Lufthansa Cargo sets course for future growth
Product innovations and ambitious savings programme to provide tailwind for Lufthansa’s cargo arm.
Lufthansa Cargo is implementing a comprehensive range of measures to counter the decline in the 2015 annual results. Besides an ambitious cost-cutting programme, the airline has announced further product innovations. The company is also pressing ahead with initiatives from the Lufthansa Cargo 2020 future programme, including close partnerships with other airlines.
“We will still be operating in an extremely challenging market environment in the years ahead”, commented Lufthansa Cargo Chairman and CEO Peter Gerber at the presentation of the 2015 annual results. “But we have a clear strategy that has been set up to facilitate sustainable and profitable growth again. With innovative products, superb service and competitive cost structures, we will make the most of the advantages offered by our Frankfurt base.”
In 2015, Lufthansa Cargo achieved an adjusted EBIT of 74 million euros (down 40 per cent on the previous year). After a strong first quarter, demand on the global air cargo markets weakened steadily. On top of this, there was turbulence in the Chinese market and a very strong US dollar, which affected export-driven industries in the US in particular. The numerous strikes of the Vereinigung Cockpit (VC) pilots’ union and Unabhängige Flugbegleiterorganisation (UFO) cabin attendants’ union led to further reductions in transported cargo volumes and revenues. With an impairment for the LCCneo project (with the construction of a new logistics centre in Frankfurt having been postponed in spring 2015 for two years initially), the EBIT (earnings before interest and taxes) fell even more considerably to 3 million euros (2014: 123 million euros).
Chairman and CEO Peter Gerber stressed that the company would stick with the Lufthansa Cargo 2020 future strategy in spite of the decline in profits: “We have set the right course, and the first plants of Lufthansa Cargo 2020 are starting to bear fruit”, said Mr Gerber. “With our new Boeing 777Fs, we are flying more efficiently and saving more fuel than ever before in our company’s history. The cooperation with ANA has gotten off to a superb start and we will be working very closely with another strong airline, United Airlines, in the future. We are also marketing the cargo capacities of Eurowings long-haul flights, which makes our network even more appealing.”
The Chairman and CEO also emphasised the successful, global renewal of the IT landscape: “This has been an important requirement to getting us working efficiently and successfully. This step has also been a milestone in our efforts towards achieving a fully digitised air cargo business.”
In order to open up new growth areas, Lufthansa Cargo is also focusing on offering an innovative product range. Besides enhancing the product portfolio (including in the hotly contested standard freight market), the company will also address a completely new market segment and consider the transport needs of private travellers, especially Lufthansa passengers. Through the myAirCargo product, passengers and private individuals will now be able to send any kind of personal item via air freight, quickly, simply and cost-effectively. “Lufthansa Cargo has often been a pioneer in the past when it comes to developing and launching new products and services”, said Mr Gerber. “We want to live up to this again with myAirCargo.”
As the basis for further success, unit costs will be adjusted in keeping with the challenging market environment. In order to remain competitive, the Lufthansa Cargo Board already initiated the C40 cost-cutting programme in the autumn of last year. It shall reduce annual costs by at least 40 million euros by 2018 through this. The focus is on staff and service provider costs. “We clearly have to further strengthen our competitiveness on the cost side as well if we are to be in a position to grow profitably again in our core business”, said Dr. Martin Schmitt, Board Member Finance and Human Resources. “This is how we will generate the profits we need to fund investment in the future of our company.”
Cargo Board Members Mr Gerber and Mr Schmitt are confident of strengthening the Lufthansa Cargo market position for the long term with this comprehensive range of measures. In spite of challenging competition, including a number of state-subsidised airlines from e.g. the Gulf, the preconditions are very good for Lufthansa Cargo. “We have a superb base in Frankfurt Airport. Nowhere else on our continent are air cargo volumes higher than here in the heart of Europe”, said Chairman and CEO Mr Gerber. “This is an opportunity we aim to and will exploit.” The Lufthansa Cargo Board is expecting this year's earnings (adjusted EBIT) to slightly exceed those of last year.