Lufthansa Cargo turns its performance around in 1H2017

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The Lufthansa Group says its cargo arm Lufthansa Cargo posted first half year earnings of €78 million – a significant difference to the loss of €45 million in the same period last year, but it says the global airfreight market “remains challenging”.

Lufthansa Cargo and its logistics division, which includes time:matters, Jettainer, an equity investment in Aerologic and stakes in handlers, saw revenue climb year-on-year (YOY) by 18.6 per cent to €1.2 billion in the first half of 2017.

Other operating income went up by 73.3 per cent YOY to €52 million, largely as a result of compensation for damages. Total operating income was 20.3 per cent higher at €1.2 billion.

Lufthansa Cargo says performance varied between regions. Capacity was expanded in the Americas and Asia Pacific traffic regions. The cargo load factor improved in all regions, with the exception of the Middle East/Africa. Traffic revenue and yields were up in all regions.

Regionally, revenue in Europe was up 5.7 per cent to €93 million, up 16.5 per cent to €451 million in the Americas, up 20.2 per cent to €458 million in Asia Pacific and up 1.2 per cent to €84 million in the Middle East/Africa.

Total revenue cargo kilometres were 4,249 million, up five per cent on the six months last year. Available cargo tonne kilometres were up two per cent to 6,177 million. The cargo load factor was up two percentage points to 68.8 per cent in the 1st half of 2017. Yields were up 10.3 per cent.

This raised Lufthansa Cargo’s constant currency yield by 9.3 per cent, thanks to “favourable trends in demand” and it expects cargo to break-even or make a profit for the year, against earlier expectations of a loss.

Demand for airfreight has been better than expected this year as the sector benefits from lower capacity and a recovery in global economies.

The Lufthansa Group as a whole increased its total revenues by 12.7 per cent to €17 billion in the first six months of 2017, up on the €15 billion in the same period last year.

Adjusted EBIT was roughly doubled to over €1 billion – up on the €529 million in the same six months last year. Net profit for the first half of 2017 was €672 million, a 56.6 per cent improvement on the prior-year period of €429 million.

The Lufthansa Group the first half of 2017 was its best-ever first half year earnings result and Deutsche Lufthansa chief financial officer, Ulrik Svensson says: “In addition to strong demand and a robust pricing environment, this is attributable to the fact that we achieved a further structural reduction in costs.

“Our hard work in cutting our costs is reaping its rewards. But we must continue these endeavors: this is the most important way that our margins can be improved sustainably.”

As for the outlook, Svensson says: “In view of our successful first half-year development and the better visibility into the important third-quarter period, we have raised our forecast for 2017.”