As reported exclusively by CargoForwarder Global on March 19, Lufthansa Cargo achieved 2017 one of its best financial results ever. At their annual press conference held at the company’s
Frankfurt HQ last Thursday, CEO Peter Gerber and CFO Martin Schmitt illustrated the figures and announced upcoming projects.
In fiscal 2017, Lufthansa Cargo’s operating profit amounted to €242 million after losing €50 million a year ago. When taking a closer look at the year-on-year changes some figures protrude from the overall result. Above all stand yields that went up a remarkable 14%, leading to a revenue increase of 21 percent or €2,524 million in absolute figures, contrasting the 2016 presented €2,084 million. This all led to an EBIT margin of 9.5 percent, versus a decline of 3.1 percentage points a year before.
All in all, the Frankfurt-based freight carrier enjoyed an impressive financial comeback caused by a number of favorable external factors in combination with internal measures:
Firstly, there was the stark market recovery that commenced in September 2016 and continues until today. Secondly, the carrier’s stiff restructuring program C40 paid off, resulting in annual savings of €70 million. Finally, the exceptional air freight boom in Q4 of 2017 drove earnings steeply upwards as a one-off effect.
“Solid growth” ahead
“We are back on the path of success and growth,” stated the very content LH Cargo CEO Peter Gerber while commenting on the 2017 figures. Although he and the carrier’s head of finances Martin Schmitt were not willing to be specific on 2018 financial and operational forecasts, they were positive that air freight growth will continue, although to a somehow lesser scale compared to the previous twelve to eighteen months. As evidence of the expected “solid growth,” the executives referred to the burgeoning e-commerce market, the ongoing global economic upward trend, increasing buying power of the spreading middle-classes, primarily in China, and technological advancements leading to new products that drive air freight further uphill.
Turning to their so called Cargo Evolution strategy, Mr Gerber lauded the “excellent results” the 2016 initiated joint venture between LH Cargo and ANA Cargo has produced so far. The Cathay JV is on track as well, he said, announcing thirdly that joint operations with United Cargo based on metal neutrality will be kicked off during the course of this year.
Touching digitalization, the CEO announced plans to automate core processes, develop new business models based on the exchange of big data, and a “Rapid Rate Response” project built on an algorithm.
An important political point tabled by him was his plea for open markets enabled by fair trading practices. Artificial tariff barriers are a step backwards, distorting supply chains, producing nothing but losers, he exclaimed. A clear message sent to Washington.
Tentative fleet policy
As to the fleet, Herr Gerber confirmed statements made earlier by the carrier’s head of sales and product, Alexis von Hoensbroech that operating a couple of additional freighters, complementing the carrier’s twelve MD-11Fs and five B777Fs, would be helpful in the light of booming demand. However, by disciplining himself he dismissed such thoughts, affirming a more conservative policy aimed at replacing the capacity of the aging MD-11 freighter fleet on a one-one basis by adding seven Boeing 777Fs to the fleet. The roll-over strategy is scheduled to be finalized by 2022 latest when the sub-fleet of MD-11Fs are completely written off, thus cementing the current uplift capability in the years to come.
Global network of cool terminals to be built
Herr Gerber added to this that he intends to deepen the ties and expand the business with freight carrier AeroLogic, the Leipzig-based 50/50 percent LH Cargo and DHL Express joint venture, currently operating with ten B777Fs. “This joint venture has created a win-win situation for both parties involved.”
Finally, Mr Gerber unveiled plans for building a “global cool network,” consisting of on-airport warehouses offering different temperature sections for handling and processing pharma products and perishables. Next to the carrier’s Cool Center at Rhine-Main Airport, whose capacity was massively enlarged last March totaling 7,800 square meters now, Munich Airport is Lufthansa Cargo’s current runner-up in this endeavor.