Lufthansa increases focus on value added logistics
Lufthansa, one of the largest air cargo carriers, reported a fall in revenues in 2003 of 8% as sales at its Logistics division dropped to €2,161bn. Profits from operating activities also fell sharply, with an 84% drop to €36m compared with the year before.
The weaker performance was due to a number of factors. The division saw a fall in freight and mail volumes by 2.7%, and this also resulted in falling load factors. In 2003 these were 65.6% compared with 66.6% in 2002 despite there being only a marginal increase in capacity. The division was also hit by falling yields due to excess supply in the market. However the greatest influence on the results was the strength of the euro against other foreign currencies.
Asia Pacific was the best performing region with a small increase in both volumes of freight and mail carried as well as sales. Both rose by 0.4%. The weakness of the German and European market as a whole gave the greatest cause for concern.
Lufthansa has adopted a strategy of increasing the level of value add that it can provide to its clients, most of which are freight forwarders. It has targeted the temperature controlled and perishables market by customizing its aircraft to accommodate temperature-sensitive goods and it is also developing its cd.solutions (‘customer definite’) product to provide a level of flexibility as regards just-in-time delivery options, intermediate storage, partial deliveries on request or packaging.
The purpose of this product development is to reduce Lufthansa Cargo’s reliance on a highly cyclical, commoditised airport-to-airport market. However the carrier’s performance in 2004 is still highly dependent on the growth of the world economy. In this respect it should benefit from the current strong market growth in the Asia Pacific market which has allowed airlines to push up prices in the past month by up to 20% due to constraints in capacity.
