Operating profits take off at Lufthansa’s cargo business

Peter Gerber

Lufthansa’s logistics division saw profits massively improve on a year ago on the back of cost reductions and higher rates.

The division, which includes Lufthansa Cargo and other businesses such as time:matters and Jettainer, saw third-quarter revenues decline by 2% year on year to €587m while revenue cargo tonne kms were down by 30% to 1.6bn as a result of the coronavirus outbreak and loss of bellyhold capacity.

Earnings before interest and tax (ebit) are up from a loss of €49m for the period in 2019 to €169m this year.

Overall cargo capacity at the group was down by 42% on last year, but the load factor improved by 12.6 percentage points to 71.6%.

Lufthansa Cargo chief executive Peter Gerber said: “We’ve done everything to stabilise global supply lines with our freighters and are pleased that this has been so successful.

“We’ll continue to do our utmost to regain the capacity that is important in view of the expected transports of Covid-19 vaccines.”

The carrier said that traffic in the logistics segment and total market freight capacity fell significantly following the outbreak of the coronavirus due to the absence of belly capacities on passenger aircraft; demand for the remaining freight capacities remained high in the third quarter 2020.

Operating expenses fell by 22% to €1.5bn (for the first nine months) due to a volume and price-related decline in fuel expenses, lower belly expenses paid to group companies and lower staff costs; staff and other operating costs were also reduced as a result of the cost-cutting programme ProFlex.

Two new Boeing 777F aircraft were added in the reporting period as part of the planned renewal of the freighter fleet; three of the six MD11 freighters will be decommissioned by the end of 2020; the remaining three MD11 freighters will be retired in 2021.

It was a different story at the overall Lufthansa Group, which announced it would cut capacity to no more than a quarter of previous-year levels for the rest of the 2020 after disclosing a third-quarter net loss of almost €2bn.

It will operate 125 fewer aircraft than originally planned. In administrative areas, only activities that are necessary for operations, legally required or related to the necessary restructuring will take place.

Such measures will help the airline limit average monthly operating cash drain, excluding changes in working capital, capital expenditure and restructuring costs, to around €350m in the fourth quarter.

Lufthansa Group chief executive Carsten Spohr said: “We are now at the beginning of a winter that will be hard and challenging for our industry. We are determined to use the inevitable restructuring to further expand our relative competitive advantage. We aspire to remain the leading European airline group following the end of the crisis.”

The group posted an adjusted ebit loss of €1.3bn in the third quarter and net losses of €2bn. This compares with an adjusted ebit of €1.3bn and net profit of €1.2bn for the third quarter last year. Revenues were down 74% in the quarter to €2.7bn.

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Damian Brett

Damian Brett
I have been writing about the freight and logistics industry since 2007 when I joined International Freighting Weekly to cover the shipping sector. After a stint in PR, I have gone on to work for Containerisation International and Lloyds List - where I was editor of container shipping - before joining Air Cargo News in 2015. Contact me on [email protected]