Story ID: CKluftcargo05282015
Lufthansa Cargo Navigates Through Headwinds in Americas
By: Chris Kjelgaard
Caption: Strong U.S. dollar contributing to instability
Word Count: 533
The U.S. dollar’s strength against the euro and high seasonality in the Americas-Europe market have challenged Lufthansa Cargo to innovate and respond to rapidly changing conditions to maintain its position as the largest general-freight carrier in the North Atlantic segment, as ranked by IATA’s CASS-USA Business Intelligence service.

Achim Martinka, Lufthansa Cargo’s vice president for the Americas, told a press briefing in New York last week that from January through March 2015 the carrier’s monthly cargo tonnage from the U.S. had fallen “clearly below last year.” In April, U.S.-originating tonnage totaled “about 5 percent” less than in April, 2014.

In contrast, Lufthansa Cargo’s tonnages from Europe to the rest of the world during 2015’s first four months rose about 15 percent.

Lufthansa Cargo forecasts that from 2014 to 2020 its average annual carriage between Europe and North America, in both directions, will rise 1.2 percent from the 2.4 million tons it carried last year. In the Europe-South America market, the carrier forecasts annual growth of 3.5 percent on its 900,000-ton uplift in 2014.

While Europe-North America remains Lufthansa Cargo’s second-largest market (Europe-Asia Pacific remains by far its biggest), in some respects “it’s a little bit of a problem child,” said Martinka.

The U.S. dollar’s strength is exacerbating the problem. Martinka said prices of export goods from the U.S. have climbed 27 percent because of the stronger dollar, and Lufthansa Cargo’s tonnages from the United States have suffered.

However, the dollar’s strength also means European imports to the U.S. cost 21 percent less, Martinka noted. For Lufthansa Cargo that has translated into big gains in imports to the U.S. “The first three months of 2015 have been the best three months ever for me on the import side,” he said. “Some of our stations are up 50 percent, and I’m talking big stations.”

Lufthansa Cargo now awaits the summer, when cargo volume traditionally slows on the North Atlantic, to see if the dollar’s strength keeps the flow of Europe-U.S. imports high. However, its strategy for dealing with the U.S.-Europe market – and the highly seasonal South America market – centers on innovation, by adding new routes or frequencies it thinks will interest customers. “We’re thinking of stepping into markets not served by main-deck capacity,” said Martinka.

The strategy has seen Lufthansa Cargo launch a weekly Houston-Stavanger-Frankfurt schedule this year, as well as a twice-weekly Dallas/Fort Worth-Manchester (UK)-Frankfurt MD-11F service. “So far we’re pretty happy with the result,” he said.

From June 7, Lufthansa Cargo will add a weekly stop at Natal--a new Brazilian station on a “geographically ideal routing”--to its existing Viracopos/Campinas-Frankfurt service. Natal will serve strong European demand for seasonal produce such as passion fruit, papaya and limes, explained Martinka.

This fall, Lufthansa Cargo’s board plans to decide whether or not to exercise one of the options it holds on five Boeing 777Fs. However, Martinka noted that with 14 MD-11Fs and five 777Fs now in service, the carrier is much larger than it was two years ago.