The logistics arm of the Lufthansa Group doubled its adjusted EBIT year-on-year to 1.5 billion euros, with revenue of 3.80 billion euros. 2021 is the carrier’s second exceptional financial year, following 2020 with earnings, before interests and taxes, of 772 million euros. In view of the continuing capacity bottlenecks in international air transport and extremely high rates, the company should continue to achieve record sales in 2022.
The champagne corks will be popping at Lufthansa Cargo today (03MAR22). Never in the history of the company, have profits been anywhere near as high as in the past financial year. A total of 7.2 billion freight ton kilometers were sold last year (previous year: 6.5 billion). The average load factor improved by 1.7 percentage points year-on-year to 71.0%, while the supply of capacity increased by 8.7% to 10.1 billion freight ton kilometers offered.
High demand for freight capacities combined with a restriction on supply due to a global shortage of freight space capacities on passenger aircraft and impairments to supply chains, especially in shipping, ensured that average yields continued to rise.
2022 forecast specifics will be made public tomorrow
At a virtual press meet tomorrow (04MAR22), the Lufthansa Cargo management will illustrate the 2021 figures in detail and deliver a 2022 outlook. Yet, it is already pretty clear what the reasons for the exceptional business success in 2021 are and how the management sees the further development in 2022.
Taking a brief look back helps. Since last summer, rates remain at high levels. For example: standard freight from Frankfurt to Shanghai costs between 1.50 – 2.50 euros per kg. However, on westbound routes from China to Europe, most carriers are demanding 3.50 – 4.50 USD per kg for general cargo. Transatlantic transports are expensive, too, costing between 3.50 to 5.00 euros per kilogram from Frankfurt, Amsterdam, or Brussels to New York, whilst they are between USD 4.00 to 5.00 on the way back. “And these are just the general market prices. Lufthansa Cargo, as a premium airline, is still well above this level with its rates,” COO, Oliver Krautter from forwarder Quick Cargo Services, knows from his own professional experience.
Price hike likely to continue
So, it is no surprise that he predicts a further upturn of the rate spiral. Russia's war against Ukraine, resulting in large-scale airspace closures imposed by the EU, UK, the USA, and Canada, and Russia's overflight ban for aircraft from Western sanction states in response, the lack of AirBridgeCargo transport capacity on east-west routes as result of the ban, the surcharges recently levied by airlines due to longer flight paths around Russia, and high kerosene prices, as well as the congestion of the maritime industry due to the enormous transport volumes, will all drive air cargo prices up further, Mr. Krautter forecasts.
In addition to the favorable market situation with demand exceeding capacity, Dorothea von Boxberg, Chairman of the Executive Board and CEO of Lufthansa Cargo, mentioned the successful completion of the carrier’s cost-reduction program as a key factor for the positive financial results achieved. Looking ahead, she announced: “In 2022, we will continue to invest in customer focus, air freight innovation, and sustainability.” The launch of A321 freighter services scheduled for 15MAR22, will ease the capacity crunch to a certain degree, at least on regional routes, she said. This offers customers “new options for the ever-growing e-commerce sector, especially in the medium-haul segment. In addition, belly capacities on Lufthansa Group airlines will again increase significantly this year.”
Will Lufthansa Cargo reanimate the Alaska route?
According to information obtained by CargoForwarder Global, Lufthansa Cargo is considering flying to China via Alaska. A similar intercontinental connection already existed two decades ago. It was a “salmon shuttle” operated between Frankfurt, Gothenburg, Fairbanks, and Osaka, flown by MD-11F.
The reason why the topic is now reemerging, is that the southern routes around Russia, between Europe and China, enforced by the flight bans, are very costly and time-consuming. AF-KLM, for example, has already canceled all air services to Korea and Tokyo, and the Japanese carriers ANA and JAL decided last night to completely discontinue their flights to/from Europe. Perhaps combined sea-air transport via Dubai or Al Fujairah will become an attractive option, provided there is sufficient maritime capacity offered by shipping lines.
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