Lufthansa Cargo – networking the world

Lufthansa Cargo ranks among the world’s leading air
freight carriers, serving around 300 destinations in over 100
countries. The company, a 100% subsidiary company of
German company Lufthansa AG operates with its own fleet of
freighters, the belly capacities of passenger aircraft operated
by Lufthansa and Austrian Airlines, and an extensive road
feeder service network. The bulk of the cargo business is
however, routed through Frankfurt Airport. The company that
currently employs more than 4,500 people worldwide focuses
on the airport-to-airport business.

In the 2014 business year, the airline transported around 1.7
million tonnes of freight and mail and sold 8.6 billion revenue
tonne-kilometres. The same year also saw Mr. Peter Gerber
appointed as the Chairman and CEO of the company. A native
of Giessen, Germany, Mr. Gerber studied law and business
management in Giessen and Hagen, and years later completed
the senior executive program at Columbia University.

Mr. Gerber with 23 years of experience in aviation industry
joined Lufthansa in 1992. His initial duties were in human
resources and law. Five years later, the young enthusiast was
assigned to head intercompany transfer pricing, fees, and
charges, focusing on airport and air traffic control costs and
relations with the Federal state authorities.Between 2001 and 2004, Gerber was assigned to direct
the D-check program, which sought to consolidate
corporate earnings. During the eight years starting in
2003, Mr. Gerber served as Lufthansa spokesman for the
Air Transport Initiative for Germany, also responsible for
strategic corporate development. Between 2004 and 2009,
the aviation enthusiast headed corporate industrial relations
and social security. In 2009, Mr. Gerber was named to the
company’s executive board with responsibility for finance
and human resources. Three years later he found himself on
the executive board of the passenger airline, heading human
resources, IT, and Services Division. Currently, Mr. Gerber
also chairs the Supervisory Board of Lufthansa Cityline and
holding membership on the Supervisory Board of Albatros
and Fraport. Air Cargo Update spoke to Mr. Gerber on a
number of subjects. Excerpts from the interview:

You recently began cargo network to and from Ho Chi
Minh City, Vietnam. How is this working for you? Is Asia a
big network for you?

Our close-knit network of global freighter and belly
connections is one of our strengths. We manage this network
flexibly in order to best meet the wishes of our clients. We are
very excited that we could successfully test the connection via
Ho Chi Minh City in the summer, and that it is now a confirmed
part of the winter schedule. By doing this we have further
strengthened the Asia-Pacific region, which obviously plays an
important part for us.
You have spoken vehemently about ‘clear imbalances’
between global regions. Some countries, you said, used
aviation as a ‘strategic weapon’ to enhance economic
development. How do you substantiate this?
Some countries have been proven to use aviation as astrategic investment – above all in regions in which there
isn’t any indigenous source of growth. Earning money
is not the main priority where subsidies are available.
Social standards and the recognition of workers’
rights are frequently handled differently. To enter the
competition under such auspices naturally distorts
the image and endangers the competitive position of
airlines, e.g. in Europe.

You have always felt that rapidly expanding presence of
the Gulf carriers is definitely a major challenge, especially
for the established airlines from Europe, Asia, and the U.S.
Where do you see Lufthansa Cargo in the race say may be
5 years down the lane?

The competitive situation is demanding for all providers
who have to operate economically. We can see that a lot
of additional supply volume is being pushed into the
market via the bellies of wide body aircraft of the Gulf
and Bosporus airlines. They are not merely affected by an
aviation tax at their hubs but rather benefit from strong
support by the government. All in all, this lowers the
market prices and holds back potential future investment.
With our strong network and our high quality, we are
comparatively well-off and able to maintain our position
as the leading European cargo airline. In the long run,
however, we need more fairness and equal opportunities
in aviation provided by a political regulatory framework
that is binding for all.

