Lufthansa rate rise shock
27 / 08 / 2009
LUFTHANSA Cargo is intending to unilaterally increase rates worldwide by 25 per cent, according to a letter (right) allegedly sent out on 27 August by executive board member Dr Andreas Otto (below).
Lufthansa Cargo declined to confirm or deny that the letter was legitimate stating “no comment” to Air Cargo News enquiries.
Otto says that: “In order to meet the current market challenges, we will gradually raise our rates over the coming weeks by an average of 25 per cent worldwide. But even this increase will only partially compensate for the dramatic decline in rates in the last few months.”
The move comes after the last issue of Air Cargo News urged airlines to “Stop the suicidal rates war now” on its front page lead and suggested that airlines raise their rates to commercially viable levels before irreparable damage is done.
However, a 25 per cent rise across the board will be met with incredulity by forwarders. It is certainly a brave move by the airline that risks driving a lot of business to other carriers, if forwarders fail to swallow the rate increase.
Controversially, Dr Otto goes on to state that: “If current market trends continue, we expect that, in the medium term, the majority of the world’s freighter fleet will have to be permanently grounded because there will simply be no economic justification for keeping these aircraft in service.”
This is a damning appraisal of the challenges facing any operator of freighter aircraft and, if true, spells a fundamental sea change in the way that the industry will look. It will also send shockwaves through the corridors of Boeing and Airbus that have invested millions in new and converted freighter products for what was expected to be a growing market.
The letter, which was received from different sources, frankly spells out the challenges facing Lufthansa Cargo and the industry at large in the coming months.
The carrier has been steadily withdrawing its MD-11Fs from service as the crisis in rates and trade continues. The airline is certainly not alone among major airlines in attempting to drastically reduce its exposure to the over-capacity in the market and stem the tide of increasing losses.
It will be fascinating to see if other airlines also take the LH Cargo approach by increasing rates across the board. Any moves will obviously have to be done extremely carefully in the wake of the price-fixing scandal and massive fines currently being imposed on many airlines.