Exclusive – LH Cargo Breaks New Grounds

LH Cargo has had enough of dire times with profits going south month after month. To get the carrier back on track the management decided to turn the tide towards achieving competitive cost structures, up revenues by introducing innovative products and push the digitization of processes ahead.

Executive Board Member Product and Sales Alexis von Hoensbroech  -  courtesy LH Cargo
Executive Board Member Product and Sales Alexis von Hoensbroech - courtesy LH Cargo

Too sophisticated structures, too costly operations, too overstaffed. Lufthansa Cargo has been facing this kind of unholy trinity for quite some time as operational and financial data prove. Therefore, the management’s decision to taking a U-turn was overdue in order to securing the freight carrier’s future, hold market analysts.

Cargo eVolution
The freight carrier’s new bearer of hope is a scheme named “Cargo eVolution.” It embraces the former strategy “Lufthansa Cargo 2000” and is aimed at modernizing structures, streamlining processes, developing a leaner organization and saving €80 million each year, including, inter alia, the reduction of up to 800 headcount out of a total workforce of 4,500.
States Executive Board Member Product and Sales Alexis von Hoensbroech: “to avoid any misunderstandings, ‘C40’ is a necessary part of ‘Cargo eVolution’ leading to unified areas of activities to achieve competitive cost structures. In addition, ‘Cargo eVolution’ targets equally at increasing our turnover for example by introducing new customized products.”

Recapturing lost market shares
Asked by CargoForwarder about the latter, the manager unveils exclusively the specifics of the carrier’s upcoming product “td.Basic”. According to Alexis, it’s a very cost-effective proposition, complementing LH Cargo’s current standard product “td.Pro”.
But when compared, some profound differences appear:
“td.Basic”: deferred product, very low rates per kilogram, prices are fixed. Shipments can only be booked online.
“td.Pro”: standard speed, price level is generally higher but rates are negotiable. Multiple booking channels.
Clients that opt for “td.Basic” receive an online booking confirmation and the time their consignment will arrive at the destination airport immediately, within an hour also the planned routing. 
Explains manager von Hoensbroech: “We guarantee customers who book “td.Basic” a specific, longer timeframe during which their goods are transported, maximum 3 to 4 days longer than ‘td.Pro’, depending on routes and available capacity. What they cannot claim, in contrast to ‘td.Pro’, is a specific flight their shipments are loaded on.” This decision is taken by the capacity managers at LH Cargo and depends on routing options, available flights and space on board the aircraft. However, the exact routing will be communicated to the customer after the booking.
Lufthansa Cargo’s main benefit: “td.Basic” optimizes the carrier’s load factor and leads to an improved utilizing of the available capacity.
Alexis adds to this an important aspect, emphasizing that “td-Basic” is not a standby product but comes with a confirmed booking. “And it is Lufthansa quality: The transport time we guarantee our customers we stick to,” he assures.

Icon td.Basic
Icon td.Basic

Substantial price differences
Asked about the price differences separating his carrier’s two general cargo products he prefers keeping tight lipped, referring to compliance requirements. However, he goes as far as saying, “they are quite substantial.” 
Clients who opt for “td.Basic” have to pay a marginal booking fee, depending on the specific size and volume of their shipments. How much this will be Herr von Hoensbroech doesn’t say. “By demanding a certain fee we intend to prevent blind bookings,” he explains.
“td.Basic” will be launched in September. Once available “as first pure online product in air freight worldwide that displays availability and price at the time of booking” (von Hoensbroech), LH Cargo hopes to soon regain losses suffered over the years in the field of general cargo. In a number of public statements, the management had admitted that they concentrated their efforts mainly on special products, while losing some ground at the lower end of the transport range.  

Another customized product tested internally by Lufthansa’s 120,000 staff before going online is “myAirCargo”. It targets tourists and travelers interested in sending souvenirs or other personal items individually and cost-effectively. It will be simply to manage by opening a website or activating the Lufthansa passenger app, leading the user to the booking portal of LH Cargo. “MyAirCargo” is both an airport to airport and a door-door product depending on the choice of the customer and we offer it to the market in combination with forwarding agents,” explains manager von Hoensbroech. So far, the outcome of the internal tests is extremely encouraging, he says. However, it will remain being a niche product not upping the carrier’s transport volumes massively, he qualifies. “But provided every ten thousandth Lufthansa, Eurowings or Austrian Airlines passenger makes use of ‘myAirCargo’ it adds up to substantial quantities.” 
The personalized product will go online next month in Europe and North America, with other regions following thereafter.

Heiner Siegmund

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Comments: 2
  • #1

    CHEN Hua (Tuesday, 19 July 2016 05:33)

    as for TD.BASIC , is it only applicable to specific trade lane or a seasonal product ? in my view, customers will think seriously which one shall be selected ( td.basic or td.pro) only when they meet capacity shortage in the market, in slack season, LCAG like other airlines who are desperately for cargo , if customers want to use LCAG's service, they will compare the rate of TD.BASIC or td. pro( negotiable ) and selected the lower one , with lower yield , LCAG may get more cargo and increase the loadfactor , however the final revenue might not be upward , all in all,revenue speaks louder than loadfactor . In slack season , if overcapacity in certain trade lane, I would like to do a test booking for td. basic and td.pro ( e.g. HKGFRA), and see if any difference on TOA in case LCAG is madly searching for FRA bound cargo , I don't think LCAG will offload the td. basic cargo in HKG but fly to FRA with half empty freighter just in order to keep the td. basic slower than td. pro , will that happen ? now back to peak season, few customer will be able to accept long time delay and repeated offloading for his td.basic cargo, then automatically most customers will reject td.basic and select td. pro, then td. basic will be frozen in peak season .... I wonder if td. basic will be a really good product to LCAG to bring more revenue , but apparently it is good news to forwarders when in low season .

    and one more question , LCAG will have close cooperation with other carriers like CX ,NH, UA , how to streamline their different cargo products ? Will CX cargo , NH/UA also provide such products to the market ?

    last question to LCAG about their my air cargo, passengers can make online booking for their personal effects , how to ensure these passengers( direct shipper) to meet IATA DG BOOK57th edition 's requirement (table 1.5.A--category 1 for shippers ) in case his cargo is a motorbike or other DG shipments( e.g LITHIUM BATTERY SHIPMENTS ),

  • #2

    A. Pauker (Tuesday, 19 July 2016 12:03)

    Dear Chen Hua,

    Many thanks for your comments and questions on our both upcoming products td.Basic and myAirCargo. We are looking forward to announcing further details as soon as the new services are launched.

    Kind regards,