Lufthansa Cargo posted weak earnings for the first half of 2019, citing lower economic growth and trade conflicts for its lackluster performance. The company posted an 88 percent fall in adjusted earnings before tax and interest (EBIT) year-over-year.
Germany-based Lufthansa Cargo is a wholly owned subsidiary of Lufthansa. The company is active in air freight and logistics worldwide.
Lufthansa’s logistics business segment’s adjusted EBIT came in at €15 million, down from €127 million during the first half of 2018. The company’s revenue also fell, coming in at €1.23 billion. Revenue was €1.3 billion, 5 percent higher, during the first half of 2018. A Euro is valued at $1.12.
The company attributed the revenue slip to pricing and volumes, especially on routes between Europe and Asia.
The segment saw capacity increase 9 percent during the first half of the year. Available cargo tonne-kilometres rose from 6.55 billion in 2018 to 7.15 billion in 2019. At the same time, the company’s cargo load factor dropped 6.1 percentage points.
“Weaker demand in the freight market caused yields to fall in the first half-year,” the company’s earnings release reads. “Depending on further macroeconomic developments and the outcome of the trade conflicts, there is a risk that this trend will continue for longer and be more pronounced than expected.”
Lufthansa Cargo responded to weaker demand by adjusting flight timetables and reducing the use of its MD11 freighters, according to the company’s earnings release. The company also said improvements to efficiency and cost structure are ongoing.
While revenue and load factor suffered across almost all regions, the company saw revenue growth in the Middle East/Africa. Net traffic revenue for the region grew 40 percent year-over-year, and load factor increased 10.1 percentage points.
By contrast, Asia/Pacific accounted for the biggest loss. The region posted a 13 percent revenue drop year-over-year, and load factor fell 7.5 percent.
Lufthansa Cargo now expects its full-year revenue guidance to come in roughly the same as last year, with an adjusted EBIT margin of 3 to 5 percent. This is revised down from 7 to 9 percent.
Lufthansa Group as a whole also posted struggling earnings, with adjusted EBIT down 60 percent year-over-year.
The company’s stock was down 5.93 percent at market close on Tuesday, July 30.
