Airline cargo revenues rise in Q2 as market grows

The cargo operations of publicly listed passenger and connected airlines improved in the second quarter compared with the previous three months, with the recovery from the prolonged decline in the cargo sector beginning in full this year, according to financial results released to date.

Lufthansa Cargo’s operating profit fell 3% in the second quarter as rising costs and lower yields offset growth in underlying freight revenues, but the airline said it expected the peak freight season to deliver strong growth for the rest of the year. Importantly, financial and operating results improved sequentially from the first quarter.

Cargo revenues at Lufthansa Group’s logistics division rose 13 percent year-on-year to 747 million euros (808 million dollars) on a 14 percent increase in traffic sales, but were undercut by a 12 percent increase in operating costs and profitability, which were 15 percent lower than a year earlier due to additional capacity generated by the expansion of passenger flights across the airline industry. The upward pressure on expenses came from higher costs for cargo charters, fleet expansion, wage and salary increases related to new employee contracts and a 2 percent increase in the number of employees.

The contributions amounted to $38.9 million in adjusted earnings before interest and taxes, down 3% from a year earlier, Lufthansa said on Wednesday. The results were significantly better than in the first quarter, when Lufthansa Cargo posted an operating loss of $23.5 million and earnings fell 114% compared with the same period in 2023. In the quarter, cargo revenue rose 17% to 2.5 million.

The improvement reflects tailwinds from a recovery in the air cargo market, where volumes are up about 13% year-to-date compared with a year ago, as well as strong e-commerce business. Capacity bottlenecks in ocean freight caused by the effective closure of the Red Sea shortcut by Houthi rebels in Yemen also helped boost traffic and rates for airlines. While yields have slowed as hold cargo throughput has increased, they remain 18.4% above pre-pandemic levels.

Lufthansa Cargo, which operates 11 Boeing 777-200 cargo planes, added two Chinese destinations to its network earlier this month. It began flying to Shenzhen for the first time from its home base in Frankfurt, Germany, and began service to Zhengzhou three days a week to take advantage of increased demand from e-commerce platforms in China. The new routes are made possible by Boeing’s expected delivery of a new 777 cargo plane this summer.

Lufthansa Cargo also flies four Airbus A321 regional cargo planes and has six other 777s, which are operated by Aerologic, a joint venture with DHL Express. And it handles cargo for group passenger airlines except Swiss International Air Lines.

Overall, Deutsche Lufthansa AG said normalization of passenger fares, overcapacity and inflation contributed to a 37% drop in operating profit and warned of another drop in profit in the third quarter. Lufthansa Airlines, the group’s largest carrier, posted a loss, which it attributed to the negative impact of strikes and delayed aircraft deliveries, which led to operational inefficiencies. As part of a new cost initiative, Lufthansa Airlines will retire its Airbus A340-300, A340-600, A330-200 and Boeing 747-400 aircraft by 2028 to reduce fleet complexity and fuel consumption.

Other passenger airlines

United Airlines’ second-quarter cargo revenue was $414 million, up 14.4% from a year earlier. In April, United Cargo opened a state-of-the-art cargo facility minutes from Newark International Airport, more than doubling the airline’s cargo space at the hub to 319,000 square feet. Nearly 30% of United’s global tonnage and cargo revenue is tied to Newark.

Delta Air Lines reported second-quarter cargo revenue of $199 million, up 16% year over year. American Airlines continued to see negative growth, with cargo revenue down 1.3% to $195 million.

Air France-KLM said revenue from actual deliveries (excluding interline revenue, container leases and other fees and handling fees from other airlines) fell 4.4%, after taking into account currency changes, to $500 million. The group said Monday it was suspending cargo routes in Latin America so that KLM and Martinair Cargo could transfer several Boeing 747-400 cargo planes to the busy Hong Kong-Europe market.

International Airlines Group, the holding company of British Airways and Iberia, said on Thursday that cargo revenue rose 1.1% to $306.3 million, despite an 11.7% increase in cargo volumes, driven by a 16% drop in profitability.

All Nippon Airways, which operates nine Boeing 767-300 cargo planes in addition to its large passenger fleet, said cargo revenue rose 12% year over year to $315 million, while traffic volume rose 3.3%. Higher fares on the transpacific route were helped by e-commerce from China.

Singapore Airlines’ cargo revenue was slightly lower than a year earlier, down 0.2% to S$541 million ($404 million). Overall cargo demand remained strong, supported by strong e-commerce flows and increased air freight demand due to the Red Sea crisis and port congestion. This helped boost cargo load factor by almost 6 points to 57.7% and mitigate the impact of lower cargo yields (-19.1%) due to increased hold capacity.

United Airlines posted the best first-half performance among publicly traded airlines to report so far, posting a 5.9% increase in cargo revenue. American (-9%), Delta (-1%), Lufthansa (-3%), IAG (-6.1%) and Air France-KLM (-14.2%) all saw cargo revenue declines in the first six months of 2024.

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