Does Frankfurt continue to be Lufthansa’s No 1 hub and
Europe’s No 1 logistics hub? Any other hub you are looking
at in a major way? Kindly elaborate

As Lufthansa Cargo we are of course standing by our Frankfurt
hub. It provides us with an excellent hub in the heart of the
most significant European production zone for air freight.
Together with our partners we wish to further strengthen
Frankfurt as a hub.

Lufthansa Cargo announced plans to reduce its overall
freight capacity with the retirement of two MD-11(F)s during the initial months of the year. What are your
projections for 2015 and 2016?

At the beginning of the year we were able to welcome the
fifth brand-new Boeing 777F into our fleet, which is superior
to our reliable MD-11F in many respects. The provisional
retirement of both aircraft makes sense if you consider the
market and also how we are incrementally modernizing our
fleet. Particularly, we want to improve our load factors and the
utilization of our aircraft in terms of block hours. Furthermore,
we want to achieve reduced turnaround times to be able to
keep the offer on a similar level, but avoid ground times.

How much of cargo did you carry in 2014? How much do
you intend to carry by early 2016?

With a transport volume of around 1.7 million tonnes of freight
and mail consignments, as well as 8.6 million sold freight
tonne-kilometres in 2014, Lufthansa Cargo ranks among the
world’s leading companies involved in the transport of air
freight – and we also want to convince our clients of this in the
future.

Elaborate on the EUR40 million (USD44 million) cost reduction
program which the Lufthansa (LH, Frankfurt Int’l) subsidiary
plans to enforce following a loss of EUR38 million (USD41.8
million) for the first nine months of its current financial year
First, there is no real loss in our core business. Our EBIT
is burdened by one-off impairments our result adjusted
by these impairments is yet positive. However, in order
to continue to provide our clients with an excellent offer,
we need to invest in the future. Our fleet is one handy
example of this, our Cargo Center another. These necessary
investments must somehow be generated. As it comes to an
end, this year has illustrated that in the current competition
we must structurally stick closer to our costing – and we are
doing just that in a carefully planned process running up to
2018.

The fifth Boeing 777 freighters Lufthansa acquired in the
beginning of 2015 are expected to offer greater operating
efficiency and help reduce operating costs and increased
use of belly capacity. How have these fared so far? Do you
intend to acquire more freighters going forward?

The fifth Boeing 777 freighters Lufthansa acquired in the
beginning of 2015 are expected to offer greater operating
efficiency and help reduce operating costs and increased
use of belly capacity. How have these fared so far? Do you
intend to acquire more freighters going forward?

How much per centage of belly cargo and freighters do
you operate? Which works better for LC?

Freight and belly capacity are roughly equal. By combining
the close-knit network of Lufthansa Passage and our global
freight connections we are in the position to offer our clients a
simple and fast solution for every logistics problem. We want
to perpetuate this recipe for success.

Elaborate on your partnership with ANA Cargo. Any
new Joint ventures you are looking at in the near
future?

We are now looking back over one year’s excellent
partnership with ANA Cargo and will further intensify the
collaboration. Additionally, we are in talks with United
Cargo, with whom we wish to bundle our strengths in a
similar manner. It strengthens all those involved and helps
to provide our clients with even better offers.

Europe has been your forte. Are you looking to expand
to Middle East and Asia in a big manner in the coming
years? Any new countries you are looking to foray in the
near future?

We keep our network flexible in order to best meet the
wishes of our clients. In the past year we have newly
integrated Natal in Brazil, Ashgabat in Turkmenistan and Ho
Chi Minh City into our cargo network. Wherever new strong
routes open, we will of course be there for our clients.

What according to you are the future prospects of air
cargo industry?

As Lufthansa Cargo we are involved in numerous talks with
our clients and partners, in order to advance digitization in
our sector. This will open up fantastic opportunities for all
those involved to make air freight even faster and better
in the future. We want to achieve this together – we have
already been able to celebrate the first significant success
with the introduction of the eAWB, and we are setting the
course for more to follow.