Lufthansa Cargo is close to converting options for five more Boeing 777Fs after the airline has seen a significant improvement in demand in some of its key markets.
“We plan to replace our MD-11s with Boeing 777s and not only with five or 10,” Executive Vice President for Sales Andreas Otto said at a Lufthansa Cargo event near Frankfurt.
The airline has taken delivery of the first two of five 777Fs on firm order. The third aircraft will arrive in early March and the fourth in June. The last of the initial batch is due in 2015. According to Otto, the carrier has to decide by October whether or not it will convert options for five more into a firm order.
“I don’t see us reducing our freighter fleet. The question is how fast can we grow,” Otto says. “The 777F is the best cargo aircraft, but it is unfortunately also very expensive.” And with the industry still in early recovery mode at best, Otto argues it is “difficult to sustain a freighter service out of Europe.”
The decision to buy more freighters runs counter to broader industry trends in Europe. Air France-KLM has made serious cuts to its cargo fleet, Air Cargo Germany went bankrupt, and British Airways World Cargo is pulling three wet-leased Boeing 747-8s from service. Lufthansa Cargo hopes to benefit from these capacity drawbacks.
But the airline has to live with weak profits in 2013, Otto says, without providing exact figures. Lufthansa Cargo reached a €310 million ($418 million) operating profit in 2010, but that declined to €249 million in 2011 and €104 million in 2012. Otto says a high double-digit number is likely for 2013. Results will be announced in March.
Lufthansa Cargo has operated a fleet of 18 MD-11s for the past several years, but retired one for spare parts, with another aircraft to follow. The company also has decided to take two more MD-11s out of service for the upcoming summer timetable and will only operate 14. The two grounded MD-11s will be retained, however, in case demand picks up. Lufthansa Cargo can afford to ground the aircraft because they are now fully written off.
Otto says Lufthansa Cargo has been experiencing growth since around May of last year. But demand picked up more noticeably around September. China to Europe tonnage is currently up by 25% and German exports into the Western Hemisphere are also seeing increases in excess of 10%. Lufthansa Cargo expects overall growth of around 5% for 2014.