo carrier

PUBLISHED : Thursday, 23 June, 2005, 12:00am
UPDATED : Thursday, 23 June, 2005, 12:00am

IN THE PAST 12 months, Hong Kong has become the biggest single station in the entire Cargolux Airlines International network, accounting for roughly 16 per cent of the company's US$1.2bn turnover last year.

The Luxembourg-based cargo carrier now has 15 flights per week from Hong Kong to Europe. The routes vary but include direct flights once a week to Helsinki, three times a week to Barcelona and three times a week to Malpensa (Milan) before terminating in Luxembourg.

Due to traffic rights, the services to Malpensa and Helsinki are offered in co-operation with Alitalia and Finnair. Other stopping off points between Luxembourg and Hong Kong include Abu Dhabi, Sharjah, Budapest, Damascus, Baku, Istanbul, Bangkok and Kuwait.

'We offer a faster and direct service to all points on our network. In the north we transport cargo to Helsinki and Scandinavian countries. In the south to Spain and Italy, and Luxembourg in the heart of Europe,' said Kevin Shek, the airline's director of sales and marketing, Asia Pacific.

Celebrating its 35th anniversary this year, Cargolux has operated out of Hong Kong since the 1970s when the territory was Asia's major manufacturing hub.

Despite its limited traffic rights in Asia, Cargolux competes out of Hong Kong with airlines such as Cathay Pacific, which has cargo routes intra-Asia to Europe. In Europe, it goes head-to-head with airlines such as the Netherlands-based Martinair.

Luxembourg's geographically central position between Germany and France served the airline well, Mr Shek said. He said cargo transiting Luxembourg reached Frankfurt faster than air cargo routed directly from Hong Kong to Frankfurt.

'When the high season hits, cargo in Frankfurt airport can be held up for a while before clearing customs and being delivered to the warehouse for distribution. Luxembourg airport is smaller and the procedures much faster,' Mr Shek said.

'The aircraft arrives, we offload it, the cargo goes through customs and our warehouse is right next to the highway from where our trucks deliver directly to customers' warehouses all over Europe.'

This market-to-market accessibility gives Cargolux an edge in an industry that is competitive and operating under severe cost restraints due to high fuel prices.

Like many airlines, Cargolux is measuring its growth this year in single digit figures, probably about 5 per cent to 6 per cent, according to Mr Shek. Being competitive means it cannot raise rates via a surcharge to clients to offset the fuel price increase.

Load imbalance is another factor affecting growth. More than 80 per cent of Cargolux's cargo from Hong Kong to Europe, for example, comprises manufactured goods from China such as toys, clothing, shoes and electronics.

The demand in Europe for these goods is high, so flying with full loads from Hong Kong is common.

But fewer goods are manufactured in Europe and are less in demand in Asia, so there is a load imbalance on outbound flights to Asia from Europe.

'The load imbalance is getting more serious. If it was balanced that would mean that we had a full load of cargo from Asia to Europe and from Europe to Asia. This is the ideal case but it just doesn't happen any more.'

The imbalance problem combined with the prohibitively high cost of fuel, will make 2005 a year of consolidation for Cargolux.

In the past five years the airline has worked hard to develop more destinations in Europe, the Middle East and Asia to better serve its international freight forwarder customers.

Its customer base is now greatly diversified with 20 per cent in the United States, 10 to 15 per cent across Asia and the rest in Europe.