Lufthansa Cargo confirms future strategy
21 / 03 / 2016
Following closely on the heels of the publication of Lufthansa’s 2015 annual results earlier this week, the German carrier has now gone public with some details on its strategies for future expansion of its airfreight operation.
According to a statement from Lufthansa Cargo, product innovations and an ambitious savings programme will provide a “tailwind” for it this year.
Significant overcapacity in the airfreight market hit Lufthansa Cargo hard last year, its earnings contribution to the parent carrier falling by 40% year-on-year.
Load factors and yields were impacted by the excess in supply over demand for capacity.
But the airline has reacted swiftly to the disappointing news, confirming that it intends to implement a “comprehensive range of measures to counter the decline”.
As well as the concerted effort to cut costs wherever possible, it is also hoping to launch a number of product innovations, while continuing to press ahead with various strategies already laid out in the Lufthansa Cargo 2020 future programme, including cementing close partnerships with other airlines.
“We will still be operating in an extremely challenging market environment in the years ahead,” observed Lufthansa Cargo chairman and chief executive Peter Gerber.
“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.”
Costs are to be reined in as far as possible. In autumn last year, the Lufthansa Cargo Board initiated the C40 cost-cutting programme. It is expected to lead to a reduction in annual costs of at least €40m by 2018.
Its 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,” Martin Schmitt, board member finance and human resources, explained.
“This is how we will generate the profits we need to fund investment in the future of our company.”
In order to open up new growth areas, Lufthansa Cargo is also prepared to invest in an expansion of its freight service offering.
Besides enhancing the product portfolio (including in the highly competitive standard airfreight market), it is also to “address a completely new market segment and consider the transport needs of private travellers”, especially Lufthansa passengers.
Most notably, through the new myAirCargo product, passengers and other private individuals will be able to send any kind of personal item via airfreight, quickly and simply.
Individuals will be able to send large or heavy items door-to-door to international destinations through Lufthansa Cargo, which will also handle customs formalities.
Users of the service will be able to book and pay for the shipment online.
myAirCargo is going to be introduced step-by-step over the course of the year, with the first phase taking the form of an internal pilot.
Roll-out to the market is planned for the summer.
“Lufthansa Cargo has often been a pioneer in the past when it comes to developing and launching new products and services,” Gerber declared.
“We want to live up to this again with myAirCargo.”
Gerber stressed that the freight carrier would continue 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,” he said.
“With our new Boeing 777Fs, we are flying more efficiently and saving more fuel than ever before in our company’s history."
The co-operation 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.”
He went on to emphasise the innovation that Lufthansa Cargo has achieved in its IT development: “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,” Gerber informed.
Despite the challenges that the carrier is expected to have to meet this year, Gerber remained positive in his closing comments.
“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. This is an opportunity we aim to and will exploit,” he concluded.