Lufthansa Sees Air Freight Yields in ‘Landslide’ Drop on Glut

(Bloomberg) -- Deutsche Lufthansa AG said a drop in prices for handling air cargo is reaching “landslide” proportions as carriers exacerbate a capacity glut by adding planes.

“At the moment we have great problems in air freight, in Germany as well as across Europe,” Peter Gerber, who heads Lufthansa's cargo operations, said late Monday at a briefing in Frankfurt. “Global growth has slowed, and global trade no longer grows faster than economic activity. Persian Gulf carriers keep adding capacity although it does not pay off, and capacity growth currently is three times greater than demand growth.”

Lufthansa is restructuring freight operations, cutting as many as 800 jobs in an effort to reduce costs by 80 million euros ($89 million) a year. The efforts follow two consecutive quarters of operating losses at the cargo unit, the first time that has happened since the collapse of Lehman Brothers in 2009. Declines in average per-kilogram prices for air freight have been accelerating and now amount to a drop of 15 percent to 20 percent, Gerber said.

The German carrier plans to offer new services including air freight shipments for private consumers, and enter into more partnerships like the ones it has with ANA Holdings Inc. and United Airlines, Gerber said. Lufthansa is also speaking with large air-freight customers including Amazon.com Inc. and Alibaba Group Holding Ltd about possibly serving them directly, instead of the current practice of doing most business with them through forwarding agents. If those ideas materialize, such services could “change the industry,” Gerber said.

To contact the reporter on this story: Richard Weiss in Frankfurt at rweiss5@bloomberg.net. To contact the editors responsible for this story: Chris Reiter at creiter2@bloomberg.net, Tom Lavell, Naomi Kresge