As many of its traditional Western markets still continue to be plagued by a severe recession, Lufthansa Cargo is pinning its hopes on the booming markets of Asia, particularly China and India, to drive the recovery.

Asia, as many German experts are saying, can drive and sustain Lufthansa Cargo’s recovery after a poor performance in 2009 when demand plummeted amidst the severe economic downturn in many Western countries. 

“The current market situation provides us with some optimism for the year 2010,” Carsten Spohr, Lufthansa Cargo’s chief executive, said at the annual press conference in Frankfurt (March 18).  The recession had bottomed off and demand was once again rising.  “We discern an upturn (in our business) in Asia,” he added.  In 2011, at the latest, Lufthansa Cargo would again start making operative profits.  The carrier would maintain its austerity measures which “seem to be working and producing positive results”, Spohr said

Lufthansa Cargo ended 2009 with an operating loss of 171 million euros.  The global recession had a disastrous impact on the global logistics industry in what the carrier described as the “toughest year in company history”.  Lufthansa Cargo, whose total revenues fell by a third to some 1.95 billion euros, is confident that it would post a “significantly better operating result” in the current year.  An indication of the improvement in the cargo carrier’s business is provided by its announcement that short-time work – or Kurzarbeit, introduced on March 1, 2009 – which helped the carrier navigate through a difficult period in its business, will be discontinued, in phases, starting in April and May.

Taking stock of the past year, Spohr said that only early capacity cuts and comprehensive crisis management had averted even greater losses; this had enabled it to retain its staff strength.  “On an overall basis, we lost a billion euros in revenues, creating an absolutely exception situation for the company.” That the carrier could still reap about two-thirds of its lost earnings, is an “achievement of which all Lufthansa Cargo employees can be proud”.  But he also acknowledged that an operating loss of 171 million euros is a “result that no Lufthansa company can be satisfied with”.  Apparently taking a dig at other competing cargo carriers, Spohr said that Lufthansa Cargo had demonstrated its “role as industry leader even in the crisis year 2009”.

Lufthansa Cargo resorted to austerity measures in the crisis-plagued year 2009.  Indeed, austerity was a key word in its strategy.  “Our strategy has paid off.  At the very onset of the crisis, we quickly and drastically reduced our costs.  We then selectively expanded capacity for customers so as to actively open up new markets,” Spohr said. At times, new freighter flights were added to destinations in the space of very few weeks.

Looking ahead, Lufthansa Cargo’s board member Peter Gerber said that the flexible use of short-time had been crucial for the successful mastering of the crisis.  “Despite the dramatic economic developments, we managed to avoid lay-offs,” he said, quickly adding that the company was not abandoning its rigorous savings policy.

“The airfreight industry has lost four years of growth in the crisis.  Cost discipline will, therefore, remain essential for success in the present year,” Gerber emphasized.  Unit costs at Lufthansa Cargo are to be cut by 10 percent by streamlining the company organization and making processes more efficient.  At the same time, Lufthansa Cargo would endeavour to increase its earnings by a minimum of 20 percent.

Spohr reiterated at the conference that the carrier was interested in long-term investments in Germany as an operating base.  “Lufthansa Cargo is the engine for Germany’s exports.  We want to further expand that role and invest three-digit million in euros in a new and highly modern freight centre in Frankfurt,” he said.  However, he made this investment contingent on long-term planning security – this was, clearly, a veiled message directed at the local politicians in regard to the ongoing dispute over an outright ban on night flights at Frankfurt airport.

“The Federal Government has expressed a clear commitment to internationally competitive operating hours in the coalition agreement (between the presently ruling parties).  It is imperative that the issue is dealt with promptly in Berlin,” he urged the government. 

The carrier intends to deploy, at least, 15 from its fleet of 19 freighters.  Two more would stand by for action, if demand continues to rise.  In 2009, the carrier deployed, during certain months, only 13 freighters.  The cargo fleet generally transports half of the total freight volume.  The rest is transported in the belly of Lufthansa’s passenger aircraft 

Lufthansa Cargo has asked for 23 night flights once the fourth runway goes into operation end 2011.