The moods within the Lufthansa Group could not be more different at the moment. While the passenger arm of the airline reported a record loss of 6.7 billion euros for 2020, the cargo division posted a record profit of 772 million euros (CargoForwarder Global, 04MAR21). However, air freight growth will not continue like this forever, CEO Dorothea von Boxberg indicated in her virtual meeting with the international media.
When explaining the annual results, Mrs. von Boxberg spoke of the “extraordinary circumstances” that led to the skyrocketing profit achieved in 2020, clearly beating earnings achieved in 2010 (342 mio euros), Lufthansa Cargo’s previous record year. The good times will last for a while, Mrs. von Boxberg forecasted, but last year’s figures are unlikely to be repeated in 2021 or after, given that once global passenger traffic picks up again, easing the current capacity squeeze, rates will drop once more.
However, Lufthansa Cargo did not just benefit from the external circumstances mentioned above, complemented by favorable fuel prices. The carrier had also done its homework properly. For instance, the fleet was streamlined, phasing out most of the aging MD-11Fs and replacing these with Boeing 777Fs. Due to their higher loading capacity (105 tons vs. 91 tons) and lower fuel consumption, trip costs per 100 tons flown were pushed down by 15%. This was complemented by efforts to further digitalize sales processes and streamline activities in Lufthansa Cargo’s Frankfurt headquarters, to name just 2 decisions leading to 70 million euros in internal cost reduction.
As far as the coming months are concerned, Lufthansa Cargo considers itself well positioned. In this context, Dorothea von Boxberg points to the China business, which is doing well due to ongoing high exports. Similarly, imports into the USA are flying high, due to their restocking of warehouses, and, in the airline's European core market, confidence is growing that the economy is on the upswing again, despite the persistent Covid-19 threat. Particularly in Germany, the automotive business is running fairly strong again, demand for pharma transports is rising, and e-commerce is forecast to reach 20% in growth by the end of the year. “Particularly cross-border e-commerce is outpacing domestic transportation,” she stated.
Further investments and goals
When looking ahead, Lufthansa Cargo anticipates a bright future with GDP expected to return to pre-pandemic levels during the course of this year, leading to ongoing high demand for air transportation.
Regarding future tasks, innovations, and investments, the carrier will
- focus on the modernization of its Air Cargo Center in Frankfurt to provide its customers with top quality handling on the ground. There, 80% of the carrier’s global volumes are processed.
- remove physical documents from fulfillment processes (eAWBs or eDGD)
- accept and check shipment data also off airport 24/7 with instant and automated customer feedback
- extend the electronic booking option for spot rates, which already is available in 50+ markets
Another hot issue standing high on Lufthansa Cargo’s to do list, is its sustainability program to offset greenhouse gas emissions. This can be achieved by using lightweight containers as standard ULDs, working in partnership with forwarding agents to carry out SAF-flights, as recently executed by Lufthansa Cargo and DB Schenker – something that will be done once a week beginning 01APR21, or by using green energy solely within the DACH region (Germany, Austria, Switzerland).
Cargo and a leisure network – challenge or chance?
Despite the above indicated tasks, one issue remains undecided: How LH Cargo will react to the parent company's strategic shift, reducing business travel and increasing leisure flights. This will result in network changes, with destinations such as Mauritius, the Maldives, Namibia, or the Dominican Republic possibly given higher schedule priority – hence, locations that are anything but hotspots for the air freight business. "We will respond to this as soon as the first results and consequences of these strategic realignments are visible,” Mrs. von Boxberg said in response to CargoForwarder Global’s question.
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