Despite concerns about weaker global trade due to the possibility of rising US tariffs, Lufthansa's freight subsidiary is confident about the coming year.

He has "an optimistic view of 2025, although this is associated with a great deal of geopolitical uncertainty", said Lufthansa Cargo CEO Ashwin Bhat in an interview with the Reuters news agency published on Monday. It remains to be seen what the new US administration's trade policy will mean for global supply chains. "There will be a lot of tension and we need to watch this very closely and be ready to react flexibly to new situations."

US President-elect Donald Trump wants to increase import tariffs on China, Europe and Mexico, which could dampen exports from these regions to the US. The weakness of the German economy is a further burden on the air freight business, which is highly dependent on the ups and downs of global trade and the economy. The crisis in the German automotive industry and the shift towards electric cars, whose production requires fewer parts to be transported around the world than combustion cars, are also being felt by Lufthansa Cargo, explained Bhat.

However, there are other growth drivers that are offsetting the falling demand from the automotive industry: Global online trade has been growing since the corona pandemic, especially from Asia. In recent years, for example, the Chinese online platforms Temu and Shein have been booming. "Germany is the second largest e-commerce consumer in Europe after the UK and we see no change in the strong trend here," said Bhat. There are also sectors that generate more logistics business. "Pharmaceuticals and semiconductors, for example, have a large share of transportation not only from Asia, but also from Europe."

For 2024, Baht expects an operating result "well above the average" of the years before the coronavirus pandemic, which brought the freight company a record profit of 1.6 billion euros in 2022 due to supply chain disruptions. In the more normal years 2016 to 2018, Lufthansa Cargo earned an average of just over 250 million euros.

"BOLD MOVES" STRATEGY

Lufthansa Cargo has to adapt to many changes in a volatile environment and deal with increased costs, explained the Indian-born manager, who made a career at the Swiss Lufthansa subsidiary Swiss before joining the Frankfurt-based cargo airline. Since this year, he wants to ensure more growth and efficiency over the next three years with the "Bold Moves" program. "It's an internal strategy, not a cost-cutting program," he emphasized. "And to say that it is a program to cut staff is completely wrong."

On the one hand, the aim is to open up new markets and sectors in order to achieve profitable growth. This is because the Lufthansa Group is aiming for an adjusted operating margin of eight percent in the medium term. Examples of this are Lufthansa Cargo's newly launched trans-Pacific flight on the Frankfurt-Saigon-Los Angeles-Frankfurt route and more flights to India. In this way, the company aims to benefit more from the freight boom in Asia. The region already accounts for around 40 percent of freight volume worldwide and is growing strongly.

"But we also have to look at our cost position," added the Head of Cargo, who has been in office since spring 2023. "There was inflation after the pandemic, and the costs for airlines in Germany have continued to rise - we have to take countermeasures in order to remain competitive." Unlike others in the industry, Bhat does not want to complain out loud about the German domestic market, which is currently struggling with many problems. "So as much as I talk about e-commerce and the Asia-Pacific region and everything else, we also believe that Germany will continue to play an important role."

(Edited by Sabine Wollrab. If you have any queries, please contact the editorial team at frankfurt.newsroom@thomsonreuters.com)

- by Ilona Wissenbach