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23 October 2014 08:54AM

Lufthansa Cargo Reduces Asia Capacity and Increases America Capacity

06 Apr 12 ,  Manik Mehta, Frankfurt
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At its annual press conference held recently in Frankfurt, Lufthansa Cargo chairman and CEO Karl Ulrich Garnadt said that there had been a "geographical shift" in its capacities for various regions.

Describing the move as "flexible capacity management", Garnadt told Logistics Digest that the devastating natural catastrophes in Japan and Thailand in 2011 had triggered a slump in airfreight demand.

 

Garnadt

 

"Demand also fell in the second half of 2011 in key Asian markets, notably China and India," Garnadt added. This had necessitated moving capacities from Asia to North America, he said.

 

Garnadt maintained that strong growth in demand in the record year 2010 was also evident in the first half of 2011.

 

"The slowdown in demand had resulted in overcapacity which turned up the competitive heat on every airline in the market.  In contrast, the Americas recorded strong growth in demand with relatively stable average yields.  Consequently, Lufthansa Cargo moved capacity from Asia to America with a view to benefiting from demand stability there," Garnadt said.

 

But Garnadt expressed confidence that the economies of both China and India would rebound.  "I am confident that the current economic slowdown in both countries is not of a long-term nature," he said.  "The USA economy, on the other hand, is moving on a positive note."

 

Lufthansa Cargo's total cargo volume, including mail, in 2011 was 1.885 million tons, up 5% over 2010, though cargo load factor was 69.5% down from 70.9% in 2010.

 

Europe's share was roughly 33.6%, the Americas 30.6%, Asia/Pacific 28.2% and Africa/Middle East region 7.6%.

 

By maintaining fiscal discipline and sharpening the overall efficiency, Lufthansa Cargo could increase its earnings by 5.3% to 2.9 billion euros; operating profit rose to 249 million euros, the second best result in the company's history.

 

Besides the high fuel prices that caused a steep rise in the fuel bill, Garnadt envisaged other challenges ahead in the year.  The European Union's "unilateral stance" on emissions trading is notably hurting European airlines and distorting competition, he lamented.

 

Other challenges were the grounding of Jade Cargo's fleet because of falling demand in China.  Lufthansa Cargo wants to give up its involvement in Jade Cargo, pinning hopes on the latter's projected partnership with UniTop, a Chinese logistics company which also has its own freighters and is involved in the express business.

 

Once the approval for the change is received from the Chinese authorities, Lufthansa Cargo will be immediately withdrawing.

 

The "sudden imposition" of a night flight ban from 23:00 to 05_00 hrs. at Frankfurt airport, confirmed through a decision by a court in Hesse, had forced the carrier to make "drastic changes" in its timetable.  80% of all flights were re-assigned in "just a few days".

 

An appeal against the lower court decision was made to the Federal Administrative Court in Leipzig which has, meanwhile, also upheld the ban imposed by a lower court on night flights at Frankfurt airport.

 

Without explicitly spelling out any alternatives to Frankfurt airport, Garnadt claimed that Lufthansa Cargo's annual loss directly resulting from the night flight ban would be around 40 million euros, besides losing the high-value express traffic, particularly on the North Atlantic route, thus weakening the carrier's competitiveness.

 

Notwithstanding the ruling by the Federal Administrative Court, Lufthansa and its cargo carrier continue to harp on having a night operation at Frankfurt airport.  Lufthansa airline’s chairman Christoph Franz stated that he was still hoping that a “practical night-flight regulation” would be found both for passenger and cargo traffic.  Lufthansa, he added, considered it necessary to have 17 starts and landings between 23:00 and 05:00 hours at Frankfurt airport.  He also hinted at stopping future investments at Frankfurt airport.

 

While emphasizing that Frankfurt airport would continue to be a hub for his airline, Franz also made it clear: “As far as investments are concerned, we shall also have to consider the venues of our Alliance partners.”  If an airport like Frankfurt, with an absolute night-flight ban, has to close down for a quarter of the day “without any flexibility”, it would also endanger its position as one of the top ten airports of the world, Franz added, describing the Leipzig court’s decision as “not a good day for us”.  “The ruling is a serious blow for the German economy. “  Lufthansa’s shares plunged by 4.8 percent on Wednesday after the Leipzig court’s announcement