Higher volumes and prices drive growth at Lufthansa

The Lufthansa Group’s logistics business grew traffic revenue year-on-year (YOY) by 12.3 per cent in the first half of 2018 to €1.3 billion and the figures were driven by higher volumes and prices.

Lufthansa Cargo – the specialist arm with the group’s logistics arm – grew capacity (available cargo tonne-kilometres) YOY by six per cent to 6,574 million in the period ending 30 June, compared to the same period in 2017. Sales (revenue cargo tonne-kilometres) rose YOY by 2.5 per cent to 4,400 million.

Earnings before interest and tax (EBIT) rose YOY by 48.8 per cent to €125 million, pushing the EBIT margin up 2.9 percentage points to 9.6 per cent for the logistics division of Lufthansa. Adjusted EBIT rose YOY by 60.3 per cent to €125 million. Figures in the first half of 2018 were boosted by significant cost savings and better demand for airfreight services.

Yields adjusted for exchange rate effects increased YOY by 16.5 per cent in line with the current strategic focus, and came despite a YOY 2.3 percentage point fall in the cargo load factor to 66.9 per cent, compared to the same period last year.

Capacity was increased in the Asia Pacific and Americas traffic regions, which are the most important traffic regions for Lufthansa Cargo, while sales developed positively in these traffic regions, albeit not quite as strongly as capacity.

The cargo load factor fell slightly in all traffic regions. Yields adjusted for exchange rate effects increased in all the traffic regions, in particular in Asia Pacific and the Americas.

Operating income was 9.6 per cent higher than the same period in 2017 at a total of €1.3 billion and operating expenses climbed YOY by 6.6 per cent to €1.2 billion. This increase related to the cost of materials and services, which went up by 9.9 per cent to €840 million. Within this, fuel costs rose by 17.6 per cent to €180 million, mainly due to pricing.

The result from equity investments increased by 50 per cent to €18 million as a result of the positive development of Shanghai Pudong International Airport Cargo Terminal Co. Ltd.

Segment capital expenditure rose by €139 million to €153 million. This included advance payments of €139 million for two Boeing 777 freighters on order.

Lufthansa Cargo said in its half-yearly report: “The global airfreight market remains volatile and challenging despite a historically good market situation. Lufthansa Cargo continues to systematically implement the strategic efficiency programme introduced in 2016.

“The target of making sustainable savings of EUR 80m by the end of 2018 has almost been achieved already. There was an unusually sharp market-wide increase in demand for airfreight services at the end of 2017. Lufthansa Cargo benefited from this over-proportionally.

“Demand in this segment also developed better than expected in the first half-year of 2018. The freight centre in Frankfurt is being continually modernised. This involves expanding capacities and further improving the entire infrastructure of the cool centre for temperature- sensitive airfreight consignments.

“A concept was also developed for a modular renewal of the logistics centre. The upgrade of the Frankfurt hub should be under way at the end of 2018.”

Lufthansa Cargo said it will integrate two more B777Fs into the fleet in Spring 2019 which will replace the MD-11F freighters in the medium term.

Lufthansa Cargo is the logistics specialist within the Lufthansa Group. In addition the logistics segment includes the Jettainer Group, the time:matters subsidiary, and the cargo airline AeroLogic. Lufthansa Cargo also has equity investments in various handling companies.

Lufthansa Cargo markets capacities on its own freighters and chartered cargo aircraft, along with belly capacities on passenger aircraft operated by Lufthansa German Airlines, Austrian Airlines and on long-haul flights of Eurowings’ flight operations.

From 1 September 2018, Lufthansa Cargo will also market the freight capacities of Brussels Airlines. A new partnership with United Airlines began in May 2018. All the stations in the USA and Europe are scheduled to have been connected by autumn 2018.