Lufthansa Cargo recovers in part thanks to e-commerce

The recent results of the freight forwarders have suffered from the effects of higher air freight rates in the latter part of the year. The latest results from Lufthansa Cargo show where all the money went.

For the financial year 2017, revenue at Lufthansa Cargo jumped by 21.1% to €2.5bn. Revenue cargo tonne-kilometres was up 7.4% and operating income rose by 21.2% to €2.6bn. The load factor increased from 66.6% to 69.3% despite the fleet expanding by 3% as measured in available tonne-kilometres. EBIT moved out of the loss seen in 2016 into a profit of €240m.

The clear implication of revenue climbing by double-digit growth on the back of single-digit growth in volumes is that the prices charged have risen significantly. Lufthansa was a bit coy about this. It preferred to describe the situation as being “achieved in a challenging market environment. In addition to a strong focus on cost optimization, high-performance products and flexible capacity management, Lufthansa Cargo’s sales strength also made a significant contribution.” In other words, it has an effective sales operation.

What Lufthansa did admit was that despite the “challenging market environment”, certain market segments, such as “the express business”, saw substantial revenue growth. It appears that even Lufthansa is benefitting from the growth in internet retailing, presumably through the AeroLogic joint venture with DHL Express.

It is interesting to think back just a year or so, when the business was aggressively shrinking capacity in the face of poor rates and low growth. That was a contrast to the bullish description of the market made by the division’s CEO Peter Gerber on Friday, that “air freight is and will remain a growth market. For certain goods, air freight is the only choice. Above all, export-strong regions such as Germany are an excellent long-term basis for the air freight business”.

It might be suggested that there is a continuing restructuring of the airfreight sector, with a shift towards internet retailing as a driver of demand. For the moment, that is good for the likes of Lufthansa Cargo, but it would be unwise to be complacent.

Source: Transport Intelligence, March 27, 2018

Author: Thomas Cullen


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