Main Event… Season kicks off with fast growing logistics provider EMO TRANS conducting 11th Global Network Meeting all this week in Bonita Springs, Florida USA.

Us On A Bus Slow down and network . . . Moving from venue to venue at EMO Annual Meeting this week includes rides on an old-time trolley.

Tilo Weger (r) well-known long time Lufthansa executive at key global stations, today heads up Luxxo International, a consulting company based in Naples, Florida is pictured here with Jo Frigger and Connie Ash, EMO Trans Executive Assistant. Connie is responsible for organizing and planning EMO’s annual event.

Benjamin Granadino Managing Director EMO TRANS Peru: “We see positive signs in developing two way traffic driven by delivering total transparency and hands on personal service to the booming markets of Latin America."

Come on in…the water’s fine. Networking continues as conversation goes from business to figuring a good time to get along to the giant outlet shopping malls located in Bonita Springs. Pictured left to right—Paul Walborn, regional sales manager, EMO Trans Denver, Marco Rohrer, executive vice president / regional manager (West Coast, South) / Branch Manager (LAX) and Lynn K. Derbin, district manager, EMO Trans Denver.

Brendan Furlong, all-cargo pro and cargo development business manager USA at Emirates SkyCargo tells EMO conferees what’s up and in the future as EK added Dallas and Seattle in 2012 and goes daily non-stop to Washington, D.C. in September. “We are good partners and will personally look after your business,” Brendan said.

What Makes Thomas Huchler run? As he heads up EMO LOG, EMO Germany’s logistic division off to a flying start, providing total distribution for Brooks Running Shoes with complete logistics support and product distribution, Thomas reports a growing business adding up to “unlimited possibilities” in the years ahead.

Profits Ja!
     Lufthansa Cargo entered into the numbers derby last week, but unlike others (including its own passenger division), the annual report ending 2011 fiscal year saw air cargo deliver the second best result in company history (the best being 2010) with an operating profit of 249 million Euro on revenues of 2.94 billion Euros, or an 8.5 percent uptick in the net.
     So while everybody else has joined the chorus of wishers/believers that the second half of 2012 will pull the lackluster first half out of the doldrums, here comes Lufthansa Cargo making money despite its Night Curfew at FRA, high kero prices and all the associated pitfalls of freighter operations pushing costs right through the roof—Lufthansa is sticking out its corporate chin at a down year and looking better every day!

