In a letter sent to their agents, Lufthansa Cargo has announced a rate increase for standard freight effective September 1, 2016. The Frankfurt-headquartered carrier is the second major freight airline upping prices, after Emirates SkyCargo’s decision published on 8th August to demand more money for flying air freight. Others might follow to curb the global trend of profitability decline.
With their individual price initiatives both Emirates and Lufthansa Cargo are rearing up against the persistent trend of falling rates in a challenging market distorted by high capacity vs
moderate demand. Explains the German cargo carrier in their announcement to the agents: “Insufficient tonnage and overcapacities in many markets have caused rate levels to disproportionately drop
at a fast pace. In order to profitably serve flight connections and make key investments for you, we have been making great efforts to improve our cost structure. In the short term, however, we
must also ensure the profitability of our services.”
Rates go up three to ten percent
Having said this they specify their new rate structure for general cargo, upping charges gradually by three to ten percent, varying between markets and regions. In the short notice to their clients, the carrier stresses that the surcharges levied on fuel and security are not affected by the step.
Only two weeks ago, LH Cargo informed the market about their decision to reduce surcharges from €0.60 to €0.55 per kg chargeable freight weight ex Germany, effective today (22 August). This, because the sum of cost factors included in the airline’s surcharge package has gone south in recent weeks, is stated in the email to forwarders.
At the same breath, LH Cargo assures to continue investing in prime products, modern infrastructure and measures to enhance services further.
No further freighter fleet reduction on the agenda
All in all their price initiatives is part of their double-pronged strategy to better yields and cut costs at the same time. For the latter they have set up their “C40” called savings program, reducing expenditures by €80 million year after year. This includes axing up to 800 jobs worldwide, mainly at their Frankfurt head office and streamlining the organization by flattening hierarchy levels.
If fleet measures are part of the program remains to be seen. Asked by CargoForwarder Global about rumors to mothball some of their remaining 12 MD-11 freighters, LH Cargo’s Head of Communication Michael Goentgens clearly denies any such intentions in the near future.