Justin Wastnage/MAINZ

Lufthansa Cargo has flagged up tough times ahead for the air freight industry by posting first quarter results showing a slump in profits, and forecasting worse times to come.


One of the world's largest air cargo operators, the company posted an operating profit for first quarter 2001 of €8 million ($7 million), down €27 million from the same period a year ago.

Walter Gehl, LHC's executive board member responsible for finance until 16 May, when he suddenly left to take over labour relations at Lufthansa's strike-torn passenger airline, says he expects prospects for this year to be moderate, but indicated the company expects a poor 2002. "We always have a four-year cycle of good, very good and moderate years followed by a year when we learn a lot," he said. Demand may even shrink next year, he believes.

Gehl attributed the slow start this year to a combination of high capital expenditure, up 34.2% due to the purchase of two Boeing 747s, and a reduction in freight from the USA. Economic problems are already taking their toll in North America and there are indications that the Asian market may slow too. In addition, the carrier is facing continuing fuel and labour cost rises this year.

The downbeat mood has been reinforced by moves last week at leading US freight airlines Atlas Air and Polar Air Cargo to lay off pilots and flight engineers.

Lufthansa is placing its faith in building a cargo alliance as a way to combat any slowdown. The company has given a name to its alliance with the cargo divisions of Star alliance partners SAS, Scandinavian Airlines and Singapore Airlines. New Global Cargo is to offer the first of many new integrated products later this year when it launches an express service across the alliance and its partners.

Chairman Jean-Peter Jansen says the focus for this year is to integrate logistics, sales and IT systems, but expansion is likely to follow. LHC is in negotiations with SAS Cargo to buy a 49.9% share in its alliance partner.

The negative outlook for 2002 is one reason for Lufthansa's delay in ordering new ultra large freighters. Jansen says that although he is disappointed that Boeing postponed development of its 747X Stretch Freighter, the company is negotiating with Airbus to acquire A380Fs instead. He believes that by 2006, the airline will need a 120t payload freighter for New Global Cargo trunk routes.

Source: Flight International