Lufthansa Cargo will complete the rollover of its MD-11F fleet by the end of this year, but the German carrier now expects to add another fleet type in the form of the A321F. Cargo Facts spoke to Ashwin Bhat, who was appointed Lufthansa Cargo CCO in March and was most recently head of Swiss WorldCargo, about the carrier’s move into short-haul freighter operations.
Cargo Facts: What would you say are your main goals and priorities for the rest of this year?
Ashwin Bhat: We’re stepping into a new segment with intra-European freighters, which we will operate from the beginning of next year. So it’s an exciting time, not just in terms of capacity, but in terms of sustainability, too. We have announced we’re flying SAF flights, and now we’re investing into sharkskin technology and a number of things are happening, even though there is a lot of ambiguity in terms of how the world is going to open up and the speed of vaccinations. But we as an organization are looking at the situation confidently and making our investment because — let’s be very clear — there is a world after COVID-19 and we need to be ready for that, not just focused on now.
The intra-Europe operation is much more about entrepreneurship, if I may use that word; we will step into a new segment of same-day products and speed to support the e-commerce business by offering this ex-Frankfurt.
CF: When did Lufthansa Cargo decide that it would be necessary to move into this narrowbody freighter segment?
AB: It has always been discussed. Strategies are an ongoing process and you have to look into where the opportunities are, and that’s where you put the highest investment and energy. That much is clear.
When was it decided? It was very, very close to the announcement. It just happened in the last couple of months. We had to find the right moment to get the approval, to present it to the board, and to get that investment approved.
CF: Why did you decide to pull the trigger on A321-200 freighters?
AB: What we believe is that the whole consumer behavior has been changing in the last year, and COVID-19 has just accelerated it by 10 to 30%. We believe that, given our knowledge, our footprint, the Lufthansa Cargo brand, the skills of our people and the relationships that we have within the industry, we are ideally placed to take that step, and that’s what we did.
CF: What were some of the main risks that that the company discussed, and how were they addressed?
AB: Will it bring complexity into the organization by having a different business? Can we define our processes? Because this business will require a different kind of processing on the ground. Will we be able to control the cost element and generate the business that we have foreseen? It’s like any other business — if you don’t want to take a risk, you don’t need to do anything. Everybody is aware that there is a risk. But we also have the confidence given that we bring the whole package compared to others — the knowledge, the experience, and the relationships. We believe we will be successful, otherwise we wouldn’t be doing it.
CF: Have you already roughly defined the kinds of routes that you’ll be flying with the A321s?
AB: It’s not going to be determined by us, it’s going to be defined by the demand and the customers. We are aware [of] where the hot spots are, but we don’t want to preempt and say this is where we will fly, like a classic network. But we have this dialogue with our customers to see what they want, and what is best-fitting for their schedule. That’s one of the [other] reasons why we have also invested into this segment, because we have bellies. It’s not that we don’t have belly space within Europe — but [this capacity] is then defined according to the demand of the passenger business: where we’re at, what time, which day and so on. With our own A321 freighters, we have the freedom to define it according to the needs of the customer.
CF: What kind of feedback have you been getting from your customers in terms of how they’re feeling about the current situation? Are they worried about capacity going forward?
AB: I wouldn’t say they’re fearful, but the fact is they believe that capacity will be constrained going forward. It will further improve from where it is today, but it is certainly not going to be at the same level as 2019 in the short-term period of the next six months. At the same time, looking at the market dynamics, there is confidence in the market, be it the inventories being filled up in the U.S. or export confidence in Europe. That is gaining traction and is positive, so the cargo will be there, and the market will be there. It’s all about capacity. Most of the customers have clearly said 2021 is going to be positive. In my opinion, it’s always a very, very dangerous game to make predictions. That’s why I said, yes, we can be confident, but we have to be very close to the market to see if there are any changes.
This story originally appeared in the August 2021 issue of Cargo Facts.
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