Lufthansa chief Spohr sees no slowdown in strong freight demand | New
While many of the fundamentals underpinning the strong financial performance of air freight have been directly or indirectly linked to the pandemic, Lufthansa Group CEO Carsten Spohr still considers demand to remain strong even as passenger business continues to decline. straighten out.
The importance of air freight was evident in the Lufthansa Group’s third quarter results released yesterday, in which its air freight business was the best performing. Lufthansa Cargo reported adjusted EBIT profit of 301 million euros ($ 359 million) for the quarter ended September 30, 2021, a division record and comfortably Lufthansa’s most profitable business in the quarter.
Lufthansa Cargo announced a 37% increase in its traffic revenue for the quarter to 2.4 billion euros, thanks to higher sales in all regions and historically high returns.
Much of the strength in air cargo since the crisis hit has been a result of lack of belly capacity as passenger planes have been taken out of service.
However, air cargo volumes and yields remained strong in the third quarter, although passenger capacity began to return to higher levels.
Lufthansa itself was at around half of pre-crisis passenger capacity levels in the third quarter and is expected to reach over 70% next year. Asked about the possible impact of this on air cargo demand during a third quarter earnings call on November 3, Spohr noted that the increase in passenger demand does not necessarily equate to a direct increase in passenger demand. belly capacity as many planes were already using routes that were profitable from cargo alone.
“We’ve had a lot of flights to the United States with hardly any passengers because the freight was paying for the flight, so there’s not a lot of extra metal going to the North Atlantic in our case. It just finally filled up in the upper level of the plane, ”he said.
Likewise, while there is demand for new or converted freighters to capitalize on demand, Spohr does not believe these will enter the fleet quickly enough to have a major impact, especially when existing aircraft leave service. freight.
“It looks like all the old cargo planes were put into service during Covid,” he says. “These planes won’t fly forever. They will probably have to return to the junkyard. At the same time, only Boeing really builds [cargo] planes right now and you know how low their production rate is [at the moment]. So there is no way it will bring the plane to market so quickly and some old planes need to be retired after Covid. “
Likewise, although there is increased interest in conversions from passenger to cargo, he does not see this changing the supply situation in the short term.
“These conversions that the industry is looking at, they’re going to take a long time. They have to be certified, they can only occur in a few MRO facilities certified to do so, ”he says. At the same time, airlines are also converting back to passenger-configuration planes which were temporarily reassigned for cargo missions during the crisis.
“At Lufthansa, we just converted the last freighter into passengers. I think [others] will do it because everyone again needs the plane for the passengers. So initially I think we might even see the opposite effect.
Meanwhile, on the demand side, he says freight customers see demand remaining strong.
“They expect this to last at least until the end of 2022. Then put e-commerce first, where customer behavior has changed more drastically since Covid, which makes us very optimistic on freight. . “
Spohr, who ran Lufthansa Cargo before taking over as head of the airline group in 2014, adds: “In the long run, it’s a more complex story. Not so much on the supply side, but on the demand side.
“It is very difficult to forecast freight demand and I think we have to be honest, what we are seeing right now will not stay forever. We’re seeing yields sometimes over $ 10 per kilo – you’re making a lot more money on the kilo per cargo than on the passenger kilo right now. Is this a long term industry trend? Probably not to this degree.