Overcapacity causes Lufthansa Cargo to make loss

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Lufthansa Cargo has made an EBITDA loss of four million euros ($4.4 million) as it continues to suffer overcapacity and competition from Bosporus and Gulf carriers.

Revenue has fallen by 19.1 per cent to 976 million euros for the logistics segment, which consists of Lufthansa Cargo, unit load device management firm, Jettainer; its stake in cargo airline, Aerologic; various handling companies and time:matters.

Earnings before interest, tax, depreciation and amortisation (EBITDA) was down from 88 million euro in the first half of 2015, and the second quarter EBITDA loss was six million euros in 2016, compared to a profit of 18 million euros in 2015.

In its first half report, Lufthansa says: “Airlines from the Gulf and Bosporus region, in particular, are increasing their freight capacities, especially due to their many new passenger aircraft.”

“Global airfreight capacity is growing faster than demand. This has recently resulted in significant overcapacities, which are having a highly adverse impact on Lufthansa Cargo’s revenue.”

Revenue in all regions saw double digit drops, with America suffering the most, down 23.1 per cent to 387 million euros. Asia Pacific was down 16.4 per cent to 381 million euros, Europe declined 12 per cent to 88 million euros and Middle East/Africa saw revenue fall 22.4 per cent to 83 million euros.

Lufthansa Cargo is reducing annual staff and service provider costs by 80 million euros a year and provisionally retired two Boeing MD-11 Freighters at the end of 2015 to improve load factor. It now operates 12 MD-11Fs and five Boeing 777 Freighters.

From July 2016, its partnership with Japanese carrier, All Nippon Airways covered the entire European feeder network and Lufthansa Cargo signed a similar agreement with Cathay Pacific Cargo in May.

Revenue for the Lufthansa Group was down 2.1 per cent to 15 billion euros in the first half of 2016, and net profit fell by 55 per cent to 429 million euros.