LH Cargo Facing New Cost Cutting Program

The carrier is forced to save more money against the backdrop of declining tonnage and decreasing revenues. Permanent savings in the region of €40 million each year are the target set by the management. Details will be revealed shortly, said the carrier.
Parallel to LH Cargo, competitor IAG Cargo also presented traffic figures that have been less than impressive.

CEO Peter Gerber of LH Cargo will soon announce new cost cutting measures  -  courtesy carrier
CEO Peter Gerber of LH Cargo will soon announce new cost cutting measures - courtesy carrier

While the Lufthansa Group expects record earnings between 1.75 and 1.95 billion euros in 2015 driven by booming passenger figures, low fuel prices and despite repeated pilot walkouts, its cargo arm is forced to further tighten its already narrow belt. This is a consequence of the weak development in air freight which started in May and keeps on going since then. Consequently, adjusted EBIT was almost halved to 35 million euros in a y-y comparison, stated the Group’s CFO Simone Menne when presenting the 2015 quarterly results. 
Therefore, LH Cargo has to bite the bullet and pave the way for an additional austerity program leading to savings of €40 million annually.

 

Targeting efficiency gains
Asked about contents head of PR and internal communication Andreas Pauker told CargoForwarder Global that the plans are still in an initial phase but scope and details will be made public by CEO Peter Gerber soon. “We are not targeting one-off effects but the intended measures shall have long-lasting consequences,” stated Andreas.
Observers expect that the reduction of labour costs will be the consolidation program’s key item.  

Latest traffic figures didn’t really enthuse IAG Cargo’s MD Steve Gunning  -  courtesy IAG Cargo
Latest traffic figures didn’t really enthuse IAG Cargo’s MD Steve Gunning - courtesy IAG Cargo

LH Cargo’s traffic results are much in line with those presented by IAG Cargo for Q3, reporting a €2 million marginal increase of revenues totaling €238 million versus €236 million from July 1 to September 30, 2014.

 

From mass to class
IAG Cargo’s CEO Steve Gunning commented: “The air cargo market has established a ‘new normal’ with excess capacity and reduced demand leading to significant price and yield pressure.” He went on to say that in Q1 the West Coast strike in the U.S. pushed cargo volumes upward, but the following months have seen a return to more challenging conditions, classified as ‘new normal’ by him.
To weather the storm IAG Cargo will further focus on cost control, premium products and partnerships like the capacity sharing model with Qatar Airways Cargo.
Steve is pinning his hopes on his premium product strategy, representing a shift from standard tonnage to temperature sensitive goods, express and other high-yield items.

Heiner Siegmund

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