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Running head: LUFTHANSA CARGO 1

Lufthansa Cargo

Name

Institution

Lufthansa Cargo 2

Table of Contents

Topic History/Background

Detailed description

Managerial Aspects

Corporate culture/philosophy

Key individuals involved

Organizational chart

Mission statement

Resources, etc.

Vehicles and employees

Key facilities and equipment

Main airports served

Number and type of aircraft

Operations

Operational philosophies

Markets served

Types of cargo

Limitations/problems

Business Relationships

Principle customers

Partners, alliances, pacts

Code-sharing, joint ventures

Any unique agreements, arrangements, etc.

Lufthansa Cargo 3

Future Plans

Summary/Comments

References

Lufthansa Cargo 4

Background

The cargo freight industry began as a public relations stunt. In 1910, a businessman flew

bales of silk from Dayton to Columbus, Ohio. When the cargo arrived, it was cut and glued with

postcards into small pieces. This stunt worked. People flocked to purchase them and thus the

industry was born (Lufthansa Group, 2017). Germany soon followed in 1911, cargo consisting of

newspapers was flown from Berlin- Johannisthal to Frankfurt. Fast forward to the year 1917 and

the first commercial air freighter, Deutsche Luftreederei, a forwarder started its journey. Its main

cargo consisted newspapers and airmail from Berlin to Weimar. Luft Hansa had shipments to the

total of 258 tonnes in its first year of operation (Lufthansa Group, 2017). Consequently, within

two years they set up an air freight service targeting major cities in the world. After the world

war, the business played a big part in supporting humanitarian issues. In the excess of one and a

half million tonnes of food and other basic amenities were airlifted into Berlin. Additionally,

160,000 tonnes of construction material was airlifted and the total flights were 200,000

(Lufthansa Group, 2017).

In 1956 they added cargo flights into domestic and freighter schedules. As a result, in

1957 it had the largest network for air cargo (Lufthansa Group, 2017). Advancements in

technology led to an increase in the amount of cargo carried. By 1960, cargo of up to 18 tonnes

could be carried. The airline’s management, driven by thoughts on the future, invested in the

Boeing 747F, launching the biggest freighter in the world, operating on a route to New York in

1972. To meet its huge cargo, the airline constructed a freight terminal at the John F. Kennedy

Airport, New York. Following this construction, they proceeded to construct a top-notch cargo

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center at Frankfurt Airport, with a capacity for handling 19 million freight quantity yearly

(Lufthansa Group, 2017).

In 1995, the new Lufthansa resumed its airline operations with strong cargo specialists. A

century later and thousands of air freights later, the business is still on the rise according to the

Federal Statistical Office, Wiesbaden, and the volume of air freights increased by 80.7% between

2001 and 2010. Also, air freights in Asia grew by 145%. Additionally, in February this year,

German exports grew by 21% (Lufthansa Group, 2017). Finally, Boeing research shows that

airfreight will grow by 6.2%per annum in the next 20 years. Therefore, the future is bright.

Managerial Aspects

Lufthansa Cargo organizational management structure is top-down. This was not always

the case and, this structure is a result of changes made in 2011. This change was brought about

by Chairperson Carsten Spohr. The change was meant to bring freshness and improve the

working environment. Lufthansa has two branches in Munich and Frankfurt under the leadership

of directors. Additionally, the company has departments of finance, sales, human resource and

revenue led by managers. They, in turn, report directly to the company’s CEO (Lufthansa Group,

2016).

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Mission Statement

The main goal of the company is to be the first choice in aviation and cargo services for

its stakeholders who include; partners, clients, shareholders, and employees. In relation to its

airline services, the company aims to be the leader in driving the aviation industry. The

company’s main pillars are; Euro-wings services, premium hub carriers and airline services

(Lufthansa Group, 2016). Lufthansa has an open communication strategy as well. Lufthansa

Cargo puts great emphasis on social responsibility and is engaged in the development of society.

Resources

Employees and Vehicles

The company prides itself on providing vehicles for transportation for its customers.

Having the special interests of each shipment at heart, the company has employed a dedicated

staff. The company offers an array of logistical solutions as per customer needs, they range from

standard to customized solutions. Through its employees, the company has been able to perform

at a very high rate (Lufthansa Group, 2016). Also, the company is a leader in providing in-flight

services like catering, sales, and consultancy. To assist in road transport, the company has

several partnerships with different feeder road companies in the world.

Key Facilities and Equipment

In the aviation industry, it has become important to put security as a priority. Lufthansa is

aware of this fact and, they have invested in setting up key security facilities to protect cargo and

people. Those investments include; setting up of response units in case of emergencies like fire

and power loss, ambulances and a firefight engines (Lufthansa Group, 2016). Additionally, in

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2012 the company chose IBS Cargo Solutions to implement iCargo solutions. This manages the

airline’s worldwide cargo movement.

