Lufthansa Cargo on Tuesday announced it has expanded into the trans-Pacific market with the introduction of direct freighter service from Vietnam to the United States and that business continued to recover in the third quarter, aided by a 16% gain in cargo revenue from the prior year.
The cargo subsidiary of Lufthansa Group said its first direct all-cargo flight from Asia to North America occurred Sunday when a Boeing 777 freighter, operated by joint venture subsidiary AeroLogic, arrived in Los Angeles from Ho Chi Minh City. AeroLogic, which is co-owned by DHL Express, will operate a week round-the-world loop to those destinations from its home base in Frankfurt, Germany.
Lufthansa Cargo CEO Ashwin Bhat said the new freighter connection was created in response to growing demand for Vietnamese products.
In August, Lufthansa, the 16th-largest cargo airline in the world by shipping activity, added another freighter to its fleet. The carrier now operates 18 Boeing 777 freighters – a dozen under its own brand and operating certificate, and six chartered from AeroLogic. Lufthansa Cargo and DHL Express share the AeroLogic fleet. Lufthansa Cargo also manages the belly cargo for sister companies Lufthansa Airlines, Austrian Airlines, Brussels Airlines, Eurowings, Discover and SunExpress.
In its earnings report, Lufthansa Group said the cargo division boosted core transportation revenue in the third quarter by 16% to 731 million euros ($789 million) while building on the return to profitability in the second quarter. Adjusted operating income improved to $41 million after nearly zero profit in the same 2023 period due to high demand from Asia.
Lufthansa Cargo has shifted capacity from the trans-Atlantic to the Asia-Pacific region to capitalize on strong trade flows from there to Europe and North America, especially for e-commerce shipments. In July, the carrier added Shenzhen, China, to its network.
“We hardly have freighters anymore to and from the U.S. We mostly focus on [passenger] bellies. We are shifting freighters more and more to Asia, especially to China, where the yields are highest,” said Lufthansa Group CEO Carsten Spohr, in a conference call with analysts. Lufthansa Cargo is also picking up more direct charter business in China because the demand from e-commerce platforms is so strong, he added.
Lufthansa Cargo’s operating profit fell 86% last year as the air cargo industry weathered a long stretch of weak demand after the COVID crisis. It lost $23.5 million on an operating basis in the first quarter before posting a $39 million profit in the second. During the third quarter of 2022, Lufthansa Cargo generated operating income of $352 million.
The third-quarter results carry more weight because they are from a traditionally slow period for international shipping. Global air cargo demand across the industry in 2024 has consistently grown 12% year over year, without much fluctuation.
The growth in third-quarter cargo revenue was slower than at United Airlines (25%) and Delta Air Lines (27%).
Cargo ton kilometers, a measure of an airline’s ability to generate revenue based on distance flown, increased 11% to 2.1 million, but the growth rate was slower than during the first half of the year. Yields increased 5.1%. Capacity also grew at a slower pace, 5% year over year, than in the prior two quarters. The aircraft load factor increased by 3.4 points to 59%.
Lufthansa said cargo operating expenses have increased nearly 9% year to date through September because of higher charter costs, fleet expansion and wage increases granted to pilots and other support staff in new labor agreements.
Management said it expected to see continued improvement in operating income during the fourth-quarter peak season.
Lufthansa Cargo recently announced the hiring of Elodie Berthonneau as vice president Asia-Pacific, in charge of sales and airport handling operations. She joins the company from Qatar Cargo where she was vice president for network planning and strategic partnership.
Lufthansa Group results
Group level revenues reached an all-time high of $11.6 billion, which Lufthansa attributed to strong travel demand and growth at Lufthansa Technik, its maintenance and repair arm. Adjusted earnings before interest and taxes fell slightly to $1.4 billion. The profit decline in the passenger segment was mainly caused by Lufthansa Airlines. Delays in the delivery of new aircraft and the associated need to continue operating older aircraft, increased airport fees, higher staff costs, and expenses for compensation payments following flight cancellations had an above-average impact on the German flag carrier.
Lufthansa Airlines has begun a turnaround program aimed at increasing efficiency, reducing network and fleet complexity, and improving product quality. Key efforts include better optimizing capacity with seasonal demand, decommissioning older aircraft and developing better crew planning systems.
Click here for more FreightWaves/American Shipper stories by Eric Kulisch.
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