Left to right—Nils Haupt, Karl-Ulrich Garnadt and Peter Gerber

     In terms of 2012, what stood out and continues to represent a major challenge for FRA hub is the court imposed night flight ban, due for a decision by a federal court in Leipzig on April 5. As Garnadt reiterated, the financial damage alone is significant, to the tune of 40 million Euros in profit—as he put it into context, over ten years, it will equal the cost of a B777 aircraft. Lufthansa Cargo’s success depends on express shipments coming from 300 destinations worldwide, 70 percent of which are transiting through FRA. The hub has been carefully built up over an period of 30-40 years into what it is today, enabling the processing of an express shipment in a three-hour window. Garnadt was emphatic about FRA being indispensable and irreplaceable for the carrier, as viable alternatives cannot be replicated in the short term, nor freighters separated from cargo carrying passenger aircraft. Just in case the point hadn’t been sufficiently driven home, he reminded the audience that out of the world’s top 10 airports, FRA was the only one that has a curfew.
     Garnadt added that an unfavorable court decision will result in scaling back development of the future hub and that Munich has seen continued growth; he also stressed that the Rhein-Main region where Frankfurt is located lives off of international trade and losing the night flights has a severe impact on many companies and thousands of employees based in Frankfurt. Arguments by the curfew supporters about the new landing-only runway opened last October were spurious because it was never intended for use on nighttime cargo flights—flight operations were to continue on the pre-existing runways.
     Internal studies have revealed that general air cargo was twenty times more expensive than ocean freight, with express cargo being fifty times more expensive than ocean freight. Continuing to provide express service through FRA is critical for the carrier. As example, the Chicago freighter carries about 30 percent express freight generated in the immediate area around FRA.
     Another thorny issue is the emission trading scheme imposed by the European Union, which Mr. Garnadt attacked in no uncertain terms, essentially accusing politicians of letting political conflicts play out on the back of businesses such as Airbus and Lufthansa Cargo. As countries outside the EU vigorously objected to and are fighting this rigid regime, refusing to be dictated to by EU bureaucrats, the spillover effect has been felt when it comes to negotiating traffic and overflight rights with non-EU other countries.
     High oil prices continue to dramatically increase the carrier’s fuel bill, and last but certainly not least, Jade Cargo has become a topic on which many questions are concerned. Herr Garnadt went on to say that Lufthansa Cargo, which holds a 25 percent stake in Jade, has been negotiating with UniTop, a Chinese partner that holds its own AOC (airline operating certificate) and logistics interest to restructure Jade and prepare to re-launch operations. No further financial impact is foreseen in 2012, following a double digit negative millions figure last year, which had depressed results. Commitment to China however remains strong, with service to eight destinations, including HKG, a handling joint venture in Shenzhen and Pudong and further cooperation with Air China.
     As part of the Lufthansa group-wide SCORE improvement program aiming to improve the cost structure by 1.5 billion Euros by 2015, Lufthansa Cargo’s share is 70 million Euros, a sum that may be seem disproportionally low, but needs to be seen in the context of much earlier significant cost control measures that had already been implemented by Cargo.
     Renewed focus on the core business has resulted in the sale of several businesses, including LifeConEx, Traxon, and TAT [Tianjin air cargo terminal]. In summing up, Garnadt expressed cautious optimism for 2012, setting the course for growth, sustained profitability, and maintenance of an industry leadership position through the ‘Lufthansa Cargo 2020’ corporate strategy program and its six components: fleet development, the Frankfurt hub, modernizing its IT platform, eCargo, quality lean logistics, and finally, cooperation with its airline partners.
     We asked Herr Garnadt for information regarding the new IT platform, the provider and a timeline.
     “We have completed the selection process and have started the negotiation with the vendor. We expect an announcement in a May-June time frame. The new system will be rolled out for cut over toward the end of 2014 or early 2015.”
     As for why Lufthansa sold Traxon, a company that was strategic for Lufthansa for nearly twenty years, Herr Garnadt had this to say:
     “To grow Traxon requires further investments; when the choice is to rather invest in aircraft, the decision and priorities become pretty clear. We continue to work with Traxon just as before the transition,” said Herr Garnadt. He also informed FlyingTypers that the new Detroit freighter service, which was launched at the outset of 2012, is “meeting our expectations and our customers are satisfied.”
     Peter Gerber, Lufthansa Cargo Board Member Finance and Human Resources, highlighted in his remarks the fact that yields have stabilized and were holding, yet due to the prevailing market conditions, cost flexibility was a must in order to react very quickly to changing conditions. Revenues rose by a total 7 percent, with the biggest contribution in the Americas at 23 percent, followed by Europe (14 percent), Africa/Middle East (7 percent) and a -4 percent for Asia/Pacific.
     Looking back to 2005, Lufthansa Cargo achieved a stable development in operating results and the sole negative of 171 million Euros in 2009. 2005 versus 2010 represented a trebling of the results, from 108 to 310 million Euros, and from 2008 to 2010 figures doubled from 164 to 310 million Euros.
     Herr Gerber echoed the importance of the 2020 strategic goals of the group-wide SCORE program
On the costs side, for example, these rose by 7.1 percent, of which jet fuel alone counted for 38 percent. Fuel prices alone translated to a 50 percent variable for operating the MD11F. The carrier currently employs 4,600 staff globally, a modest 3 percent increase year-on-year 2010 at 2 percent of the total costs.
     A recurring topic during the interview was the backlash from Russia in particular, with 11 out of 30 weekly flights in the summer schedule pending approval by the Russian authorities in what is seen as retaliation for the unilateral EU emission trading scheme. AeroLogic, a cargo airline in which Lufthansa Cargo has a 50 percent stake, operates about 30 flights a week, and is also awaiting approval. In response to a question, Karl Ulrich Garnadt commented that Russian overflight approvals are habitually received late; there are currently two weeks before the summer schedule becomes effective. At the government level, this matter needs to also be taken up with ICAO.
     Another thorny issue raised was the Air Cargo Germany and Air Bridge Cargo situation, for which an LBA (German FAA equivalent) decision was pending. Herr Garnadt said that he didn’t mind competition; however, it had to be a level playing field for all and ensure that attempts to circumvent German ownership laws are appropriately scrutinized.
    Peter Gerber denied that Lufthansa Cargo was focusing on part-time and contract labor and said that any future investments and/or divestitures are being evaluated on an ongoing basis.
     In closing, regarding the e-Freight subject Herr Garnadt made reference to the recently concluded IATA WCS in Kuala Lumpur, indicating that he was optimistic that this time there was collective, across the board agreement that progress must be made lest further market share be lost by airlines and forwarders, something the industry could ill afford.
     The press conference ended with Nils Haupt, Lufthansa Cargo Director of Communications, introducing his successor, Matthias Eberle, who takes over effective April 1, 2012, with Nils taking on new responsibilities with Lufthansa in New York.
Ted Braun

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