Lufthansa’s Logistics revenue falls 36% in 2023

Lufthansa Group today reported 35.4 billion euros ($38.8 billion) in revenue for 2023, an increase of 15% year over year. However, revenue in the company’s Logistics segment, which includes Lufthansa Cargo , fell 36% YoY to $3.3 billion. [caption id="attachment_57131558" align="alignright" width="300"] (Courtesy/Lufthansa Cargo)[/caption] THE BIG PICTURE: Like many other carrier groups , Lufthansa has seen an increase in cargo capacity, largely driven by the post-pandemic return of passenger travel and decreased cargo demand, which is also normalizing from the pandemic, according to the earnings report released today by Lufthansa Group. Despite decreased revenue in the Logistics segment, Lufthansa Group’s earnings were buoyed by its Passenger Airlines and MRO segments. The Logistics segment comprises: Lufthansa Cargo; Jettainer ; time:matters Group ; Heyworld ; CB Customs Broker ; and The group’s 50% stake in AeroLogic . BY THE NUMBERS: While cargo numbers were down, the company posted its third-highest annual revenue. Also in 2023: Adjusted EBITDA was $5.4 billion, up 32% YoY; Share price at yearend was $8.81, up 4% YoY; Earnings per share were $1.53, up 112% YoY; Available cargo tonne kilometers were 15.5 billion, up 9% YoY; and Cargo load factor was 56.4%, down 3.9 percentage points from 2022. WHAT THEY’RE SAYING: Lufthansa Group’s cargo business declined in 2023 due to normalization across the industry, according to the report. “Performance in our airfreight business around Lufthansa Cargo was characterized by the normalization after the [coronavirus] pandemic and weak global trade,” Chief Financial Officer Remco Steenbergen said on today’s earnings call. “Encouragingly, the air cargo market seems to have bottomed out in the second half of 2023. In the fourth quarter, volumes were up year on year. In addition, yields continue to stabilize at levels of around 40% above 2019.” STATE OF PLAY: The Employers’ Federation for Air Transport Companies reached a labor agreement with the Vereinigung Cockpit pilots union for Lufthansa Airlines and Lufthansa Cargo in 2023. The agreement, which runs through 2026, includes an 18% pay increase, a standardized remuneration structure and the payment of an inflation compensation premium. Lufthansa is in negotiations with German trade union ver.di , which represents ground handlers, security personnel and others in the service sector. Security personnel represented by ver.di are striking at Frankfurt (FRA) and Hamburg (HAM) airports today and Friday. “I don’t want to say too much about the current negotiations at this point, but let me make one thing very clear: Every strike disappoints hundreds of thousands of our guests, whom we won and need to win in the face of international competition,” Chief Executive Carsten Spohr said on today’s earnings call. “Strike costs are personnel costs. Where there are strikes, there is no growth but rather shrinkage. Strikes, therefore, must not be the first but the last resort. “We just cannot give in to have a few less days of strikes and endanger the future of this company,” he said. FLASHBACK: Lufthansa Group ranked 16th on Air Cargo Next ’s Freight 50 list of the top cargo carriers. NOTEWORTHY: For the first time since 2019, Lufthansa Group will propose a dividend — 33 cents per share -- for 2023 at the annual general meeting on May 7. FUTURE LOOK: Following airfreight market normalization in 2023, Spohr said Lufthansa Cargo is “ideally positioned to benefit from both the cyclical upturn and structural growth,” especially resulting from e-commerce growth . “Large e-commerce companies from China currently need extensive freight capacities to secure their growth,” Spohr said. “This also holds true for European short-haul routes, which we now serve with four freighters. In addition, geopolitical uncertainties, the effect of which we are currently seeing above all on the sea routes through the Red Sea, are driving short-term demand for airfreight in the right direction. “The environment remains challenging for the foreseeable future,” he said. “Nevertheless, Lufthansa Cargo has all the prerequisites to make a decent contribution to our results in 2024.” THE BOTTOM LINE: “After four very difficult years, today we are once again able to present an outstanding result,” Spohr said. “And honestly, even with all my years in the industry, I never thought we would reach this point again so quickly.” MARKET REACTION: Shares of Lufthansa Group ( OTCMKTS: DLAKY ) were down 0.92% from market open to $7.57 as of market close today. The company has a market capitalization of $9.1 billion. Editor’s note: All amounts have been converted to U.S. dollars. Register here for Air Cargo Next ’s free webinar, “The Role of Drones in the Future of Air Cargo,” on Tuesday, March 26, at 11 a.m. ET.

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