Lufthansa Cargo CEO Peter Gerber speaks about the freight operator's year after the pandemic took hold, touching on future fleet plans and sharing the preparations that have been made to transport a potential COVID-19 vaccine.
This interview is part of Air Transport Month, a detailed examination of the future of the air transport industry as we begin to climb out of the COVID-19 crisis.
Rush transcript:
Kurt Hofmann:
Hello, ladies and gentlemen, and welcome to another interview for Aviation Week Network ATW Leadership Forum. My name is Kurt Hofmann, I'm correspondent for ATW. And today, I have the great pleasure to talk to Peter Gerber, the CEO and chairman of Lufthansa Cargo. Peter Gerber, thank you very much for your time and welcome to our interview.
Peter Gerber:
Yeah. Thank you very much, Kurt, and thank you very much for the opportunity to speak with you.
Kurt Hofmann:
Oh, we always appreciate to talk to Lufthansa Cargo. One of the most leading cargo airlines worldwide, we can say. The image of cargo changed actually. We realized over the last few months it was a byproduct for many airlines, now today, it's the main driver for many airlines to make money anyhow. How is the current status for Lufthansa Cargo? How is business doing at the moment? What's the status at the moment?
Peter Gerber:
Yeah, actually we are doing quite well at the moment. So this means, of course, cargo is of big relevance for the worldwide supply of goods, especially of medicine goods, but also of all other critical goods. And so, therefore, to a certain extent together with the data flowing around the world, this keeps the global world moving and keeps the global world going without people meeting, which is, of course, very, very difficult. So this shows more or less at the moment, the relevance, or as we call it the system relevance of cargo in the world. And for us, as you mentioned, one of the big cargo carriers, business is good at the moment. This is what we can say. And we try to fulfill all the needs of our customers, which is not easy in those times, but I'm proud that we, to certain extent, can do it.
Kurt Hofmann:
Do you expect that the demand will continue to stay? Remember we had a interview a few months ago, it was very difficult to estimate, and also the times are very uncertain at the moment anyway. So what is your feeling demand for the cargo business? And maybe you can add, you have no belly capacity on long haul routes. I know that belly capacity on the passenger aircraft is very important for Lufthansa Cargo, how has this hurt your business?
Peter Gerber:
Yeah. First and foremost, I think what we can safely say is business is still uncertain, but this is maybe some kind of the normal mode in the air cargo business that the business and the outlook is always uncertain. But taking this away, I believe for the moment they are quite good prospects. And the reason for this is that there is still a clear lack of capacity. And as you mentioned, around 50% of the worldwide air cargo capacity is normally seen in bellies. And as a lot of bellies are not flying at the moment and so few passenger planes are flying, this means there is a lack of supply. And on the other hand, all freighters we have in the world are flying with record breaking load factors, and this means there's still more demand than we can supply to all our customers. And so, this means for the moment, I believe, the prospects are quite good.
As the world economy is running, of course, there are some problems on account of corona, but when you look to greater China, to Asia, you see, for them, crisis is already over, they have a growth from nearly 5% again. And so, this means the world economy is still quite robust, and this means there's a lot of demand for air cargo. And again, as the supply is still a little bit weak, I believe for the next month, for the next foreseeable month, given all the uncertainty we have in our cargo business, the prospects are quite good.
Kurt Hofmann:
Talking about corona, the vaccine one day it will be available, hopefully, and we realize many cargo airlines like to be in this part of the business, and I think there is a lot of capacity necessary, how has Lufthansa Cargo prepared for this topic?
Peter Gerber:
Yeah. Luckily, we are quite good prepared on this. We were, as you may remember, the first carrier to get CEIV certified. So this means this very special pharma standard of IATA. And I'm proud to say that we have one of the biggest pharma networks around the world. So we invested heavily in Frankfurt, in Munich, and also in Chicago, our brand new pharma and cool center there, and we have more than 30 other stations around the world, and this gives quite a big, huge pharma network. And so, we are prepared to fly this vaccine around the world, and we really hope we can help all the customers which want us to help them. And I think it's of critical importance for the whole world that all the players in the air cargo business are prepared and are able to fly this vaccine. I think it's almost critical for our civilization.
Kurt Hofmann:
We talk about the freighter demand, and so all the freighters are worldwide flying. What about your fleet? You have now nine modern Boeing 777 freighters, a few MD-11s left, and you have access to AeroLogic, a few aircraft, as a joint venture between DHL and Lufthansa Cargo. So what about your fleet currently and you're looking for more aircraft, are more aircraft necessary?
