Lufthansa Cargo Lufthansa Investor Day 2010

Lufthansa Cargo Lufthansa Investor Day 2010
Carsten Spohr
Chairman and CEO
Lufthansa Cargo AG
Frankfurt / June 28, 2010
Lufthansa Cargo at a Glance
Facts and Figures
● 4,500 employees
● Belly capacity on more than 400 LH aircraft
● 19 freighters (MD-11F)
●
●
●
●
12 subsidiaries and joint ventures (14 A/C)
360 destinations worldwide
1.5 m tons cargo/mail
~ 3 bn EUR turnover (≙10% of LH Group)
8,500 shipments / 4,100 tons daily, thereof:
● 160 tons foodstuffs
● 53 tons pharmaceutical products
● 10 tons valuables
● 4 horses, 4 cars
● 3 human organs
1
Substantial Differences Between Passenger and Cargo Business
Pax Business
Cargo Business
Round Trip: Pax „always“ return
One Way: Freight is consumed / used once it arrives
Imbalances on routes are a major challenge
One Dimension: One passenger = one seat
Three Dimensions: Weight, Volume & Contour
Complex optimization task
High predictability: Advanced booking and payment
Low predictability: Air freight is usually not foreseeable
production shortage
Cargo is a last minute business
Active: Pax moves to connecting flight and
“complains” if forgotten
Passive: Cargo fully dependant on handling processes
Cargo needs complex ground handling
B2C: Customer retention via brand loyalty
B2B: Rational purchasing behavior
Cargo has limited possibilities to leverage the Lufthansa brand
2
Agenda
● Air Cargo Industry
● Lufthansa Cargo AG
● Economic Development
3
Importance of Air Freight for Worldwide Foreign Trade
Estimate 2010
Air freight value share of
worldwide foreign trade
Lufthansa Cargo Group share
of worldwide air freight
2.7 Trillion EUR
65%
Other mode
of transport
35%
Air freight
Lufthansa
Cargo
Group:
~10%
Value of transported goods
worldwide by Lufthansa Cargo
Group: 95 bn EUR
4
Global Division of Labor and Production with Strong Impact on Growth
Rates and Imbalances of Air Freight Trade Lanes
Worldwide air freight volumes 2009, million tons
1.0
1.6
1.2
1.0
0.6
0.9
0 .9
0.5
0.5
0.4
1.3
0.5
0.4
0.4
Secure: 2% Live: 1%
Fashion: 2%
Consumer Goods: 5%
Temp contr.: 1%
Spare Parts: 26%
Chemicals: 8%
Cars/Car Parts: 9%
Dominant trade lane
Weaker trade lane
5
High-Tech: 12%
Raw Materials: 18%
Capital Equipment: 16%
Competitive Landscape of Lufthansa Cargo Group –
Top-Players Going Through Significant Structural Changes
US Carriers
Belly only, focus on
passenger services
Air France / KLM / Martinair
Termination of freighter
strategy?
China Carriers
Capacity growth,
further consolidation!
Cargolux
Capital increase necessary,
fleet roll over 747-8F,
without strategic partner
Korean Airlines
Capacity growth via
freighter, without strategic
partner
Emirates
Freight capacity growth
mostly via bellies
Singapore Airlines
Without strategic partner
6
JAL
Termination of
freighter services
Structural Changes After Crisis: Decreasing Overcapacities Offer the
Perspective to Increase Productivity and Stabilize Yields
Development of air freight overcapacities, indexed on 2008
23%
Forecast 2008
Forecast 2010
20%
19%
● Forecast regarding capacity growth
reduced significantly
● Opportunities for carriers: Increase in
productivity and stabilization of yields
12%
11%
● Perspective of capacity shortage instead
of overcapacities?
2%
1%
● Repetition of irrational freighter order
behavior?
1%
-1%
-3%
-5%
2009
7
2010
2011
2012
2013
2014
-6%
2015
Agenda
● Air Cargo Industry
● Lufthansa Cargo AG
● Economic Development
8
Traditionally Lufthansa Has Been the Innovation Leader in Air Cargo
First B747F-Operator
Opening LCC
Roll Over MD-11F
Foundation Jade
Foundation AeroLogic
Foundation
Lufthansa Cargo AG
1972
1977
1980
1995
1998
2000
2004
2007
Foundation German Cargo
td.services
Service Packages
e.Booking
9
Lufthansa Cargo is well Positioned within Market and LH Group
Estimated Revenue Shares in % as of 2010
LH Group within air
freight market
10%
LH Cargo within
LH Group
10%
25%
10
Air freight share
within LH group
intercont traffic
LH Cargo Outperforms Competitors in Air Freight Industry
Operating results in m EUR
Lufthansa Cargo
136
AF/KLM Cargo*
SIA Cargo
Cargolux*
164
77
35
Margin:
6.1 %
18
4
-3
-58
-63
N/D
-41
-138
-171
35
-102
-538
2007 2008 2009 Q1
2010
Source: Company reports.
