The logistics arm of the Lufthansa passenger airline remains by far the most profitable member of the Lufthansa Group. This has been affirmed by the operating results now presented for the 1st half of 2021, which documented an all-time revenue height achieved by the freight airline.
According to a press release, aired last Thursday (05AUG21) by the Lufthansa Group, its cargo arm has generated a record-breaking adjusted EBIT of 640 million euros in the first half of 2021,
thus breaking another sound barrier. It is the highest ever in the history of the carrier following an EBIT of 277 million euros in a y-o-y comparison. Much to the delight of CEO Dorothea von
Boxberg: "We are pleased that we were once again able to significantly increase our earnings in the first half of 2021. This enables us to further invest in the topics relevant to our
customers, such as digitalization, sustainability, and our infrastructure at the hub in Frankfurt.”
On Way to Surpassing the Magic Mark of 1bn Euros
If the data for the first half of the year is extrapolated conservatively, LH Cargo should exceed the revenue threshold of 1 billion euros at the beginning of or by mid-October. This calculation does not take into account the upcoming peak season in the cargo business or the gradual increase in capacity due to the revival of the passenger business, which ups the belly hold capacity Lufthansa Cargo can sell. This also applies to the Group members Brussels Airlines and Austrian Airlines, whose freight activities are also entirely managed by Lufthansa Cargo.
The Group's press release does not provide any further explanation for the outstanding financial success of the freight subsidiary. Instead, Lufthansa CEO Carsten Spohr and his management team forecast a lasting positive trend in air freight, strongly benefitting their cargo daughter’s sales: “Continued structural capacity constraints in the global freight business are expected to support the revenue and earnings development of Lufthansa Cargo in the coming years,” reads the statement.
In addition to the ongoing C-19-related constraints on lower deck capacity of pax aircrafts, which continue to keep prices for freight shipments high as the gap between transport demand and supply tends to last, there are further reasons for Lufthansa Cargo's outstanding half-year results.
Many Successful Course Settings
For instance, the "Proflex" savings program announced at the end of 2019 has reduced the cost base remarkably. In line with this, LH Cargo succeeded in pushing down the fixed and variable costs by EUR 50 million euros each consecutive year. Another big point was the rollover of the fleet by phasing out most of the aging and kerosene consumptive MD-11 freighters and operating a uniform fleet of Boeing 777F instead. This has allowed for increased productivity and reduced expenses.
Another big achievement are the route joint ventures agreed between LH Cargo and ANA Cargo, United Airlines Cargo and Cathay Pacific Cargo respectively. They are based on metal neutrality and revenue sharing, so they benefit the parties equally. In addition, the partnering airlines have significantly expanded their intercontinental cargo network, which makes them even more attractive for forwarders. Successful digitization initiatives, the inception of the e-commerce specialist Heyworld, and an extremely flexible route policy are further advantages that undoubtedly positively impacted the half-year results.
Reducing Climate-Damaging Fuel Burn
CEO von Boxberg also points to another sector where her airline is making its mark: “We are very proud that we undertook further milestones towards CO2 neutrality in the second quarter. For example, we were able to offer a weekly CO2-neutral cargo flight for the first time with our partner DB Schenker. This makes Lufthansa Cargo the first cargo airline to offer this service."
Final take away: It can be assumed that some corks have popped at Lufthansa Cargo last Thursday. However, since the company's revenues flow into the coffers of the parent company due to an internal accord, LH Cargo probably did not toast its success with champagne, but with the slightly cheaper sparkling wine.
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