Improved 1H18 for Lufthansa Cargo on growth outside Europe

Germany-based Lufthansa reported 1H18 revenues for its logistics business segment up 12.3% year-over-year, to €1.3 billion, despite Group cargo traffic which grew at a slower clip, increasing just 2.9% during the same period, to 5.37 billion RTKs. Improved earnings before interest and taxes (EBIT), which rose 48% year-over-year to €125 million, indicate both that restructuring efforts Lufthansa Cargo began implementing in 2016 continue to improve the division’s earnings, and that revenues from the company’s operations outside of Europe continue to increase.

The carrier attributed the low-single-digit cargo traffic increase to the sharp increases in 2017, which make annual comparisons more difficult this year. Improvements to the division’s earnings, meanwhile, were due in part to lower operating costs. A 2016 cost-cutting goal of “sustainably” cutting expenses by €80 million before year-end 2018, for one, has already been achieved for Lufthansa’s logistics unit (which includes Lufthansa Cargo, the air freight container management specialist Jettainer Group, the time:matters subsidiary, which specializes in urgent consignments, and returns from equity investment in the cargo airline AeroLogic GmbH and various handling companies).

Lufthansa Cargo’s fleet is currently comprised of seventeen aircraft: five 777Fs and twelve MD-11Fs. Next spring, the carrier will take the next step in its fleet modernization program with the introduction of two new 777Fs to replace older MD-11Fs. The Group is expected to add more 777Fs in the future, but it remains unclear if the MD-11Fs will ultimately be replaced on a one-to-one basis.

Long-term fleet planning will depend in part on how the air cargo market develops over the next few years. In June at least, cargo traffic growth appeared to be slowing across much of Europe. Almost unanimously, most of Europe’s top airports, for which we have data for reported modest declines in June cargo throughput. Lufthansa Group airlines were no exception, with June traffic down 0.6% y-o-y to 913 million RTKs, marking the first year-over-year decline for the Group since June 2016. Year-to-date traffic remains 2.9% higher y-o-y, which is significantly slower growth than the 7.3% year-to-date growth over the first six months of 2017.

Despite slower traffic and lower revenues from Europe, Lufthansa Cargo saw higher growth in other regions, particularly for the Americas and Asia-Pacific regions. Revenues derived from the Asia-Pacific regions rose 10.3% to €532 million, while the Americas region saw growth of 6.5%, to €517 million. Traffic was up 3.5%, and 4.2%, respectively, for the two regions.

Shifting to Europe’s number-two combination carrier, Air France-KLM reported a slightly improved yield on lower cargo traffic. The group reported 1H18 cargo revenues up 0.9% y-o-y to €943 million (6.9% on a constant currency basis) on traffic that was down 1.4% to 4.32 billion RTKs. Since AF-KLM no longer reports a breakdown of detailed financials by unit, it is hard to judge if profitability is improving for the Group’s cargo division. The Franco-Dutch Airline Group reported an overall loss of €159 million in the second half, in part due to an Air France strike impact of €335 million.

Those interested in learning more about the outlook for air freight and fleet plans in Europe are invited to join us at Cargo Facts EMEA 2019, to be held in Frankfurt 5-6 February at The Westin Grand Frankfurt. For more information, or to register, visit https://www.cargofactsemea.com 

 

  Like This Post