• Skip to main content
  • Skip to primary sidebar

Ad – Bottom Content

Payload Asia

Lufthansa Cargo “cautiously optimistic”

Payload Asia

Leaderboard

  • Home
  • Latest News
  • Channels 
    • Carriers
    • Aircraft Manufacturers
    • Airports
    • Courier & Mail
    • Freight Forwarders
    • Express
    • Ground Handling & Cargo Terminals
    • Logistics
  • 11th Payload Asia Awards
    • Winners Circle – 11th PLA Awards
    • About
    • Categories
    • 10th Payload Asia Awards
    • Winners Circle – 9th PLA Awards
    • Winners Circle – 10th PLA Awards
    • Awards Gallery
  • Subscribe
  • Advertise
  • More 
    • Event Calendar
    • Directory
    • Contact Us
Share

Lufthansa Cargo “cautiously optimistic”

April 14, 2012 by PLA Editor

The year 2011 was a very eventful year for the air cargo industry noted Lufthansa Cargo chairman and CEO Karl Ulrich Garnadt kicking off the division’s annual results press conference. Indeed for Lufthansa, it would not be unreasonable to describe it as an über eventful year with apparently more surprises to come this year if recent comments that the carrier may exit dedicated freighter operations if the Frankfurt night ban becomes permanent, are any indication. By Donald Urquhart in Frankfurt.

While facing many of the same challenges as its industry counterparts – a rapid market decline after a stellar 2010 and bright start to 2011 with key China and India markets hit particularly hard; rising fuel costs; natural disasters including flooding in Thailand and the Japanese tsunami and nuclear accident and the impending emissions trading scheme in the EU – Lufthansa Cargo also faced a number of unique challenges. Chief amongst these was the total night-ban at Frankfurt airport which was slapped on practically overnight and problems with its joint venture cargo airline in China, Jade Cargo.

In the end, despite these adverse conditions, it was the second best year ever for the cargo division of Lufthansa which turned in an operating profit of 240 million euros on a 5.3 per cent rise in earnings to 2.9 billion euros. “Lufthansa Cargo turned in an outstanding result in a demanding market environment,” Garnadt emphasised pointing to the “very respectable” operating margin of 8.5 per cent.

He attributed this success primarily to cost discipline, a focus on quality improvement, a broad product range and flexible capacity steering dictated by demand. “We raised our quality level markedly again during the year and attained top marks anew in all areas. We will stay on that path and further expand our quality lead,” he said pointing for instance at the investment in the Lufthansa Cargo Cool Center for temperature-controlled shipments at Frankfurt Airport.

Sharpening its business focus and shedding non-core assets also helped plump the bottom line and create a leaner organisation with the selling of its shares in subsidiaries Traxon, LifeConEx and Tianjin AirCargo Terminal (TAT). The disposal process for time:matters, the carrier’s urgent parts logistics business, is also ongoing noted Peter Gerber, Lufthansa Cargo board member Finance and Human Resources. “We are not against staking holdings in other entities, we just want them to be relevant to our core business,” he added.

The carrier also benefited from surging German exports that both “fired growth and increased market share,” for Lufthansa Cargo, Garnadt said. But for the key Asian markets, particularly China and India, the demand drop necessitated the shifting of capacity to other markets, which for Lufthansa saw it move to the trans-Atlantic trade which enjoyed reasonable growth last year. The weakness can be seen in the carrier’s traffic revenues which saw Asia-Pacific revenues fall four per cent while the Americas were up a full 23 per cent. Europe rose by 14 per cent while Africa and the Middle East were up seven per cent.

“This is one of the strengths of Lufthansa Cargo, we can flexibly get freighter capacity to where the demand is,” he says. But as for China and India the carrier doesn’t expect the slack demand to be permanent – “it is a transitory effect,” he says.

On a solid footing

This year’s performance slightly exceeded expectations in the first two months he says, noting that “costs are ok, quality is in the right direction but we took massive capacity out of the market,” amounting to nearly 20 per cent in January and 15 per cent in February. But this will be restored gradually and by the end of the second quarter Lufthansa Cargo’s capacity will be similar to that of the same period last year while the third quarter will see some expansion. By year end the capacity removed from both the Indian and Chinese markets will be restored, he added.

