Lufthansa air cargo head predicts industry shakeout

Lufthansa air cargo head predicts industry shakeout    The newly ensconced head of Lufthansa Cargo AG is predicting that overcapacity in the airlines will lead to 'blood, sweat and tears' in the near future for the air cargo industry.
   Speaking to industry leaders Tuesday at the Cargo Network Services conference in San Diego, Carsten Spohr detailed some of the surprises he has faced in his first 100 days as chief executive officer and chairman of the German airline's cargo arm, and made some predictions about the near-term future of the air cargo industry.
   Spohr said that despite global average air cargo growth rates of 6 percent, and double-digit growth rates in Asia, 'The challenge is not to participate in the growth, which is easy, but to do this profitably — which is not easy at all.'
   He pointed out that yields have been under pressure for years, and that increasing imbalances in the global trade lanes are compounding low load factors to and from Asia.
   'Additional capacity and competition from government-owned airlines that only care for top line growth and don't care for the bottom line is definitely a challenge for this industry,' he told the audience of several hundred.
   And while he was pleased to be working in a growing sector of the industry, he is very doubtful that the growth is going to make many in the airline industry happy.
   In the future he expects many airlines to realize that revenues do not mean profits, and that the current situation will change dramatically as the number of airlines on order come online.
   'I am convinced,' he said, 'that if capacity growth continues, which we fully expect, we will see blood, sweat and tears in the very near future. I am sure that only a very few airlines will be able to still make a profit in such an environment.'
   He predicts that the near future will see two parts of the air cargo industry heading in distinct directions. The airlines that focus on air cargo as a core component of their business will continue to succeed. On the other side, he predicted that growing within the reality of this overcapacity for 'the airlines that treat cargo as a side business, just providing cheap capacity for the market, mostly not even knowing the own cost on the cargo side, will remain a difficult, if not impossible thing to do.'
   Spohr said he believes that how professionally the airlines treat the air cargo business in the coming years will determine who succeeds and who fails.