LH Cargo Announces Shock Therapy

It can be imagined that sour faces prevailed after CEO Peter Gerber together with Executive Board members Alexis von Hoensbroech, Soeren Stark and Martin Schmitt presented the staff their intended cost-cutting program. Their sad message they delivered to the attendees and Lufthansa Cargo's total workforce of 4,600 headcount was the intended cutting of 700 to 800 jobs, although most of them through early retirement or natural fluctuation. However, some of the employees also applauded this step, knowing about the precarious financial position Lufthansa’s cargo daughter is facing since months. Although the job cuts was the most discussed issue, the LH Cargo management raised hopes of better times ahead by presenting a comprehensive strategy named CARGO eVOLUTION. This masterplan tabled by the freight carrier's Executive Board is based on four pillars: 

Renewing and strengthening the core business
LH Cargo emphasizes that the intention is to grow, together with their customers. They aim to achieve this by concentrating on new products and innovative solutions together with launching a stiff cost-cutting program called C40. This plan is expected to reduce expenditures by €80 million annually, mainly as a result of job cuts. “These job cuts will be as socially acceptable as possible,” the airline says.
The result will be a leaner organizational structure, based on customer needs. “C40 will help us achieve competitive unit costs,” reads their release. The management also intends making it significantly easier to deal with LH Cargo by making processes more efficient at customer interface. The carrier reassures: Lufthansa Cargo’s global network reach and capacity offer will not change as a consequence of C40.

Open up new customer segments
The freight airline also wants to target new customer groups and focus on introducing new services and products. “Starting in summer, we will also be offering solutions to private customers for their transport needs. Furthermore, we are investing in the growing segment of e-commerce-driven transportation,” LH Cargo states.

Expand partnerships
Making the network more attractive and widening the reach is the next point stated in the carrier’s C40 strategy. This shall be accomplished by relying on their own freighters and the network served by the MD-11Fs together with the B777Fs, but also by marketing the belly capacities of Lufthansa, Austrian Airlines and Eurowings. In addition to this, the ties with network partners ANA, United Airlines and Cathay Pacific, based on metal neutrality, will be deepened. 

Lead digitization
Last but not least, Lufthansa Cargo wants to push digitization forward. “We lead the way when it comes to digitization in airfreight,” is their statement. “We want to digitize our core processes and touch points with all of our key partners.” This will increase quality, speed and efficiency within the transport chain. “We are targeting the future potential offered by new technology such as cloud solutions and we want to play a pioneering role within the entire industry in this area.”

The details of the C40 program presented today are the carrier’s reaction to the massive drop in profits. While in the financial year 2014, LH Cargo posted an Ebit of €123 million, last year earnings fell dramatically to €3 million, mainly due to an ongoing overcapacity and throat cut competition but also as a result of the many strike actions the entire airline has suffered from. 

Heiner Siegmund  /  Michael Taweel