Lufthansa Cargo profits fall nearly 100% on weak shipping demand

Company braces for continued revenue contraction in 2nd half

A close up photo of a Lufthansa Cargo jet being refueled at night be a tank truck.

Lufthansa said lower oil prices and costs for refined jet fuel have helped reduce costs at Lufthansa Cargo and other airlines in the group. (Photo: Jim Allen/FreightWaves)

Operating profit at Deutsche Lufthansa AG’s cargo subsidiary plummeted 92% during the second quarter as the ongoing freight recession eroded nearly half of revenues from the same 2022 period, the company reported Thursday.

The company was downbeat about the cargo business in the second half of 2023, saying it expects a continued decrease in freight rates “and thus a significant decline in revenue” and operating profit for the full year. 

Lufthansa Cargo’s core transportation revenue declined 45% to 663 million euros ($727 million) during the three months ended June 30 as the market continued to normalize from unprecedented demand and rates caused when the COVID crisis created supply chain chaos, pushing shippers to ocean alternatives. Earnings before interest and taxes were $40.6 million, down from $528.5 million — but still an improvement from the pre-pandemic benchmark.

Lufthansa Group (DE: LHA) said the cargo unit’s profit margins dropped 33 points to 5%. Despite lower demand, Lufthansa Cargo’s average yields remained 40% above the 2019 level, slightly better than the overall market.


Air cargo demand has fallen 7% to 10% since March 2022 as supply chains recovered and the global economy slowed. Conditions have marginally improved in recent months, but airfreight data provider Xeneta said Thursday that volumes in July worsened 2% month over month as capacity recovered 7% from a year ago. Reports from various researchers suggest that demand in the last week of July was about 3% lower year over year. Shipping rates are more than 40% cheaper than the prior year. Xeneta said freight rates have been 40% behind the 2022 level for four consecutive months. 

Figures from the International Air Transport Association, which has a different methodology, show air cargo demand fell 9% during the first five months versus the same period last year.

Lufthansa Cargo, the 16th-largest airfreight carrier by volume, said its capacity was up 6% in the second quarter because of the recovery in passenger flight operations at sister passenger airlines.

The unit’s overall revenue, which also covers on-demand freight forwarder Time:matters and container provider Jettainer, dropped 43% to $781 million.


Deterioration in Lufthansa Cargo’s results accelerated in the second quarter. Last year, the unit posted record adjusted operating profit of $1.7 billion on the back of a strong first half. By the fourth quarter, EBIT was down 10.4% year over year to $310 million as the traditional peak freight season disappointed. 

Management in March addressed the market realities but was still optimistic for 2023, saying yields should be significantly higher than in 2019. A better first quarter slightly pulled up the six-month results, with core traffic revenue and adjusted EBIT down 38% and 81%, respectively. Load factors on Lufthansa aircraft are 60%, 4.3 points lower than at the start of the year. 

New A321 passenger-to-freighter aircraft

Lufthansa Cargo operates 16 Boeing 777 freighters on long-haul routes and three Airbus A321 converted freighters for same-day e-commerce customers within Europe. Eleven aircraft are operated by Lufthansa Cargo crews under the Lufthansa Cargo brand. Five aircraft are chartered from AeroLogic, a joint venture with DHL, and operated by AeroLogic on behalf of Lufthansa Cargo. Lufthansa Cargo also manages the belly cargo for Lufthansa Airlines, Austrian Airlines, Brussels Airlines, Eurowings, Discover and SunExpress.

Lufthansa Cargo recently received its third leased A321 freighter, which began revenue service on a route between Milan and Malta. The A321s, which are operated for Cargo by Lufthansa CityLine, meet the airline’s strategy to provide next-day service for e-commerce shippers. 

“This route is one of our shortest freighter routes, but of great value for Malta as it opens up new markets to the small island. After two months of frequencies, we are pleased with the development and see a lot of … dangerous goods, but also live animals on this routing,” said Antonio Di Martino, head of sales and handling for Italy and Malta, in a LinkedIn post last month. 

Lufthansa restructured the cargo division in April, promoting Ashwin Bhat to replace Dorothea von Boxberg, who was reassigned to lead Brussels Airlines. On Tuesday, Frank Bauer took over as CFO. He previously was controller and head of risk management for Lufthansa Group. 

Lufthansa’s second-quarter cargo performance aligns with the rest of the airline industry. 

Korean Air, the fifth-largest cargo shipping airline, on Wednesday said cargo revenue in the second quarter plunged 56% to $748.8 million. All Nippon Airways’ cargo revenue fell 60%. The major U.S. airlines, which don’t operate any freighters, saw revenues decrease between 37% and 40%.


Overall, Lufthansa Group’s second-quarter operating margin of 11.6% was the best in its history, as revenues increased 17% to $8.8 billion, and operating profit nearly tripled to $1.2 billion.

Management gave positive guidance for travel demand, especially for premium seating, and said it expected rising costs to moderate in the second half. But a potential new deal with pilots designed to avert any labor action during the busy travel season could increase costs. Reuters on Thursday reported that Lufthansa is offering cockpit crews pay increases of 18% over a three-year term, with various bonuses raising total compensation between 25% and 50%, depending on individual circumstances. 

In May, Lufthansa Group agreed to acquire 41% of ITA Airways, the largest carrier in Italy. FreightWaves previously reported that Lufthansa Cargo is already handling some cargo for ITA. The deal is expected to close by the end of the year.

Click here for more FreightWaves stories by Eric Kulisch.

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