Exclusive - LH Cargo Stays Committed to Freighters

What have logistics players Lufthansa Cargo and Hapag-Lloyd in common, which topics can they share and learn from each other to synchronize activities and are both companies competitors or rather collaborators in the logistics arena? These and a bouquet of other questions were touched upon at a debate between Lufthansa Cargo’s Chief Peter Gerber and shipping line Hapag-Lloyd’s CEO Rolf Habben Jansen last Thursday during their first meeting ever at Hapag-Lloyd’s Hamburg, Germany  headquarters. The “Air Freight meets Sea Freight” named event, attended by about 80 participants, proved to be a high-level discussion that could be the starting point of subsequent meetings of this kind.

Ensured a successful evening (l > r): CEO Peter Gerber of LH Cargo / Moderator Oliver Detje of media house DVV / Hapag-Lloyd’s Chief Rolf Habben Jansen  -  photo HL
Ensured a successful evening (l > r): CEO Peter Gerber of LH Cargo / Moderator Oliver Detje of media house DVV / Hapag-Lloyd’s Chief Rolf Habben Jansen - photo HL

“Yes, we definitely stay committed to freighters, although I can’t say if we’ll operate 10, 20 or even 25 all-cargo aircraft in about ten years from today.” This was LH Cargo Peter Gerber’s direct answer to CargoForwarder Global when being asked about his company’s future fleet strategy and development. By delivering this clear statement, he differentiated his carrier’s policy from that of his European rivals AF-KL-MP Cargo or IAG Cargo that decided to abandon main deck capacity and concentrate solely on belly-hold transports of air freight.

Showpiece AeroLogic
In the same breath, the manager emphasized the importance of AeroLogic, a 2007 incepted 50/50 JV agreed between DHL Express and LH Cargo, that operates 8 Boeing 777Fs. At the Hamburg meeting, Herr Gerber confirmed ongoing discussions between LH Cargo and Deutsche Post-DHL to further secure the successful development of the joint venture. “AeroLogic has not only reached its targets but has clearly exceeded them until now,” Peter exclaimed.

Germans lack forward-thinking attitude
Hapag-Lloyd’s boss Rolf Habben Jansen pronounced that the growth of container vessels tends to reach its limits. “20,000 TEU giants could be the end of the line, because larger ships would hardly entail any additional economic advantages for shipping lines.” Not to mention the harbours that have to provide the infrastructure to handle the huge masses of containers and major canals that are not passable because of the big vessel’s large draught. Touching Hapag-Lloyd’s home port Hamburg, Habben Jansen expressed his concern that the harbour might lose its international competitive position as Europe’s number 2 after Rotterdam. This because the Elbe River needs to be dredged to enable 12,000 or even 18,000 TEU loaded vessels to steam upstream without the risk of running aground. This issue has been discussed ferociously for more than ten years between the industry, politicians and particularly environmentalists, without consent. Hopefully next summer, the judges of Germany’s Federal Administrative Court will terminate the long-standing legal dispute by delivering a final ruling. Dutch national Habben Jansen compared the long-winded Elbe quarrel with measures taken in Rotterdam: “In Holland they decided more than a quarter of a century ago to build the Maasvlakte to guarantee the deep-water access to Rotterdam. This demonstrates their forward-thinking attitude when it comes to building sustainable infrastructural projects.” This future-oriented step secured the city to strengthen its leadership role as Europe’s number one transit point for maritime goods. He closed this chapter by recommending that the Germans should take this as an example and develop a look-ahead mindset for securing future wealth instead of permanently opposing major infrastructure projects.

Around 80 hand-picked guests attended the “Air Freight meets Sea Freight” event  -  picture: hs
Around 80 hand-picked guests attended the “Air Freight meets Sea Freight” event - picture: hs

Stepchild aviation
Protest was the buzzword motivating LH Cargo’s helmsman Gerber to spur the debate, pointing out the annual losses suffered by LH Cargo that amount to 30 million euros as result of the conflict-ridden night flight ban imposed by judges on Frankfurt’s Rhine-Main airport, the carrier’s number one gateway. Surveys show that less than 10 percent of people living in Germany feel harassed by aircraft noise, with declining percentage, he cited survey results.
Unfortunately, aviation and logistics in general don’t enjoy much respect from the broad public, including leading partisans from left to right wingers and members of the Federal Government. This is shown by the many restraints imposed by politicians on the development of this sector by imposing flight curfews at airports, levying special aviation taxes or by creating cumbersome bureaucratic hurdles. In contrast, the situation at other nations is entirely different, noted Gerber. Take the Gulf carriers, Peter said, which enjoy their state’s full support, shown by their fabulous fleet growth in combination with huge airports built in Abu Dhabi, Dubai or Qatar, financed entirely from public funds. Peter’s recommendation to Berlin’s political rulers: “Germany must decide if an own national aviation sector should be maintained based on commercial principles. If this is wanted, they must ensure fair competition rules, enabling us carriers to successfully weather the storm.”

Three challenging targets
Another topic tabled at the meeting was the forming of alliances. Bundling forces could help to ease the squeeze a bit put on LH Cargo and other European carriers by the state aided Gulf airlines. Gerber pointed out that this strategic tool that led to route joint ventures between LH Cargo and ANA Cargo as well as United Cargo is still in its infancy. Next big steps following the basic agreements between the three carriers are the harmonization of their IT-systems, which will be achieved in mid-2016 and the moving of the partners under one roof at jointly served destinations. Stated Gerber: “This will keep us busy in 2016 among other important issues and will be accomplished in 2017 when we should be able to offer our clients standardized services and a uniform IT system.”

Hapag-Lloyd headquarters at Hamburg  -  photo: hs
Hapag-Lloyd headquarters at Hamburg - photo: hs

Can rail challenge air and sea? 
Asked if the new Silk Road could lead to a modal shift from ocean or air to rail both managers reacted rather relaxed. “For some goods rail transports across the Eurasian land bridge might be an alternative but when looking at the broad picture I remain very calm in view of 300,000 containers that are moved between Far East and Europe each week,” said Hapag-Lloyd’s Rolf Habben Jansen. A single cargo train is capable of carrying around 45 containers. So even if rail transports gain fast ground they won’t really become a competitor to sea freight, concluded the manager.
Nor do they harm air freight, added Peter Gerber. “Our core business consists of flying high value consignments and special products that need to be rapidly transported.” Having said this, the manager praised the e-commerce boom that opens up new opportunities for cargo carriers. At the end of the day it’s a give and take with the entire cake being constantly redistributed between actors engaged in air, sea or surface transportation. 

Unpredictable fuel prices
Touching the current decline of fuel costs both managers surprised the audience by stating that they would prefer somewhat higher prices at a steady level. “This would increase our planning security which is of much higher value than constantly fluctuating prices,” noted Rolf Habben Jansen. Panelist Peter Gerber nodded in agreement. The decreased fuel expenditures have been passed on to the customers by price or surcharge adjustments, assured both managers. 
The trend-setting “Air Freight meets Sea Freight” evening ended with an emphasis on wining and dining at Hapag-Lloyd’s historic building in downtown Hamburg.

Heiner Siegmund

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