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Lufthansa attracts an Integrator

FRANKFURT: FedEx Trade Networks, the Integrator's forwarding arm, is talking to Lufthansa Cargo about a block space or regular capacity agreement.

A spokesperson for the German airline that will operate four new B777 freighters and 14 MD-11Fs in its summer schedule, said an agreement is expected by mid-year.

As Lufthansa Cargo talks growth for 2014, the AF-KL-MP Cargo combine says it will further reduce its cargo fleet – now managed by Martinair – to eight aircraft this summer. This follows the coincident move by IAG Cargo to cancel its agreement with Atlas Air to operate three 747-8Fs for British Airways.

Otto LufthansaAndreas Otto (right), member of the Lufthansa Cargo executive board with responsibility for product and sales, says the company is expecting air cargo industry growth rates of around four percent per annum until 2020 – a far cry from an 8.2 percent average between 1971 and 1990, 6.6 percent for the next decade - but half a point higher than during the last 13 years.

Noticeably, between the period 1991 and 2013, the industry experienced five years of negative growth. Four of those years occurred during a political or economic crisis relating to the U.S.

Since a low period of minus 13 percent in January 2012, Lufthansa Cargo says its traffic results have steadily risen to a five percent growth forecast this year. In 2013 the company says it had a 25.4 percent share of its home market – its nearest competitors being Cargolux and Emirates at 6.6 percent and 5.7 percent respectively.

Otto says Lufthansa Cargo will make another profit in 2013 –  but less than the 104 million the previous year. Full year results are due in March. By comparison he cites continued losses by AF-KL-MP Cargo and Singapore Airlines and suggests the only aircraft that can be operated sustainably out of Europe is the B777 freighter. Ironically Air France cancelled part of an order it had for such equipment in favour of retaining older B747s – now parked or disposed of.

A decision as to whether Lufthansa Cargo can afford a further five B777Fs will be made in August.

Citing a recent face-to-face question put to 200 shippers, Otto says 90 percent want the company to continue operating dedicated freighter equipment and are prepared to pay for it – which is slightly at odds with a finding from Lufthansa Cargo's 2013 customer satisfaction index. While all other KPIs met or exceeded the industry average, it was its lone price-performance ratio that was around seven points below the 75 percent average.

Otto suggests the result is indicative of its customers' historic willingness to enjoy the company's  service quality while balking at the sticker price – despite the KPIs. Fortunately for the airline, 2013 saw a dramatic reduction in European-centric all-cargo capacity. So maybe any price hike it imposes this year will hold.

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