Will there be an extinction of classical European cargo carriers? There are indications that for some the worst is still to come. In view of the financial results it seems that the wheat is separating from the chaff.
One wouldn’t want to be a financial investor these days with a larger involvement (or better investment) into air transport. Over the past weeks, industry media were full of worrisome messages concerning the European cargo carriers, like the results of Air France/KLM-Martinair’s cargo division exemplifies, losing over €200m (US$ 274m) during the past twelve months.
Similar announcements came from London-managed IAG Cargo (British Airways and Iberia), presenting an 11.8% drop in revenues to €1.03bn (US$ 1.492 billion) and reporting yields down by 2.3 per cent. Interestingly, IAG did not deliver any statements on income. So our assumption is that they are in a somehow comparable position to that of their French/Dutch rival, ending up the year in deep red, too.
The recent management crisis within Cargolux has presumably not helped to significantly better their 2013 results. So far, they haven’t published FY 2013 net profits while they’ve lost €25.2 million (US$ 35.1 million) during FY 2012.
We could easily add ailing Alitalia Cargo or SAS Cargo to the list of loss making units, which means that changes to the detriment of European cargo carriers are already visible. Only exception is LH Cargo that just reported a net profit of €77m (USD 107 million). Presumably Swiss World Cargo also ended up in the black. But back to LH Cargo: the question is how the often as expensive to very expensive criticized carrier is able to achieve profits year after year while each of their major European rivals is losing big money.
A seamless strategy ensures financial success
From our viewpoint, this is achieved by a mix of different measures. These are: LH Cargo’s fast and very flexible to market reaction, their management’s quality beats quantity (of tonnage) philosophy, a very customer focused communication strategy together with high operational efficiency and a strong identification of the employees with their company. Meanwhile, the logistics division of Lufthansa is known as “elite school” for the carrier’s group management: Carsten Spohr, ex Cargo CEO was only days ago appointed Group CEO, to replace Christoph Franz who surprisingly announced leaving the airline next May. As a consequence of this decision, Karl Ulrich Garnardt, Cargo CEO had been appointed head of Lufthansa’s influential passenger division. It’s the second time he takes over a position left vacant by Spohr. At LH Cargo Garnadt will be succeeded by Peter Gerber who also has a cargo background, being responsible for Finances, IT and Human Resources from 2009 to 2012. More recently, Peter Gerber headed Lufthansa passenger division’s Staff, IT & Services units.
The eternal Otto
Above all, Andreas Otto has to be mentioned, Lufthansa Cargo’s Chief Sales and Marketing Officer for the past 14 years. Sitting on the same chair since the beginning of this century Andreas is - solid as a rock - successfully steering the global sales and marketing activities of the German cargo carrier. This “Otto” continuity in this position and function is one of the Cargo Crane’s big assets.
And this is another part of the puzzle that makes Lufthansa Cargo so different from its rivals: while other CEO’s, CSO’s, etc. are all giving great statements of what needs to be changed in air cargo, they often disappear from the scene within 3 years or less (without bringing their projects to an end), while the, in the beginning of his LCAG career often criticized Dr. Otto has been able to turn his long-term projects into success.
Keeping promises is the key to success
Today, each of the key forwarder’s top procurement executives has realized the solid standing of Dr. Otto and his team of talented subordinates around the Globe. And this is obviously today the strongest arguments why Lufthansa Cargo is so different from its main rivals: they keep their promises! It’s that simple. If additional or maindeck capacity is needed in a specific market, Lufthansa Cargo reacts flexible and sales driven. The carrier’s sales and marketing team knows their customers extremely well and retain even full freighter flights at least at break-even level. As seen at AF-KLM-Martinair or Cargolux - that’s not an easy task, considering the fact that rivals from the Gulf or Fareast are heavily subsidized by their states. However, the German cargo carrier has obviously found the right mix by investing into its people and network and a very simple operating routine: do the right things the first time right!
And whoever has been able to steer the cargo arm of Lufthansa during the past (difficult) years, has been trained to be tough enough to run a successful job for the carrier’s more prestigious passenger division. I cannot recall any other common carrier around the globe where this does happen. At rivalling airlines managers that haven’t been successful to run the passenger business have often been moved into cargo.
So the answer to my above raised question in which air cargo carrier it would be worth to invest is quite simple: without doubt, Lufthansa Cargo would (still) be my first choice.