With the publication of its first-half results, Lufthansa issued a warning that, for the first time in many years, its cargo division was likely to post a full-year operating loss.
We have come to expect losses at Air France-KLM Cargo, but Lufthansa? Lufthansa’s cargo operation had always seemed proof against increased competition and a deteriorating yield environment. Sure, profits were down, but a loss?
Yes, as shown in the chart, Lufthansa reported a first half operating loss of €46 million, and foresees no improvement for the full year. In its first-half report, Lufthansa summed up the situation this way: “Competition on global airfreight markets remains intense. Airlines from the Gulf and Bosporus region, in particular, are increasing their freight capacities, especially due to their many new passenger aircraft. 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.”
Air France-KLM Cargo – no surprise here – is still bleeding, but not as badly as in the past. Air France-KLM’s cargo division reported a first-half operating loss of €116 million – a dismal result, but better than the €141 million loss in 1H15 – as cargo revenue fell 15.8% y-o-y to €1.04 billion. These financial results come against a background of falling demand, as the carrier reported cargo traffic in the half down 7.5% to 4.12 billion RTKs.
One of the steps AF-KLM has taken to reduce the losses is a drastic reduction in main-deck capacity. This continued in the first half with the retirement of the last MD-11Fs from the fleet of the carrier’s Martinair subsidiary, leaving just six freighters (two 777Fs, three 747-400ERFs, and one 747-400BCF). The result has been a reduction in the operating loss attributable to freighter operations from €120 million in 2013 to €42 million last year, and just €12 million in the first half of 2016. AF-KLM says it expects its freighter operations to break even in 2017.
For its part, IAG does not publish operating profit/loss data for its cargo division, but revenue and yield declines, while not as bad as at its two bigger competitors, were still significant.
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