LH Puts Cargo Project on the Backburner

Lufthansa’s Executive Board has stopped plans for building a state-of-the-art distribution center called LCCneo at the Cargo City North of Frankfurt airport, home base of Lufthansa Cargo. The decision for investing into the complex has been postponed and will be tabled again in 2017. Constructing the LCCneo is a central pillar of the freight carrier’s future program “Lufthansa Cargo 2020”.

Lufthansa exect Harry Hohmeister announced the LCCneo delay  /  company courtesy
Lufthansa exect Harry Hohmeister announced the LCCneo delay / company courtesy

´Roughly €700 million. That’s the estimated price the LCCneo would cost if being built. Too much for the moment, said the airline’s Board member and Chairman of LH Cargo’s Supervisory Board Harry Hohmeister today (29 April) at his company’s general meeting of shareholders in Hamburg. However, Hohmeister emphasized that the multi-million euro investment for constructing the facility is only postponed and will be put on the Board’s agenda in 2017 again. But he also indirectly indicated that it might even take longer for the project to getting green light, by speaking of a deferral of “at least two years.”
The manager went on to say that LH Cargo’s existing ground infrastructure at Rhine-Main airport is quite efficient, enabling the carrier to continue to work successfully on its self-imposed targets during the coming years. 

No successful competition without modern ground infrastructure
According to Hohmeister, the decision to postpone the LCCneo plans is an important step to improve the investment-grade rating of Lufthansa Airlines and enhance the financial profile of the entire LH Group.
Simultaneously, the LH Executive Board reaffirmed the need of modern ground infrastructure as a pre-condition for a successful, profitable and sustainable business conducted by Lufthansa Cargo.
The Board’s decision to shelf the LCCneo project for the time being comes as no major surprise. This was indirectly indicated at various occasions in recent months when Lufthansa’s financial situation deteriorated as result of many factors (CargoForwarder Global reported on 23 March). One annoying break factor, upsetting many clients, was the continuous walkouts of the pilots which caused revenue shortfalls of more than €200 million. Also, the carrier’s passenger business turned out to be disappointing in 2014, demonstrated by the management decision to pay no dividends to the airline’s shareholders. Finally, the crash of the Germanwings aircraft in the Alps, caused intentionally by the co-pilot, will cost the airline’s parent Lufthansa big money.

Image of LCCneo / courtesy LH Cargo
Image of LCCneo / courtesy LH Cargo

Bitter announcement
To put it in a nutshell: it’s Lufthansa’s strained financial situation that led Herr Hohmeister and his Board colleges to freeze the funds intended to be spent on building the LCCneo. 
It’s a bitter announcement for CEO Peter Gerber and the entire LH Cargo. In spite of this decision we will continue implementing our program “Lufthansa Cargo 2020,” the LH Cargo Chief emphasized. This includes the modernization of the freighter fleet, the digitalization of all paper-based processes, implementing a new IT landscape for handling processes that will be finalized within 2015 and deepening the ties with Japanese carrier ANA Cargo.
However, in case of the LCCneo the carrier’s future program needs to be rebranded.  Instead of “Lufthansa Cargo 2020” it would be more appropriate to name it “Lufthansa Cargo 2022 – or later.”

Heiner Siegmund

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