News / Lufthansa Cargo sees operating profit vanish in Q3 'weak market'

Airbus A330 of Lufthansa D-AIKI ("Jena") at Frankfurt Airport

Lufthansa Cargo has posted a dramatic year-on-year drop in profitability in the third quarter, ending 30 September.

Ebit (operating profit) for the period was breakeven, at €0, and on an adjusted basis, totalled €1m ($1.07m). This compares with €330m and €331m respectively a year earlier.

A spokesperson told The Loadstar the decline was the result of “weak market demand in combination with rising capacity, leading to a lower yield level”.

Traffic revenue – income from actual flown shipments – also fell sharply in Q3, by 41%, to €675m, reflecting the significant drop in rate levels over the past year, the spokesperson added.

Capacity, expressed as available cargo tonne km (ACTK) and sales – revenue cargo tonne km (RCTK) – increased by 7% and 5% respectively, year on year, resulting in a cargo load factor of 55.6%, down 0.8 percentage points.

The spokesperson played down the impact of operating costs on the unit’s ebit in Q3 and said: “Despite certain cost increases, the overall unit cost position is developing positively, compared with the previous year.”

On the prospect of Lufthansa Cargo taking action over the exceptionally sharp drop in profitability – job cuts, sales office closures/re-organisation or changes in the flight network – the spokesperson said the situation was being “observed closely” and “appropriate measures will be considered if necessary”.

And for the outlook for Q4 ebit, added: “Unfortunately, we do not give guidance on quarterly performance.”

Meanwhile, Lufthansa Cargo’s close European rival, Air France-KLM Martinair Cargo, in its Q3 results, highlighted the “continued normalisation of activity, translating in a decrease of unit revenues”, which were down 38.9% on Q3 22.

Traffic revenue was down 37%, year on year, to €439m, while RTK was largely unchanged, “on the back of a strong demand in 2022”.

The resumption of passenger travel resulted in an increase in ATK of 3.3%, and its cargo load factor was 1.4 points below Q3 22, at 44.8%, as belly capacity rose.

The carrier group also noted that “operational issues” of its full freighters resulted in a reduction of South America operations, “in order to restore reliable operational performance for our customers”.

Air Canada, which this year dropped an order for two 777 freighters, saw its Q3 cargo revenue decline by C$66m (US$48.3m) on Q3 22, to C$215m. President and CEO Michael Rousseau attributed this to “lower yields in all markets from continued softness in demand”.

But he added: “Although it’s relatively early, signals observed from the markets demonstrate upticks in demand and in yield.”

Asked to comment on Air Canada’s backtracking of the freighter order, Mr Rousseau said: “We did cancel two 777 freighters because it was a little bit too early for us to take those into our network. But we are looking to expand our 767 freighter business and build that business over time.

“The market has been soft. We believe we’ve hit the bottom and we’re starting to see some early signs of strengthening demand and yield, and we’ll take full advantage of that with both our bellies and our freighters,” he added.