With the ‘Lufthansa Cargo 2020’ programme launched last year, the company has clearly defined its longterm strategy, explained the chairman. And with orders for five new B777 freighters, the upgrading of the IT platform, plans for a new logistics center in Frankfurt to replace the existing 30 year-old facility, as well as other longterm projects, “the key markers are in place to ensure that the company remains industry leader also in 2020,” he said. At the same time, Garnadt was emphatic about huge challenges confronting the airfreight industry in the coming years. The EU’s unilateral stance on emissions trading is notably hitting European airlines and distorting competition. The continuing lack of uniformity in global security standards in the air cargo business as well as the slow certification of known consignors in Germany are threatening to inhibit growth, he said.

Night ban

But clearly the biggest challenge for the cargo carrier remains that of the Frankfurt airport night ban which if made permanent – the court ruling will be confirmed on 4 April – will result in a sustained annual loss of earnings of nearly 40 million euros. Garnadt emphasised that this is a direct loss of earnings and means a “tripledigit” loss in sales. Where this hits the hardest is in Lufthansa Cargo’s high yield express traffic, particularly over the North Atlantic, from which the carrier derives nearly one third of its profits.

“As for the future this will mean a lower growth in the cargo fleet and we will have to reduce our growth figures, but don’t know at this point by how much,” he said. Responding to industry speculation about the cargo carrier shifting to other neighbouring airports like Cologne-Bonn, for instance, Garnadt said Lufthansa Cargo “can’t simply go away from Frankfurt.”

“We have over 40 years of development at Frankfurt which has unparalleled infrastructure in Europe and the combination of cargo transport – freighters, belly and road – through Frankfurt cannot be so easily replicated. You can only do it in one place as efficiently and that is Frankfurt – this is the drama of the situation for Lufthansa Cargo,” he added.

Indeed the drama has been ratcheted up a few notches following comments by Garnadt to a German magazine in which he says the current solution of scheduling take-offs and landings only before 22:00 and after 05:00 was “just a stopgap”. “It costs money and does not pay,” he said before going on to say the cargo carrier would consider disposing of its entire freighter fleet – now standing at 18 MD-11Fs – if necessary.

The year ahead

Looking ahead Garnadt says Lufthansa Cargo remains “cautiously optimistic for 2012, with an upturn in demand expected in the second half,” he said, adding that demand-driven capacity management will be the way forward.

New in the summer schedule for the cargo carrier’s global network is Chongqing, which will be served with four MD-11F flights weekly, as well as Shenyang in northeastern China and Qingdao (Tsingtao) in Shandong province courtesy of the expansion of the Lufthansa passenger network. Also on the freighter network, flights to Detroit are to be stepped up to twice-weekly connections and in South America twiceweekly MD-11F flights ex-Frankfurt are set to be introduced to Montevideo, capital of Uruguay. India’s Kolkata (Calcutta) has been reinstated with the summer schedule and will be operated once weekly.

On a longer term scale the carrier is aiming to raise earnings by a minimum of 70 million euros yearly from 2015, Gerber announced. “That will furnish the foundations for Lufthansa Cargo’s ambitious future plans,” he said.

Jade(d) Cargo

The story of Jade Cargo has been a persistent bugbear for Lufthansa Cargo over the last year, if not longer. Problems in reaching an agreement on an injection of equity capital with its joint venture partner in China and the ultimate tailspin of the China air cargo market resulted in Jade’s operations being suspended at the end of the last year. An agreement with a new investor, Chinese transportation group UniTop, is set to enable Jade to take to the skies again, but not much longer with Lufthansa’s involvement. “Jade is looking in a better position than we thought possible three months ago,” said Lufthansa Cargo CEO Karl Ulrich Garnadt who added that the current management will stay in place at least temporarily.

Clearly Lufthansa Cargo has had enough of the joint venture that has suffered bouts of problems from its very inception in 2004 at which time it lingered in a odd situation of having aircraft but no pilots. “As long as we get permission from the authorities, we intend to exit our stake,” Garnadt said, adding that the company had taken a loss of almost 16 million euros from the joint venture in 2011.

Garnadt, who said Jade was preparing to restart flights, declined to say if the restructuring deal would involve UniTop buying Lufthansa’s 25 per cent stake in Jade, but analysts speculate that UniTop will acquire both Lufthansa Cargo’s share along with the 24 per cent stake held by German development bank DEG. The remaining 51 per cent is held by Shenzhen Airlines.

