Lufthansa describes a terrible year but FedEx implies a recovery

For Lufthansa Cargo revenue fell for the financial year by 9.2% to €2.4bn. Profits were savaged, with operating profit falling by 26%, operating margin by 0.7% and EBITDA by 33.8% to €131m. This, despite fairly savage reductions in capacity with the cargo load factor falling by just 0.3%, suggested rates must have been very weak. Markets saw falling demand across the world, even in the previously strong Middle-East with the Asia-Pacific the only region to grow and this only by 0.1% in terms of tonnage carried.

Lufthansa Cargo expect 2013 to be some sort of nadir with demand either rising or steady through 2014.

In contrast FedEx’s biggest problem over the past quarter was the weather, with heavy snow interrupting services. Although the group’s revenue and profits both increased, its core Air Express business saw revenue decline very slightly, although operating profits increased 14% year-on-year to $135m.

Despite the bad weather domestic volumes increased marginally whilst ‘International Economy’ traffic increased 8%, admittedly whilst the more expensive ‘International Premium’ service fell by 5%. Fred Smith, FedEx’s Chairman and CEO commented that “On days when the weather was closer to normal seasonal conditions, our volumes were solid and service levels were high.”. The ‘Ground’ and ‘Freight’ business at FedEx saw solid growth in volumes of 8% and 9% year-on-year, aided as ever by internet-shopping demand.

These FedEx numbers suggest that underlying freight demand in the US and beyond is recovering and that the sort of market conditions described by Lufthansa may be ending. Although wider economic conditions in parts of Europe are still poor and markets such as Asia are slowing appreciably, US demand is apparently well on the way to recovery and this surely will have some implications for the air freight market despite loss of market share to sea freight.