11
2007 2008 2009 Q1
2010
* Excl. competition compliance
2007 2008 2009 Q1
2010
2007 2008 2009 Q1
2010
Lufthansa Cargo Offers Various Platforms
2010
1.5 To.
17 To.
89 To.
LCAG
MD-11F
Passenger
Bellies
13 To.
8 To.
20 To.
12
112 To.
Jade
744F
Charter-A/C
AeroLogic
777F
103 To.
Foundation of Jade Cargo International in 2004 – Participation in Growing
China Air Freight Market
● Joint Venture with Shenzhen Airlines
(51%), DEG (24%) and Lufthansa Cargo
(25%)
AMS FRA
VIE
LUX
VBS GVA
IST
BCN
TSN ICN
LHE DEL
CTU
DXB
BOM
CCU
● Located in the Pearl River Delta, Jade
Cargo offers easy access to the biggest
air freight market worldwide
YNT
PVG
SZX
HKG
● Commercial situation strongly improved,
positive result despite crisis in 2009
MAA
● Financial stabilization in focus for 2010
13
Foundation of AeroLogic in 2007 –
Innovative Approach to Integrate Express Service Provider and Cargo Airline
Ownership: 50% each
Commercial
responsibility:
65%
14
• Located in LEJ
• 8 B777F A/C
• Independent flight operations
Commercial
responsibility:
35%
Weekdays (Days 1-5):
Network: DHL Express
Weekends (Days 6+7):
Network: Lufthansa Cargo
Extra on-load of Lufthansa Cargo
Extra on-load of DHL Express
Extensive Cooperation of Austrian Cargo and Lufthansa Cargo –
Ribbon Cutting on July 1st
● First full integration of cargo division into
LH Cargo
● Cooperation generates revenue and
cost synergies of at least 10 m EUR per
year
● Installation of joint cargo hub
management in Vienna
● Combined market share Austria: 30%
● Sales outside Austria through LH Cargo
with Austrian focus teams
15
Agenda
● Air Cargo Industry
● Lufthansa Cargo AG
● Economic Development
16
Air Freight: Unique Dip in 2009 and Impressive Recovery in 2010
FTKT vs. PY in %
30%
25%
20%
15%
10%
5%
0%
-5%
-10%
-15%
-20%
-25%
Jan Mar May Jul Sep Nov Jan Mar May Jul Sep Nov Jan Mar May Jul Sep Nov Jan Mar
07 07 07 07 07 07 08 08 08 08 08 08 09 09 09 09 09 09 10 10
Sources: IATA.
17
Revenue of LH Cargo Decreased by 1 bn EUR in 2009 –
Two Thirds Could Be Compensated by Cost Measures
FY 2009 vs. 2008
2.91 bn EUR
-33%
-0.96 bn EUR
-23%
-0.63 bn EUR
66%
1.95 bn EUR
Cost
Revenues
2.75 bn
EUR
2.12 bn
EUR
Operating
Result
2008
18
2009
0.16 bn EUR
-0,17 bn EUR
2008
2009
Lufthansa Cargo Crisis Management 2009
Q4: Alignment for future
• Implementation of learnings
during crisis
• Process optimization
Q3: Margin optimization
• Rate increase of 25%
• Focus on yield and margin
management
Q2: Volume strategy
• New destinations
• Adaptation of incentive agreements
• Focus on load factor optimization
Q1: Cost cutting measures
best • Adjustment of freighter capacity
year
• Reduction of personnel and material costs
• Cutting of invest- and project budgets
2008
2nd
19
“Industry
Leader”
Economic Situation with Strong Recovery and Disproportionate Positive
Outlook for Air Freight
Export growth vs. PY in %
20%
US
DE
CN
15%
10%
5%
0%
2007
-5%
2008
-10%
-15%
Source: Global Insight, May 2010.
20
2009
2010
2011
2012
2013
2014
●●
●●
Market
Marketrebound
reboundimport
importand
andexport
export
Strongest
Strongest„recovery
„recoveryeffect“
effect“inin2010
2010ever
ever––
earlier
earlierthan
thanexpected
expected
●●
●●
Growth
Growthforecasts
forecastsremain
remainpositive
positive
Currency
Currencydevaluation
devaluationofofEuro
Eurobolsters
bolstersexports
exports
●●
●●
Trend
Trendtoto„Global
„GlobalSourcing“
Sourcing“continues
continues
…
…
LH Cargo Shows Strong Recovery in 2010 for all KPIs
LH Cargo FTKT vs. PY in %
40%
Dev. in market share, Europ. carriers cum. 2010
4,6%P
5%
20%
0,4%P
0%
0%
-0,1%P
-20%
-1,9%P
-2,7%P
-40%
-5%
Jan Mar May
09
09
09
Jul
09
Sep Nov Jan Mar May
09
09 10
10
10
LH Cargo net yield, indexed on Jan. 2009
120
AF
Group
LH
CV
BA
Virgin
LH Cargo load factor
80%
110
70%
100
90
60%
80
70
Jan Mar May
09
09
09
Source: AEA.
21
Jul
09
Sep Nov Jan Mar
09
09
10
10
50%
Jan Mar May
09
09
09
Jul
09
Sep Nov Jan
09
09
10
Mar May
10
10
Operating Result in Q1 2010 Improved by 107 m EUR to 35 m EUR –
Second Best First Quarter Result Ever
Operating result, Logistics, Q1
€ 50 MM
€ 25 MM
€ 0 MM
46
8
19
11
-7
0
35
6
-16
-€ 25 MM
-72
+107 m EUR
-€ 50 MM
-€ 75 MM
2001
22
2002
2003
2004
2005
2006
2007
2008
2009
2010
Our Five Pillars of Success
Industry Leadership
23
Location:
Network
Product:
Quality/Cost:
Innovation:
Hub
Frankfurt
remains
Europe‘s
largest
freight
consol hub
plus MUC,
LEJ, VIE
Density of
group
network and
flexibility of
network
adjustments
to satisfy
customer‘s
demand
Wide range
of products
complemented by
competence
centers
Industry
leader
regarding
quality / cost
ratio and
security
Focus on
innovative
projects to
improve
efficiency
and ecology
Our Priorities and Goals: To Leverage our Industry Leadership Position!
Leverage market
opportunities
Achieve solid and stabilized “Cash Value
Added” to support Lufthansa Group
Support LH Group corporate strategy to create an airline group
through realization of synergies within air cargo business segments
24
Thanks for Joining …
2010
2009
25