Much of the financing trouble with Jade escalated after Air China took over Shenzhen Airlines and is said to have refused Lufthansa’s argument for a further capital increase to enable the airline to keep its fleet in the air.

Other Topics: Air & Cargo Services, air cargo, Air Cargo Asia, air cargo freight, Air Forwarding, air freight, Air Freight Asia, Air Freight Logistics, air freighter, air freighting, Air Logistics Asia, Air Shipping Asia, airlines cargo, airways cargo, asia cargo news, cargo aviation, Lufthansa Cargo “cautiously optimistic”

Related Articles

  • Xeneta reports resilient air cargo market despite July IT outage
  • Lufthansa Cargo presents commitment to transforming the aviation industryLufthansa Cargo presents commitment to transforming the aviation industry
  • cargo handling services of Vienna AirportLufthansa Cargo continues to rely on the cargo handling services of Vienna Airport
  • exclusive commercial rights on first key laneVietjet Air Cargo, Teleport deepen partnership with exclusive commercial rights on first key lane
  • Budapest Airport Revolutionises Cargo Operations With Kale Info Solutions’ Airport Cargo Community System
  • RTX Pratt And Whitney's West Palm BeachRTX’s Pratt & Whitney announces GTF MRO capacity expansion at West Palm Beach facility

Ad – After Content

Primary Sidebar

Trending News

  • Singapore Airlines Group continues progress on decarbonisation journey with Neste and World Energy agreements 136 views

  • 2024 marks record air cargo year for Vienna Airport: 22% cargo growth with 15.3% increase in pharma handling compared to the previous year 127 views

  • DHL transforms DHL Health Logistics campus in Florstadt into a European pharmaceutical hub as part of its multi-billion investment strategy 109 views

  • APL Logistics opens first-of-its-kind flow-through center in Jakarta 106 views

Payload Asia Awards

Subscribe To
Our Newsletter



Payload Asia continues to be the authoritative source for informative, accurate and up-to-date news and information on the air cargo industry and related sectors.

With its updated and refreshed look the online edition continues to provide high quality coverage on the Asia-Pacific, India-Middle East, Europe-CIS, North & South America and Africa air cargo markets.

© 2024 Harvest Information. All rights reserved. Privacy Policy

Partner Sites : Asia Food Journal and Television Asia Plus .

We use cookies and similar technologies to improve your browsing experience.
Continuing to use this site means you agree to our use of cookies. I agreeRead More
Privacy & Cookies Policy

Privacy Overview

This website uses cookies to improve your experience while you navigate through the website. Out of these cookies, the cookies that are categorized as necessary are stored on your browser as they are essential for the working of basic functionalities of the website. We also use third-party cookies that help us analyze and understand how you use this website. These cookies will be stored in your browser only with your consent. You also have the option to opt-out of these cookies. But opting out of some of these cookies may have an effect on your browsing experience.
Necessary
Always Enabled

Necessary cookies are absolutely essential for the website to function properly. This category only includes cookies that ensures basic functionalities and security features of the website. These cookies do not store any personal information.

Non Necessary

Any cookies that may not be particularly necessary for the website to function and is used specifically to collect user personal data via analytics, ads, other embedded contents are termed as non-necessary cookies. It is mandatory to procure user consent prior to running these cookies on your website.

Analytics

Analytical cookies are used to understand how visitors interact with the website. These cookies help provide information on metrics the number of visitors, bounce rate, traffic source, etc.

Performance

Performance cookies are used to understand and analyze the key performance indexes of the website which helps in delivering a better user experience for the visitors.

Advertisement

Advertisement cookies are used to provide visitors with relevant ads and marketing campaigns. These cookies track visitors across websites and collect information to provide customized ads.

Save & Accept

Stay Updated!

Subscribe now to receive the latest news, updates, and exclusive insights. Don’t miss out!

 

By submitting this form, you consent to receive marketing emails from Payload Asia. You can revoke your consent to receive emails at any time by using the SafeUnsubscribe® link, found at the bottom of every email.

Disclaimer: Translations on this website are automated using Google Translate. While we strive for accuracy, please be cautious, as machine translations may contain errors. For critical or sensitive content, consider seeking professional human translation. We are not liable for any reliance on the translated content.

1