Course of business

Cost discipline and flexible capacity management

In the first half of the financial year 2011 Lufthansa Cargo made excellent use of the still robust economy and reported rapid growth rates. Both freight volumes and price levels ensured that quarterly profits were high. From the middle of the year the pace of industry growth slowed considerably. Thanks to great cost discipline and rapid, flexible capacity management, Lufthansa Cargo was nonetheless able to achieve much better traffic performance than the industry as a whole in the third and fourth quarters as well, increasing profits further.

Good load factors at higher capacity

Capacity went up significantly year on year, as did freight volumes. For the first time, the capacities of Austrian Airlines, the eight AeroLogic aircraft and the MD-11 freighters grounded in the crisis year 2009 were all available for a full financial year. These different platforms enable Lufthansa Cargo to provide its global route network with optimal capacities in line with demand at any given time. Adding new destinations to the global network flexibly and at short notice or shifting capacities to growth regions are integral parts of the regular management process. In the reporting period numerous new destinations were included in the route network, such as Kolkata in India, Lahore in Pakistan, Houston in the USA and Dhaka, the capital of Bangladesh.

Lufthansa Cargo 2020 sets the course for sustainable growth

After the record result in 2010, Lufthansa Cargo used the reporting year to lay the foundations for the profitable growth in the years ahead with its Lufthansa Cargo 2020 strategy. The company’s successful future is built on economic success and sustainable profitability. This is how Lufthansa Cargo intends to continue participating in the growing airfreight market, to simplify and optimise its processes and to achieve unit cost advantages. Six focus themes have been defined to put this strategy into practice:

Lufthansa Cargo 2020 focus topics and targets (graphics)

Fleet development: Last year Lufthansa Cargo ordered five new Boeing 777 freight aircraft for delivery between 2013 and 2015. The aircraft will cover the planned growth and their outstanding fuel efficiency will deliver significant unit cost advantages.

Modernisation of the IT environment: The aim is to replace the previous core IT system by introducing a modern and flexible platform on the basis of industry standards. The main advantages are improved data quality, greater security, paperless data exchange and end-to-end process management. The new system is so flexible that it makes complicated ad hoc solutions superfluous; it facilitates everyday routines and thus saves time and money.

Location Frankfurt/future of the Frankfurt cargo hub: The position of the site in Frankfurt is to be strengthened in cooperation with system partners such as the airport operator, customers and authorities, although the extent depends largely on further developments concerning the night-flight ban. A major part of the plan is the modernisation of the cargo centre to improve quality and reduce unit costs. Non value-added activities are to be automated and production routines are to be scheduled centrally. The reorganisation will reduce waiting times within processes.

eCargo: eCargo digitalises the exchange of information and data between Lufthansa Cargo and its customers and partners along the entire transport chain. The digitalised “customer to customer” process will become standard and manual corrections of transmitted data will no longer be the norm. The physical flow of documents will be eliminated, unit costs will be reduced.

Quality/lean logistics: Only by means of outstanding quality for its customers can Lufthansa Cargo secure and build on its market position. The aspiration is continual process improvement that delivers sustainable benefits for customers.

The consistent use of lean management methods is one way of getting there. The lean philosophy has already been successfully established at various stations in the Lufthansa Cargo network, such as Dusseldorf, Johannesburg and New York, where it increased productivity substantially.

Cooperation: Cooperation agreements both within and outside the Lufthansa Group are a lever for sustainable growth. In the years ahead Lufthansa Cargo will be arranging more and more agreements with airline partners. This gives the company access to capacities on strategically attractive traffic flows and expands the products on offer to customers.

Night-flight ban has a huge impact on the development of the Frankfurt hub

In mid October 2011, just a few weeks before the winter flight plan went into effect, the Hesse administrative court in Kassel imposed a surprising ban on night-flights at Frankfurt Airport. At short notice Lufthansa Cargo had to switch its planned 69 weekly night-flights to other slots or move them to other airports, in some cases even cancelling them. Higher costs and lost revenue mean that annual economic losses in the significant two-digit million euro range are to be expected if the night-flight ban is upheld. A final decision on long-term investment, including in the new logistics centre, will therefore only be taken once the number of permitted night-flights in Frankfurt has been legally settled.

Lufthansa Cargo is focusing the group

In the financial year Lufthansa Cargo continued sharpening its focus on the core business segment. The company sold its share of the equity investment in LifeConEx to DHL Global Forwarding.

In November 2011 Lufthansa Cargo also disposed of its 46.85 per cent stake in Global Logistics System Europe Company for Cargo Information Services GmbH (TRAXON Europe). TRAXON will remain an important partner of Lufthansa Cargo as a neutral platform and provider of electronic communications solutions. Furthermore, Lufthansa Cargo sold its equity investment in the Tianjin Airport Hua Yu Air Cargo Terminal Co.

Investment in growth segments

As in the previous year, Lufthansa Cargo continued to invest in the growing business of temperature-controlled cargo in 2011. The pharma hub developed with the operator of Hyderabad Airport in India went into service in May. The latest infrastructure and special processes designed for sensitive pharmaceutical transport bolster Lufthansa Cargo’s position at the biggest hub for temperature-controlled transport in South Asia.

In December a new hangar for temperature-controlled consignments, the Lufthansa Cargo Cool Center, went into operations at the home base in Frankfurt. Since then all chilled shipments sent via Frankfurt have been handled in the modern, 4,500 square metre Cool Center.

Focus on social commitment

The social commitment of the company and its staff again played a special role in 2011. As in prior years, emergency aid flights to areas in crisis were carried out in cooperation with relief organisations. Lufthansa Cargo helped with aid shipments those suffering from the disastrous earthquake in Japan, for instance. In August and September Lufthansa Cargo organised an aid flight for the victims of the famine in East Africa.

At the same time, Lufthansa Cargo continues to give substantial support to the aid project Cargo Human Care in Nairobi, which was set up by company employees.

In June thirty years of partnership were celebrated with Werkstätten für Behinderte Rhein-Main e. V., a workshop programme for disabled people. Lufthansa Cargo has bought lashing straps and other loading aids from the charity since 1981 and thereby helps to provide work for around 100 people with disabilities.

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