Peter Gerber:
Yeah. So what you quoted was quite precise. So this means we have nine own 777, we have four 777 in AeroLogic, because everybody has access to his own capacity, DHL has, and Lufthansa Cargo has, so that's 13 777 then at the moment. And currently, we are still flying six MD-11, and we will fly some of them till the mid of next year. And, of course, that's true, we are looking for additional capacity, and we check whether this is a sensible case or not, but as we see quite good prospects, I believe, we will see some additional capacity at Lufthansa Cargo. It's a little bit too early to say in which form, but it's pretty clear our new fleet will be a 777 only fleet, which is the best aircraft for us in our business. And, of course, we are looking for additional capacity maybe in this direction.
Kurt Hofmann:
Would be, by the way, freighters available actually on the market? Because it is quite booming, the freighter market.
Peter Gerber:
Absolutely. So, of course, it's very difficult at the moment. Also, there the supply is very difficult, but as we say in Germany, if you have to wish to get something, there may be always a way.
Kurt Hofmann:
Okay. I remember many years ago there was always a discussion that if Lufthansa Cargo is necessary for Lufthansa, I believe there is no question today, of course Lufthansa cargo is necessary. But I remember airlines like Air France or KLM and many others reduced their freighter fleets quite massively. Do you think your competitors now are very unhappy that they made this decision a few years ago, and now you're on the forefront actually with your fleet?
Peter Gerber:
Yeah. I don't know what about our competitors. I believe you have to ask them, but I can imagine that they maybe are not so happy with this decisions of the past. And we also had this discussions, and I'm very glad that we at Lufthansa took a different strategic decision due to the importance of air freight, of course, for the German export market, and also for the tradition within Lufthansa where cargo always has had a big tradition. And, of course, it wasn't easy to take those decisions, but we always look very deeply into the data.
And so, I think in the end, we took the right decision to not only operate freighters longer, but to modernize our fleet and have a very modern company providing all our customers with air freight. And I'm very glad to say that also within the Lufthansa Group strategy, the Cargo is an integral part, so it's an important part of the whole Lufthansa strategy moving more from aviation to an airline group. And so, of course, Cargo as an airline has a part in this airline group. And I think for the moment, the prospects are quite good. And again, I believe it has proven that the European, especially the German or the Middle European cargo market is a very important one, and it's important to be an important player there.
Kurt Hofmann:
Are there still some aircraft flying at Lufthansa, this passenger aircraft as a cargo aircraft? And I remember in one of our discussions, this is not a way you can continue forever to operate passenger aircraft for a cargo aircraft, because in terms of economics it's not a big business, is it? Or how you see that passenger to cargo aircraft?
Peter Gerber:
Yeah, that's true. We christened them freighters, so this is what the small talk within the employees then in the market is, so we call them freighters. And, of course, we flew quite a few of them in the phases where we needed urgently to get the masks and the medical supplies here to Germany and to Europe. And, of course, there are always some around, even we, maybe next week, we'll fly a couple of them again. But you mentioned correctly that from an economical point of view, this is nothing you can do forever, because you have nearly...
For instance, when you look at a 330, an Airbus 330, you have nearly the same costs for flying as when you fly a 777 freighter, but you have at maximum a third or 25% of the capacity. And this shows that this can't be a very good case, or you can only operate this successfully when there are times when the demand is so high and so big that the prices are very high or you urgently need some things, then you of course can operate something like that. And we are glad to do this, because we have such a big fleet in the Lufthansa Group on hand, if it's necessary, but all in all, this has not a big commercial future.
Kurt Hofmann:
Okay. Final question. What's actually the global market share of Lufthansa Cargo in the cargo business? Is it you plan to grow, probably?
Peter Gerber:
Yeah. So as everybody does at the moment, so it's difficult to say. I think if we take out the integrators, it's close to 10%, so 8, 9%. Of course, we lost a little bit of share because of the lack of bellies, so it's difficult to say this at the moment, but normally it's 8, 9% in the markets where we are flying. This means except of the Pacific, so because we are not operating there, if you take this, then it's less.
Kurt Hofmann:
But we can say Lufthansa Cargo is one of the leading cargo carriers worldwide.
Peter Gerber:
I think we are proud enough to say this. And we are very glad to perform our business for our customers. And we thank all our customers for the trust they have in us, because they make us one of the big carriers, it's only our customers. And so, we have to give them a big thank for that.
Kurt Hofmann:
Peter Gerber, CEO and chairman of Lufthansa Cargo. Peter, thank you so much for your time to give us the latest insights and updates about the Lufthansa Cargo business. Quite interesting. And we keep on following you, how your developments go on and how many aircraft you will fly in the future. Thank you very much for your time.
Peter Gerber:
I have to thank you, too, Kurt, and it was my pleasure. Thank you very much.
Kurt Hofmann:
Thank you, Peter. And ladies and gentlemen, thank you for watching another interview from our site, and take care and goodbye.
