With time definite services, a wide range of differentiated products, a global partnership programme which the carrier signed with leading forwarding agents, the creation of subsidiaries to move into niche markets – just to name a few very remarkable points – the carrier was clearly the undisputed benchmark for the industry.
It was Lufthansa (LH) Cargo that delivered the big news and defined most of the standards. A certain attitude of “we are setting the pace” was fostered by many of its up-and-coming executives, most of whom came directly from the benches of universities or academies.
By passing the carrier’s threshold at its Frankfurt headquarters they were ready and very eager to reinvent most facets of the air freight business. But as one critic sarcastically put it, what they unfortunately had forgotten to teach them in school was how to practically build a cargo pallet, or load a freighter.
Under pressure
But as Lufthansa Cargo’s market share in Germany and elsewhere shrank, and the much praised global alliance WOW failed to work, profits began to fall.
Other carriers passed by the once world market leader, be it due to mergers like Air France-KLM Cargo or because of leaner and comparatively less costly and sophisticated operations.
As a consequence, by the end of 2004 the carrier axed 40 per cent of the management jobs mainly at the overstaffed
Frankfurt head office and announced a harsh cost savings program together with a redefining of the strategy.
One year later the then CEO Jean-Peter Jansen announced that the so called ‘excellence + growth programme’ had shown first encouraging results.
The turnaround
Now with Jansen successor Carsten Spohr in command and ramping up the pace, LH Cargo seems to be back on track. This is demonstrated primarily by the operating profit of 136 million euros the freight airline posted in fiscal 2007, an increase of 54.5 million euros year-on-year.
Clearly the ‘excellence + growth programme’ contributed significantly with earnings totaling 258 million euros – 25 million euros above target.
All together the figures “substantiate the growth policy we are pursuing and demonstrating impressively that we can still perform exceptionally even in difficult market conditions,” stated Chairman Spohr during this year’s annual press conference of his airline.
Now, the carrier aims to grow marginally above market average in the coming years. Although a rather conservative and down to earth statement by the still very ambitious airline it is a plan that might just fit the current environment, not to mention the ground seems to have been well paved by the management during the lean years LH Cargo went through.
Strategic changes
Since then some notable changes were put in practice. First, there is the rediscovery of the carrier’s own strength by concentrating on the ‘Lufthansa Cargo Group’ rather than dreaming any further the dream of an alliance called WOW. Meanwhile, most of the business cards of the 4,500 staff have been newly printed – without mentioning WOW.
Next, LH Cargo abandoned any plans of influencing the entire door-door supply chain by emphasising the airport-airport transports plus the ground handling services as core competencies. Further, the enormous number of products including the 1998-initiated time definite programme was cut back sharply enabling the sales people a better overview and deeper understanding of their offerings.
Of high importance was the strategic alliance LH Cargo inked with Deutsche Post’s logistics pillar DHL Express. It resulted in mutual intercontinental flights to North America, Middle East and the Far East. Last year this pact has even been deepened by creating the joint venture AeroLogic GmbH – a 50/50 partnership.
The Leipzig/Halle factor
The carrier announced its intention to deploy up to twelve leased B777LRF that will be based at Leipzig/Halle airport and be utilised by both parties on a number of intercontinental routes.
At the Leipzig/Halle airport DHL has just finished building a huge sorting center for express shipments that was officially opened 26 May, by German foreign minister Frank-Walter Steinmeier and Deutsche Post Chairman Frank Appel.
In addition to this DHL facility, Lufthansa Cargo is also investing in its own spacious warehouse at Leipzig/Halle. On average, seven freighters of the carrier’s fleet of 19 MD-11F are presently utilised for mutual intercontinental services by both partners.
Chinese jade
Meanwhile, Jade Cargo Airlines, of which LH Cargo holds a stake of 25 per cent, has to be mentioned next. Having severe headaches ever since it was founded in 2004 because of pilot shortage things have eased notably lately, confirms Kay Kratky, newly appointed chairman of Shenzhen-based Jade.
By summer the cockpit problem will be solved for good he confirms. Then he expects to have 125 captains and first officers on his payroll. This number suffices to get all six B747-400ERF airborne, he says. So far one of the freighters is still standing at Shenzhen’s tarmac because of lacking personnel.
All three carriers, LH Cargo, Jade and WorldCargo of LH Cargo subsidiary Swiss are the core of an airline group which AeroLogic is set to join in April next year.
In addition to this inner circle, LH Cargo is covering niche markets by having launched a number of satellites like the Charter Agency, the third party air freight manager Cargo Counts, the ULD manager and global market leader Jettainer and last but not least, time:matters, the specialist for same day and highly urgent shipments.
On the ground
Further, there are PACTL, ICCS and TAT – three Chinese ground handling subsidiaries Lufthansa Cargo set up at Shanghai Pudong (PACTL), Shenzhen (ICCS) and Tianjin (TAT).
“We indeed benefit quite obviously from the ground handling service of ICCS here in Shenzhen”, confirms Jade’s helm Kratky. Or as managingdirector of Lufthansa Consulting GmbH, Werner Schuessler states: “Without ground quality there won’t be any quality in air transport.”
The former head of LH Cargo’s Global Cargo Handling Services division was mainly responsible for forming the strategic duopoly of handling and carriage. A step that paid off quite well by giving the LH Cargo club a competitive advantage, he emphasises. Maybe not to climb up to first rank in tonnage, but by offering the global market a competitive and very qualified product.
