Lufthansa Cargo Plans for Better Results in 2014

Today, LH Cargo presented its 2013 financial figures at the carrier's annual press conference held in Frankfurt. The results were rather disappointing for the carrier.

Presented LH Cargo's 2013 results and the 2014 outlook (from l > r): Head of Corp. Comm. Matthias Eberle, CEO Karl Ulrich Garnadt, CFO Martin Schmitt  /  source: hs
Presented LH Cargo's 2013 results and the 2014 outlook (from l > r): Head of Corp. Comm. Matthias Eberle, CEO Karl Ulrich Garnadt, CFO Martin Schmitt / source: hs

2013, a lukewarm year for LH Cargo. The operating profit reached €77m on total sales of €2,4bn - a revenue minus of about 9% on 2012. These results gave the carrier just 3.2 percent net margin, this is also less than the 3.9 percent margin in 2012. In total, 1.7 million tons of air freight and mail were uplifted - minus 1 percent on 2012.
According to LH Cargo's CEO Karl Ulrich Garnadt the results were below expectations.
Various aspects contributed to these disappointing figures, among others, the continued decline in yields especially from the Far East.
The results may have been less encouraging if LH Cargo's 2013 "Score Program" had not contributed around €70m in cost savings and further revenue enhancement.
The carrier's financial head, Martin Schmitt stated that LH Cargo is placing much emphasis on this program for 2014.

Back to 2013
Although the figures were disappointing, when looking back on the general trend one could argue that the results were satisfactory. However, a 3.2 percent net margin is not something which should become normal for the future. A healthy margin for a carrier who has invested so much in its product would need to be in the range of 7 to 8 percent per annum.
It's time now for LH Cargo to put 2013 behind it, but not to forget that 2014 will present many of the same problems which can affect results as in 2013.
The main issues which contributed to less profit were yield declines, currency fluctuations, high investment costs, and a 7 percent increase in staff costs which was due mainly to adjustments in the staff pension fund ruling.

Mr Garnadt, who will leave his present position within the company as of 1 May, stated that the Cargo division is sticking to its plans on pushing ahead with the LH Cargo 2020 Program which in the long term will continue to position the carrier as the world's number one cargo airline in terms of profitability and innovations. This program entails enhancement of fleet development, a new cooperation with other passenger carriers, the set-up of the Lufthansa Cargo Center, pushing ahead on e-cargo development as well as further quality enhancement and IT development.
Mr Garnadt refrained from disclosing which carrier or carriers are being considered or in discussion with LH with regards to this bilateral cooperation. He did however state that this will be made public in the near future. This in his words will result in LH Cargo being able to expand its network further and give its clients an even better product pallet.
Could this cooperation be something along the lines of the QR/IAG system?

LH Cargo is proud of the fact that their customer satisfaction index has not dropped below the 80% mark during the past years.

Fleet development!
The cargo fleet presently consists of 14 MD-11Fs and as of tomorrow 3 B777Fs.
Two MD-11s have been sold and a further two have been placed in storage and can be brought back into service at short notice if required.
When questioned by CargoForwarder Global about the options for a further five B777Fs, Garnadt stated that the option for ordering aircraft number six has been put back from 2014 to autumn of 2015 for possible delivery in 2019.

LH's Cargo head, in one of his last statements before moving over to the passenger airline, said that the cargo team is optimistic to achieve its targets for 2014 and beyond. He added that the carrier expects airfreight demand to increase moderately.
He finished by stating that "we are not going to complain about the uneven playing field or other challenging factors, but we are going to do all possible to increase LH Cargo's results in the coming years. He again made it clear to his audience that it is up to the politicians to ensure that "a level playing field" is established to avoid distorted competition between commercial and state supported carriers.

John Mc Donagh / Heiner Siegmund