Number and Types of Aircraft

The company operates with cargo aircraft that include 14 Boeing MD11Fs and 5 B777Fs.

Also, the company has 12 MD-11F in their fleet. There are also passenger aircraft used in freight

transport. The company has 617 aircraft in total with an average age of up to 11.3 years. The

fleet includes; 34 Boeing 777X, 4 Boeing 777-300ER, 24 Airbus A350, 25 Bombardier C Series,

111 Airbus A320neo family and 7 Airbus A320 family (Lufthansa Group, 2016).

Main Airports Served

Lufthansa Cargo has flights in 18 local and 193 international destinations. The company

has adopted a multi-hub network strategy. It includes; Lufthansa Passenger, Australian Airlines,

and SWISS (Lufthansa Group, 2016). Their hubs are in Frankfurt, Zurich, Vienna, and Munich.

In addition, there are alliances aimed at boosting these networks and joint venture partnerships.

In particular, Eurowings offers a variety of point-to-point networks in many German-speaking

countries.

In the summer, the Lufthansa Group operates airlines to 301 destinations in 100 countries

(Lufthansa Group, 2016).

Operations

Operational Philosophy

Using the company’s main goal and mission. The company seeks to consolidate its three

pillars into cooperating in benefiting from economies of scale. An example is that Lufthansa

Cargo transports a huge chunk of cargo under the belly of the Lufthansa Group Passenger

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aircraft. Also, digitization of all aviation value chain forms is being pushed to secure Lufthansa

Cargo’s positions as a leader in the aviation industry. This target is being met under the “7 to 1-

Our Way Forward” strategic plan (Lufthansa Group, 2016). The strategy targets both the internal

and external challenges to the company. Consequently, the company has strategized on

improving the overall customer experience by optimizing its route networks and reducing costs.

Also, with Eurowings, the company plans to capitalize on point-to-point traffic which maximizes

on low-cost fares and flexible bookings.

Markets Served

Its largest market is Asia Pacific, with a 50% share of the traffic revenue. In addition, the

Americas also represent a significant portion of the market and increase in demand. The volume

of freight in this region is rising faster than in Asia. Previous expansion in Japan has made the

region to have a significant stake in the markets served. Through partnerships and joint-ventures,

the company also has some presence in other areas of the world. Finally, the company

predominantly dominates Germany (Lufthansa Group, 2016).

Types of Cargo

While the amount of cargo transported by the company is impressive, under their special

services, they have offers for transporting animals. An example is pigs, which they can carry

8,000 pigs (Pearce-Dawson, 2014). Other animals include lions, hippos, and cattle. Also, last

year they transported 15,000 dogs and cats. Additionally, the cargo depends on its size. Parcels,

for example, can be delivered to any place. When it comes to machinery the location and area

play a major part in pricing and regulations. In addition, the company is offering a Road Feeder

Service Cooler option for customers transporting temperature sensitive cargo. Under the new

operation, temperature delicate cargo will be cooled and warmed while in transit while on board

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and also while on the road (Lufthansa Cargo, 2017). Some of the sensitive cargo may include

medication and the entire Lufthansa Cool Center has been improved to meet this new service.

Also, the company is known for transporting thousands of tons of flowers, especially during

Valentine’s Day period. This year alone, the company transported 1,000 tons, connecting several

parts of the world, from Kenya and South America. The roses begin their journey from these

regions and upon arrival in Frankfurt, they are dispatched to other places in Europe. The

company has also been awarded a CEIV certification in the pharmaceutical transportation. This

makes the company among the best in the world in transporting pharmaceutical cargo (Lufthansa

Cargo, 2017).

Limitations

Depending on size and location, the overall cost of transportation can be high. In

addition, in 2016 the company faced losses amounting to 50 million Euros, leading the company

to evaluate its 777F fleet (Hoffman, 2016). This has hampered expansion efforts. Also, striking

pilots threatened to disrupt work in 2016 however, they did postpone their strike but their issues

with the company remain and can be an impediment in the future. In addition, security is a top

priority for the company but the lack of harmonization of security standards in the industry is a

major concern as was pointed out in the 2016 Security Conference (Lufthansa Cargo, 2017). It is

worth noting that their efforts in Asia were hampered by Russia blackmailing the company into

setting up a local connection with them thereby, creating unforeseen costs for the company.

Business Relationships

The company is fully aware of the importance in engaging in joint-venture and

partnerships. In 2015, the company went into business with Skylink Handling Services to

manage air cargo services at Amsterdam Airport Schiphol. Having recently celebrated over 20

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years in the airline industry, the company has recognized the work of their partner, Dachser.

