150,000 empty containers stranded in Russia as trade imbalance grows
The huge trade imbalance between China and Russia since the invasion of Ukraine has led ...
By Ian Putzger
With the launch of its regional freighter operations imminent and market conditions remaining strong, Lufthansa Cargo is considering expanding its widebody freighter fleet.
The carrier’s first A321 cargo aircraft is set to start flying on 15 March and is already open for bookings, said LH Cargo CEO Dorothea von Boxberg.
From its base in Frankfurt, it will serve destinations, including Istanbul, Tel Aviv, Tunis, Dublin and Manchester, while the second A321 the airline ordered is due to join the fleet in August – routes, based on customer demand, have yet to be determined.
But the regional freighter network looks set for further expansion. Ms von Boxberg said management was discussing adding more A321 freighters to the line-up.
However, she does not envisage a dramatic boost in the near term.
“I don’t think it will be a large fleet in two years,” she said, adding that expansion would be driven by customer demand.
The strongest driver for this is e-commerce, which Ms von Boxberg described as the biggest single growth engine for air cargo in the past year and which yielded record results for LH Cargo.
Heyworld, the company’s dedicated e-commerce offshoot, launched in 2019, has seen customer demand grow from point-to-point service within Europe to markets beyond, prompting the platform to expand into longhaul sectors Asia-Europe and Europe-North America, she reported.
This is adding fuel to the argument for boosting the widebody freighter fleet. After two additions last year, it now stands at 15 777-200Fs, with the last of the MD-11s retired last year.
“We would like to get more 777 freighters,” Ms von Boxberg said, adding that management was also looking at the A350 freighter.
The Russian invasion of Ukraine, and its repercussions, have exacerbated the capacity crunch. Barred from Russian airspace, Lufthansa and other European carriers are now taking a southern flight path to Asia.
The longer flying distance and the need for more fuel reduce the cargo payload capacity on LH aircraft on these routes by about 10%, Ms von Boxberg notes. Similar constraints on other European and Asian carriers and the inability of Russian airlines to fly into European, Canadian and US airspace, effectively means a 10% capacity reduction between Europe and Asia, she adds.
At the same time, belly capacity remains constrained, albeit less than before. Last year, LH’s overall cargo capacity was 22% below 2019 levels, with bellyhold space more than 50% down. Management expects belly space to grow this year, but not to reach 2019 levels.
But, while capacity remains under pressure, there are no signs of demand abating, said Ms von Boxberg. Economic factors remain strong. E-commerce has been a potent driver of growth, Chinese exports have continued to expand, US inventory levels have remained low and expectations for German exports are on a high level, well above their long-term average.
In addition, demand for airfreight has been stoked by disruptions in production and congestion in ocean freight, she said.
These factors, supplemented by a cost-cutting programme, propelled LH Cargo to record results last year. Revenue soared nearly 38% to €3.8bn ($4.12bn), with adjusted ebit reaching €1.49bn, up more than 93% year on year.
For this year, there are three principal objectives. LH Cargo wants to become the most customer-centric, digital and sustainable air carrier.
The customer focus aims to “scrutinise each step in the customer journey” to see how this can be improved. This includes elements like enhanced booking tools and proactive service through upgraded CRM that gives customer service staff easy access to more relevant information in order to offer better solutions.
On the digitisation front, LH Cargo wants to get all data ahead of goods acceptance, so problems can be resolved before the cargo reaches the airport, to make sure freight won’t miss a flight. By late March, it will only accept shipments that come with e-air waybills in all feasible lanes.
And t he group aims to halve its CO2 footprint by 2030 and become carbon-neutral by 2050. At LH Cargo, 99% of the CO2 footprint is in the air, Ms von Boxberg noted, adding that the shift from MD-11s to 777 freighters has resulted in a 15% reduction. The company is preparing to join the science-based target initiative, with validation expected by mid-year.
Other steps include fitting the freighters with ‘sharkskin’ technology and more use of sustainable aviation fuel.
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