New strategy delivers 3Q dividends for Lufthansa Cargo

Unlike other Western European combination carriers, Lufthansa has maintained its commitment to freighter operation.

The Lufthansa Group reported revenues from its Logistics business segment up 17.4% y-o-y in 3Q17, to €594 million, on higher cargo traffic and a more favorable pricing environment. EBIT in 3Q17 was €21 million, up from a loss of €17 million in the same quarter of 2016, in part from the success of a cost-cutting program implemented last year.

Based on LH Cargo’s most recent traffic release, strong financial results were to be expected. Group cargo traffic rose 6.0% y-o-y in September to 938 million RTKs. Traffic on the trans-Atlantic lane grew fairly strongly – up 8.3% to 399 million RTKs, but traffic to/from the Asia-Pacific region was up just 3.7% to 439 million RTKs. For the first three quarters of 2017, Lufthansa Group’s cargo traffic was up 8.0% to 7.99 billion RTKs.

For the first nine-months of the year, LH Cargo revenues (excluding other logistics revenues) were 15.9% higher at €1.64 billion, while overall profit for the logistics unit was €105 million, up €168 million from the €63 million loss in the same period in 2016, on lower expenses. Employee headcount for the unit dropped 4.5%, while capital expenditures dropped 20.7%.

Unlike last year when cargo capacity grew faster than cargo traffic, LH Cargo’s cargo capacity was up just 2.0% over the first nine-months of 2016. Traffic measured in RFTKs rose 6.4% during the same period, pushing load factors 2.8 pts higher. Notable cargo traffic revenue increases were reported in the regions America and Asia/Pacific, which saw y-o-y increases of 17.7% and 18.8% in the first nine months of 2017.

Turning now to LH Cargo’s freighter fleet, earlier this year, the resurgence in air cargo demand convinced LH Cargo to put a parked MD-11F back into service. The carrier now operates a freighter fleet comprised of five 777Fs and twelve MD-11Fs. While the remaining MD-11Fs are still relatively young, LH Cargo is expected to soon provide guidance on its future fleet renewal plans.

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