For the third time in a row, Lufthansa Cargo CEO, Dorothea von Boxberg presented a record annual result during a press briefing on Friday (03MAR23). However, global air freight flows and yields are tending towards normal levels once more, she says. Although she did not provide a financial outlook, this points to lower sales and profits in 2023.
But first to her presentation where she focused on the results achieved by Lufthansa’s freight arm in fiscal 2022. These are more than impressive. Sales leaped by 22%, reaching an all-time high of 4.6 billion euros versus 3.8 billion generated the year before. Adjusted EBIT totals 1.6 billion euros, plus €100 million year-on-year. Sales measured in freight ton km stayed flat at €7.2 billion, while capacity increased 17%. However, the freighter fleet’s utilization plummeted 9.9% due to declining demand from the second half of 2022 onwards and the shift to lower deck transportation options offered by the fast recovery of the Lufthansa passenger network. “This strong growth trend in the belly segment continues unabated and accounts for roughly half of Lufthansa Cargo's transport capacities offered to the market,” the CEO illustrated.
Bellies are back
In the 2023 summer flight schedule alone, cargo will be carried on board of more than 7,000 flights per week operated by the Lufthansa Group members comprising of Lufthansa German Airlines, Austrian Airlines, Brussels Airlines, Eurowings Discover, and SunExpress, she explained. Subsidiary Swiss Air Lines traditionally presents its own annual results, including cargo figures. Currently, market observers assume that the Zurich, Switzerland-based carrier has also finished 2022 with a substantial surplus.
Volatility is the only constant in a fast-changing world
Yet, it appears that the party will come to an end in 2023, as macroeconomic perspectives are deteriorating, and global political risks dampen expectations. Citing Seabury statistics, Ms. von Boxberg speaks of a “normalization” caused by freight flows shifting back from air to ocean as port closures, particularly in China, are over and inventories are still well filled. These are the two key factors particularly dampening transport demand. Added to this, is the volatile political situation mainly caused by the Russian war on Ukraine, which makes medium- and longer-term forecasts very difficult. This war alone, which forces Lufthansa Cargo and its European peers to circumvent the vast Russian landmass due to Western sanctions on/to flights between Europe and the Far East, ties up the capacity of 1.6 cargo aircraft, the CEO said. It distorts competition and benefits mainly Chinese cargo airlines given that China did not sanction Russia. Flying across Siberia on the way to Europe and back results in shorter flight times and less fuel burn, favoring Air China Cargo, Cainiao, or SF Airlines, but also players like Ethiopian Cargo, which just launched twice-weekly flights connecting Shenzhen and Belgium.
Focusing on “China + 1”
She confirmed that the two most important markets for Lufthansa Cargo remain China and the USA, with particularly Southeast Asian countries such as Thailand and India gradually gaining in importance. This “China + 1” dubbed strategy is reflected in the flights to Vietnam, where Hanoi was added to Ho Chi Min City in OCT22. The carrier is thus strengthening its presence in the two flourishing Vietnamese economic regions, offering the market 250 tons of cargo capacity per week on board of its B777F fleet to and from Vietnam.
Launching A321F flights has paid off
Addressing fleet issues, she said that a significant number of older freighters would retire from service if yields continued to decline as expected. This should serve to reduce the supply of capacity and stabilize rates. The Triple Seven freighters operated by Lufthansa Cargo, particularly the seven B777-8F still on order, are very fuel efficient (-13% compared to the current B777F fleet), further reducing greenhouse gas emissions once operational.
Turning to the two leased A321F serving intra-European and north African routes (Dublin, Madrid, Tunis, Cairo, Tel Aviv, among others), she spoke of “nice results in 2022 on the sales side.” In 2023, two additional A321P2F will be added to Lufthansa Cargo’s short- und medium haul fleet, reinforcing the network offering the market charter options. “Primarily, the freighters cater to the demand of e-commerce,” she explained.
No main deck into Africa
On the intercontinental network side, no major changes are planned in 2023. “We remain flexible and react to market demand,” was her noncommittal statement. Asked whether Lufthansa Cargo will again operate a freighter to Sub-Saharan Africa as it used to prior to Covid-19 (to Johannesburg and Nairobi), the CEO remained vague. “This is not on our current agenda, but can’t be excluded for the future. Africa is covered extremely well by Brussels Airlines which serves many destinations there both with cargo and passenger services.”
Touching decarbonization targets, she pointed to her company’s ambitious SAF program, in which DB Schenker, K+N, Dachser, and DHL, as well as several other European companies are participating. She lauded the fact that, for the first time, two leading Japanese forwarding agents have joined the SAF bandwagon: Kintetsu World Express (KWE) and Yusen Logistics, a subsidiary of Nippon Yusen Kabushiki Kaisha.
Moving into a circular economy
Sustainability, she stressed, remains high on the airline's agenda. “There are many small improvements that we have achieved, such as the application of Shark Skin to the freighter fleet, which is under way, lowering fuel burn and thus greenhouse gas emissions.” Another example is the use of thinner foils to wrap pallets or loose freight shipments. “We are moving into a circular economy in this field since the foils contain a portion of recycled plastic and Lufthansa Cargo takes all foils back after use.”
Final question from CargoForwarder Global: “When will annual financial statements be presented on site again, as they always were pre-Covid?” Answer from Communications Director, Jacqueline Casini: “We plan to do that, and we will!”
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