LH Cargo Ups Profit

The air freight daughter of Deutsche Lufthansa has increased its EBITDA in the 2014 fiscal year by more than 20%, surpassing 100 million euros. In contrast, the tonnage transported decreased.

Low fuel costs up LH Cargo operated MD-11F’s profitability  /  source: hs
Low fuel costs up LH Cargo operated MD-11F’s profitability / source: hs

CEO Peter Gerber and his executive board members must have mixed feelings about the 2014 figures. On the positive side, the operational profit increased substantially, leaping from €79 million in 2013 to €100 million-plus last year. Less favorable is, however, the contraction of volumes by 2.7 percent.
From parent Lufthansa’s view, most important is the profit increase, not so much the tonnage flown. This satisfaction is expressed in the company’s release, issued today (12 March): “Despite tough competition within the airfreight sector and higher depreciation needs, the Lufthansa Group’s logistics business was able to maintain its success thanks to its efficient capacity management and its modernized freighter fleet.”   

Overcapacity kills higher cargo revenues
2014 was indeed a challenging year for Lufthansa Cargo. Large parts of Europe maintained flat results due to the ongoing economic crisis, with most Mediterranean regions being particularly hard hit, resulting in declining tonnage (-6.5%). The Russian market nearly collapsed which had a major impact primarily on Austrian Airlines’ turnover, whose air freight business is entirely managed by Lufthansa Cargo. China’s exports decreased, Brazil’s economy came to a near standstill, transport capacity offered to the global markets continued to exceed the demand keeping price pressure up and – above all – yields went further south. 
In the face of these rather difficult external conditions it appears as a miracle that the carrier managed to increase the year-on-year profit by about 20 percent.
Helpful in this context was the sharp decline of fuel prices that almost halved in 2014, easing the costs of MD-11F operations.

Will more 777Fs be added to the fleet?
Cost reductions were also achieved by partially rolling over the fleet, replacing or sidelining some of the aging MD-11Fs by brand new Boeing 777Fs, of which LH Cargo obtained 4 last year, with a fifth Triple Seven freighter arriving in Frankfurt last month. If more new aircraft are to come or the issue be postponed in case the market perspective should be considered to remain critical, shall be decided next fall by the management. 
A summary of LH Cargo activities in 2014 would be incomplete without mentioning the joint venture signed with ANA Cargo on routes from Japan to Europe, with all air revenues flowing into a common cash box. This pact will be intensified in summer, enabling customers to book capacity on either ANA or LH Cargo aircraft on routes from West to East.

Detailed financial and operational data of fiscal 2014 will be presented next Thursday during LH Cargo’s annual press conference in Frankfurt. 

Heiner Siegmund

Write a comment

Comments: 0