Dachser which provides logistical support to Lufthansa Cargo (Lufthansa Cargo, 2017). In 2015,

Dachser flew its biggest market share with the company. Under the Lufthansa Global

Partnership, the company has 12 major global partners including Dachser. In addition, in order to

reach its European customers well, the company is in collaboration with ANA Cargo and

together are expanding their freight operations for routes in Japan and Europe. This means they

offer networks consisting 90 flights weekly to their European clients connecting to Japan.

Similarly, Lufthansa Cargo in cooperation with United Airlines, have a cargo joint venture

covering networks between Europe and the USA (Lufthansa Cargo, 2017). The venture is aimed

at helping in airline bookings and general handling processes. This has created great flexibility in

600 flight connection weekly between them. Also, a partnership with a competitor, Cathy Cargo

is aimed at creating more flexibility in networks between Hong Kong and Europe. Some of the

obvious benefits are more direct connections in these regions and time-saving. Apart from such

joint ventures, celebrating ten of Cargo Human Care, the company in collaboration with German

doctors have been offering medical assistance to the poverty affected parts of Kenya. Currently,

there are children homes housing 120 orphans and 50 German doctors in the country courtesy of

the company (Lufthansa Cargo, 2017). Also, in the region of Marsabit, CHC is assisting over

6,000 people. Additionally, the company has many road partners. Chief among them is the Road

Feeder Service, which carries over 600,000 tons of cargo per annum. The service boosts 65,000

scheduling trips and 26,000 of them are outside of Europe. Also, a strong partnership with DHL

Global Forwarding has seen the company receive awards and was recently recognized for its

efforts in environmental conservation. Also, in support of humanitarian aid, Lufthansa Cargo in

cooperation with the German Red Cross, signed a framework agreement to ensure worldwide aid

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transport is faster than ever. Lufthansa Cargo is in partnership with startups, Logistics Tech

Accelerator and RocketSpace (Lufthansa Cargo, 2017). Under RockSpace’s digitization

program, the company offers digitization developers insights into the freight and cargo industry.

Future Plans

Under the Lufthansa 2020 future goals, the company plans to increase partnerships with

other airlines. Plans are underway where through airCargo clients will be able to send any type

of personal goods faster and efficiently. Additionally, cost cutting is a huge part of their program

with the implementation of the C40 cost cutting program and further initiatives in line with it in

the future (Lufthansa Cargo, 2017). The company is also looking to expand its freighter markets.

Just last year the company set up a new connection in Moscow and the south coast of China. The

company will increase frequencies in Shanghai as well (Lufthansa Cargo, 2017). Also, a

technological partnership with RocketSpace and other like-minded companies are aimed at

increasing the company’s grasp in tech for the future. The company is setting up a new IT

landscape with a vision for the future and the strengthening of their partnership with ANA in a

big part of their future plans to increase flexibility for customers.

Summary

Lufthansa Cargo has more than 20 years of good service. The company has more good

than bad and their financial strength, good leadership, and future driven policies are encouraging

signs that the company has a bright future. Their goal to offer a positive impact in the aviation

industry is admirable and should be copied by other airlines. Their top-down management

structure and strong corporate culture and values have played a big part in their success. The

company’s decision to invest in technology with ambitious company’s like RocketSpace is

commendable and their partnership with ANA is full of potential. Also, their humanitarian

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efforts in Kenya and their partnership with the German Red Cross cannot be overlooked and

must be commended. Similarly, their efforts towards environmental conservation and the

recognition they have received from it are very positive and in line with the world’s agenda on

fighting global warming and environmental degradation.

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References

Lufthansa Group. (2017). History. Retrieved on May 15, 2017 from

https://www.lufthansagroup.com/en/company/themen/100-years-of-

airfreight/history.html

Lufthansa Cargo. (2017). Press Release. Retrieved on May 15, 2017 from

https://lufthansa-cargo.com/press-release-details

Lufthansa Group. (2016). Annual Report. Retrieved on May 15, 2017 from

http://reports.lufthansa.com

Hoffman, K. (2016). Lufthansa Cargo posts 50 million loss in 2016, evaluates 777F fleet.

Retrieved on May 15, 2017 from

http://atwonline.com/airline-financials/lufthansa-cargo-posts-50-million-loss-2016-

evaluates-777f-fleet

Pearce-Dawson, T. (2014). Lufthansa Cargo-A Modern Day Noah’s Ark. Retrieved on May 15,

2017 from https://smbp.uwaterloo.ca/2014/10/lufthansa-cargo-a-modern-day-noahs-ark/

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