Europe’s largest freight carrier, Luxembourg-based Cargolux is reaching ever more customers through new deals with Chinese and Emirati partners. Richard Forson, President & CEO of Cargolux, says that a growing fleet of low-emission aircraft will be hitting the skies.
Can you briefly describe Cargoluxís reputation and how Luxembourg stands apart from the other players in the cargo industry?
In the cargo industry, Cargolux is regarded as a premium brand in terms of transportation, air cargo and box storage systems. Over the last six years, we have seen that air cargo volumes have been steadily increasing for Cargolux, having a positive impact on Findel airport, our main base. Today, we are the largest freight airline in Europe, in terms of the number of dedicated freight aircraft, and we currently operate a fleet of twenty-seven 747s, which represent a significant amount of cargo capacity in the market. People use Luxembourg as Cargolux is recognized as one of the key players in the air cargo market. Luxembourg is able to handle all of the freight, thanks to the logistics setup that we have. The performance of the airport itself is also extremely good. Hong Kong International Airport, for example, is around 11% YTD 2017 versus 2016, whereas if we take a look at Findel’s performance, it is around 16% to 17% on average in terms of volumes handled compared to the previous year. Although Luxembourg Airport is not the size of Hong Kong, Frankfurt or other big hubs, the infrastructure that it does have is used to its maximum.
What is your expansion plan for the cargo industry infrastructure?
At this stage, they are expanding the cargo ramp at Findel. Currently, it can accommodate up to eight 747 aircraft and to the airport is in the process of increasing that number up to 12 to be parked at the same time. In addition, we have seen significant growth in our fleet. Over the last six years, we almost doubled our fleet in terms of the number aircraft that we operate. The expansion of Findel infrastructure is welcomed.
What are the key ingredients to Cargoluxís success?
The two major strengths of the company are its human capital and its flexibility towards its customers. Cargolux will always find a solution for the needs of our customers. That has been the norm for the airline. A third strong point for us is the fact that we operate a one-type aircraft fleet. This way, we have the capability to swap aircraft without causing any disruptions in operations. This helps in the flexibility that we offer to our customers; we change fleets on a continuous basis.
Can you comment on your new strategic partnership with Emirates Sky Cargo?
We now are able to offer destinations that we could not offer before. Emirates Airlines, through especially it passenger network, reaches more destinations than we can cover. Because we are a freighter-only airline, flying to destinations that do not require 747 capacity does not work for us. However, through the cooperation with Emirates, which started in May 2017, we will now be able to offer more destinations to our customers. Also, we have one dedicated 747 for their use, a number that could grow.
What will be the impact of the joint venture you signed in June 2017 to create Henan Cargo Airlines in terms of reach, market share and competitiveness?
Cargolux has a 25% share in Henan Cargo Airlines, while Chinese shareholders hold the remaining 75%. The airline will be able to offer service to destinations, especially outside of China, that we cannot. It is important to understand that this is not a Cargolux subsidiary airline. We are a minority shareholder and the destinations that they intend flying to are complementary to what we do.
What are some other challenges that lie ahead of Cargolux?
Some of the challenges depend on the extent to which the industry and the global trade continue to grow, as well as the rate at which the industry infrastructure is coming into operation. There are always going to be irrational players in the market whose intention is not to operate sustainably but to grow market share and volume. Regarding Cargolux, we need to make sure that we can deal with this and more importantly, ensure that that we meet the expectations of our customers.
What is Cargolux’s plan to digitize operations?
Anything that exists today in paper form is soon going to be digitized. We need to keep in mind, though, that the process has to be precise, especially from a business perspective. Before we start digitizing, we have to form the process that will be used in the future; if we digitize without optimizing the process, we are not going to achieve anything. Digitization is an enabler and it will also play a crucial role in our business in the future. The only way to get use information and analyzing it correctly is through digitization and data analytics. When I carry out a transaction, I need to capture all the necessary information at the beginning. Once I have got that in the system, I can analyze it. I want to allow my customers to interrogate this information as related to his shipment and when it moves. The other thing to consider is artificial intelligence, which is also important, because digitization is going to result in huge amounts of data being collected. The human brain, even though it is the most complex computer that exists, cannot analyze this huge amount of data in a short space of time, whereas with big data and analytics, you have the possibility of using the power of a computer and other self-learning systems to analyze all of that data for you. It makes predicting the future a bit easier than how it was in the past. From a company’s perspective, the analysis of all the data is going to be crucial. If you have systems that continuously increase intelligence automatically, thanks to their algorithms, they become more and more efficient, as time goes by.
Can you give us some example of innovations that you have implemented in Cargolux, such as smart digital technologies and green efforts for freight transport?
In terms of green development, we analyze how we can cut down the consumption of fuel. This is a major project in Cargolux that is achieved by using software to assist us in reducing fuel usage. This project is being developed not only to reduce unnecessary consumption of fuel but more importantly, to reduce the impact on the environment. At this stage, we optimize our procedures and optimum route plans using a lot of manual input. In the future, our systems will do that automatically for us in order to reduce our consumption of jet fuel. It amounts to a significant amount in terms of savings that we can achieve, while also reducing our impact on the environment. In terms of the cargo warehousing related to the Luxembourg Airport, we are continuously improving all the processes regarding the throughput. For the same infrastructure that you have, you can increase your volumes without necessarily increasing space. Finally, we invested in a new fleet of 747-8F aircraft, which are a lot more environmentally friendly both in terms of emissions and noise, compared to all the older generation models of the same aircraft. They don’t come cheap; it is an expensive project. That’s why sustainability in the industry is the number one priority. Our strength is that we can operate sustainably for a long time and if we grow, we grow sustainably, even from an environmental perspective.
What is the importance of the US market for Cargolux, and what are your plans for the US market?
The US market is the biggest consumer market in the world. The Chinese consumer market is growing really quickly as well. If the Chinese market continues to grow at this rate, it will probably exceed the US. However, the US consumer market will undoubtedly remain a significant one for all types of products. In terms of capacity in the US, we adjust our capacity accordingly based on market demand. We have direct flights out of Europe heading towards the US as well as from Asia directly into the US. The US today represents a very important trading partner for a lot of countries around the world.
How do you see the future of the cargo industry in Luxembourg?
I believe that there will always be a need for airfreight. The biggest question for me is what is technology going to do with the airplane. At this stage, the biggest jump in technology in respect of aircraft is moving from the piston engine to the jet engine and from there you have gone into more efficient jet engines. Also, today there are unmanned vehicles, where you do not need a pilot. I do not know how acceptable that will be in the future for passenger planes, but from a cargo perspective, it might well be possible. The technology to do this exists today. What we need is the will to make the jump.