Cargolux reports full year results 2011

HIGHLIGHTS:

- Company incurred a full year net loss of US$ 18.3 million compared to a US$ 59.8 million profit in 2010
- Revenues rose 8.4% to US$ 1,867.4 million compared to US$ 1,722.6 million in the prior yearKey Performance Indicators
- Tonnes sold declined 3.6% to 658,800 compared to 683,380 in 2010
- Average load factor softened 2.5 percentage points to 70.8%
- Daily average aircraft utilization decreased by 1.9% to 15:28 block hours
- FTK decreased 4.6% from 5,284 million in 2010 to 5,039 million in 2011

Albert Wildgen, Cargolux Chairman, said: 'It is difficult to pinpoint one reason specifically, as a combination of factors impacted our performance negatively, including excess capacity in the markets, steadily rising oil prices, an unfavorable fleet mix coupled with higher wet leasing costs and reduced network flexibility resulting from the delays in the Boeing 747-8 program. Looking to 2012, we expect trading conditions to remain more than challenging.

Capacity decreased by 1.3%, reflecting the weak demand for air freight throughout the year. With a 0.5% decline compared to 2010, overall block hours including wet leased capacity remained relatively flat at 86,090 hours. Daily aircraft utilization dropped 1.9% to 15.28 hours during the review period. Cargolux Airlines and Cargolux Italia carried 658,800 tonnes of cargo, 3.6% less than in the previous year. Production, measured in freight tonne kilometres (FTK), decreased 4.6% and reached 5,039 million. Load factors dropped by 2.5 percentage points to 70.8%. Asian exports, where the chargeable tonnage fell by 15.4% and Africa, with a decline of 14.3%, were particularly affected. In contrast, export tonnage from the Americas grew by 10.1% while exports from Europe were relatively strong. In fact, Germany had a record year in exports and traffic to Asia was stable. In short, the weak economy mostly affected our import business into Europe, mainly out of Asia, but also from flower markets like Kenya and Ecuador.

Commenting, Frank Reimen, Cargolux President and CEO, said: 'After the remarkable recovery in global air freight markets in 2010 following a disastrous 2009, we saw load factors and yields come under pressure from the second half of 2011, in particular in the last quarter, as a result of weakening demand and rising capacity with a supply/demand gap at year end of 5.7%. Besides, our business was adversely affected by record fuel price levels. All in all, these negative developments led to a consolidated loss of US$ 18.3 million for 2011 on revenues of US$ 1,867.4 million. Therefore, we have developed a comprehensive action plan for 2012 to respond dynamically to the current downturn but also to take advantage of any potential upswing in global air freight markets.'

Network

With the unfolding supply/demand problem, Cargolux continuously adapted its network in 2011. For example, a new tailor-made flight from Shanghai to Luxembourg was introduced with direct transfer connections to São Paulo, Brazil. The Company added a fifth frequency between Hong Kong and Budapest and introduced a new Komatsu - Chicago - New York service in October. Capacity to the United States was increased, growing Cargolux business in certain markets by around 50%, and direct flights were added between the US and West Africa in view of the booming oil industry there. Capacity out of Asia, affected by weak consumer demand in Europe, was reduced primarily by operating fewer frequencies.

Even though 2011 proved difficult for the industry as a whole and the Asian markets in particular, Cargolux operated successfully in the Americas; s