Lufthansa’s cargo business remains in the red
02 / 08 / 2016
Lufthansa’s cargo division recorded its fifth quarterly operating loss in a row as competition on global airfreight markets remained “intense”.
The German airline group’s logistics business, which includes Lufthansa Cargo, ULD specialist Jettainer and its other investments, recorded a 16.4% year-on-year decline in second-quarter revenues to €496m.
Earnings before interest and tax (ebit) came to a loss of €27m compared with last year’s loss of €68m. The last time the logistics division recorded a profit was in the first quarter of last year.
For the half year, revenues declined by 19.1% year on year to €976m and ebit was down 187.5% to a loss of €46m.
Lufthansa said the result was down to strong competition.
“Airlines from the Gulf and Bosporus region, in particular, are increasing their freight capacities, especially due to their many new passenger aircraft,” it said in the interim report.
“Global airfreight capacity is growing faster than demand. This has recently resulted in significant overcapacities, which are having a highly adverse impact on Lufthansa Cargo’s revenue.”
The airline has already announced a spate of measures to help combat the conditions, laying up two of its MD-11 freighters and announcing plans to shed up to 800 jobs worldwide.
It has also reduced capital expenditure this year, spending a total of €15m during the first six months compared with €95m for the same period last year and staffing numbers were down 3.2% at the half year mark.
As well as cost reduction measures, the cargo airline has launched a new basic cargo offering, added a service aimed at private individuals, will invest in other products, has expanded its partnerships to increase the reach of its network and began selling capacity on sister airline Eurowings.
“A comprehensive cost-cutting programme was launched back in autumn 2015, which is intended to reduce the annual costs of staff and service providers by €80m” Lufthansa said.
“Higher revenue is also expected to come from innovative products and a particular proximity to customers.
“Secondly, new services will open up additional customer segments, as with the myAirCargo product, which provides transport solutions for private individuals.
“Thirdly, the closely-knit and wide-ranging network will be expanded further by developing partnerships.
“Fourthly, the company will continue to drive forward digitalisation along the entire logistics chain.”
On the operational side of the business, first-half traffic declined by 3% to 4bn revenue cargo tonne km, while capacity was down 1.4%.
As a result of demand declining ahead of supply, its load factor stood at 66.6% compared with 67.7% last year.
Meanwhile, the overall airline group saw half-year revenue decline by 2.1% to €15bn, ebit was up 11.9% to €518m and net profits more than halved to €429m.
“The Lufthansa Group achieved a solid result for the first half-year,” says Carsten Spohr, chairman of the executive board and chief executive of Deutsche Lufthansa.
“We see progress in all the areas where we can influence the changes ourselves. And this is particularly true for our cost structures and the growth of Eurowings, the development of which is progressing well.”
“At the same time, our industry has to prepare for a difficult second half-year”
“The terrorist attacks in Europe and also the increasing political and economic uncertainties are having a tangible impact on passenger volumes.
“The forward bookings, in particular for our long-haul services to Europe have declined significantly. We expect the high pricing pressure to continue.
“In view of this, and as we recently announced, we expect to report an adjusted ebit for the full year which is below the previous year’s.”