“We are preparing intensively for the distribution of coronavirus vaccines”

Interviewer: The complete collapse in passenger numbers due to the coronavirus brought with it a massive reduction in air freight transshipment. At the same time, freight forwarders are urgently searching for available transport capacities. How did you experience this unprecedented upheaval from your perspective as a decision-maker in a “front-row seat”? Did Lufthansa Cargo have a contingency plan ready in the drawer for a pandemic scenario of this size?

Dorothea von Boxberg: No, we did not have an emergency plan ready for this pandemic with its rapid development of events. But in situations like this we fall back on our tried and tested crisis management team, who analyzed the data daily and made targeted decisions quickly: again and again, our colleagues managed to adapt the freighter flight plan appropriately and find new operational solutions. This meant we were able to maintain continuous supply chains in the air.

At the height of the numerous lockdowns a number of PAX carriers announced that they had returned certain routes to the schedule as “freight only” – among them Lufthansa, including Austrian. Other carriers have even removed rows of seats from their passenger cabins. What do you think of these efforts? Do you see these types of flights as competition?

In the first months of the pandemic in Europe, when people were desperately looking for medical protective equipment, especially protective masks, in the Lufthansa Group we also removed seats from some passenger planes so we could transport freight. This enabled us to quickly bring much-needed capacity to the market. Overall, however, these “preighter” (passenger-freight) services are much less efficient than transport in cargo aircraft or additional cargo on passenger aircraft. Only small cargo can be loaded through the doors to the main deck of a passenger aircraft. The maximum possible tonnage is much lower than for freighters. At the same time, however, the cost per trip remains similar to that of a freighter. Should there be a renewed urgent need in the future for capacity which can be easily loaded in “preighters,” we could offer these services again at short notice.

While the world was in lockdown, there was an e-commerce boom: many consumers were ordering goods online like crazy. How did this development affect air freight? Along these lines, what do you think of Amazon’s efforts to strengthen its air freight capacity by building up its own Prime Air aircraft fleet?

For years, e-commerce has been a rapidly growing segment in logistics and clearly also in air freight. The coronavirus crisis has reinforced this trend. In times of lockdown, a lot of things were ordered online to avoid coming into contact with people when shopping. In addition to e-commerce, the pharmaceuticals business has also grown this year and I expect this trend to continue next year. On the other hand, other classic air freight segments such as automotive are declining.
The pandemic also poses new challenges for e-commerce logistics, because many air freight connections in the bellies have suddenly disappeared or bottlenecks on the last mile have had a negative impact on delivery times.
In this context, Amazon’s efforts to strengthen its own Prime Air aircraft fleet are quite understandable. For Amazon, fast shipment and reliable delivery are one of their strongest USPs. At this point, we do not see Prime Air as a classic competitor, as they ultimately serve a demand that Amazon itself creates as a key player in the growing e-commerce industry.

China reports a successful ramp-up of its production capacities and worldwide research for a COVID-19 19 vaccine is feverishly underway. Assuming that the virus does not put a halt to the production of goods again, do you consider the worldwide supply chains to be well equipped for a “transport backlash”? Do you anticipate a “V-shaped recovery” of global trade?

The positive economic data from China does indeed give hope for a rapid recovery in other markets as well. However, the current strong increase in coronavirus cases in Europe may continue to be a damper for the next few months. The World Bank expects the global economies to recover by 2022 and return to pre-coronavirus levels. It seems very likely to me that global flows of goods will return much faster than capacity in air freight will. According to all the forecasts, aviation, in particular long-haul travel, is one of the industries that will be particularly hard hit by the coronavirus. Therefore, I expect that it will take several years before belly capacities return to the 2019 levels. For air freight, it is quite plausible that capacity will remain tight for some time to come.

How is your company preparing to distribute a possible coronavirus vaccine?

We are preparing intensively for the distribution of coronavirus vaccines. Pharma has been a focal topic for us for years, and we are continuously expanding our expertise in this area. Our network of CEIV Pharma-certified stations enables the optimal transport of pharmaceutical consignments, from export and transit to import. At these stations we have the appropriate cooling equipment, processes and specially trained staff to handle temperature-controlled shipments. Just this year, we opened a new Pharma Hub in Munich and the Pharma Center in Chicago. A task force is currently preparing for the special requirements of COVID vaccines.

China is currently intensifying its efforts around the “New Silk Road.” The expansion of the rail link through Central Asia and Russia is impressive simply because of its speed. The “Iron Silk Road” service was in high demand, among other things due to the coronavirus pandemic. Could rail transport lead to a redistribution of global flows of goods in some areas? 

With the expansion of the New Silk Road, freight transport between China and Europe is indeed gaining in importance. In terms of positioning, it lies between air and sea freight. While air freight has been used so far to transport time-critical and valuable goods along this trade lane, less time-critical goods of lower value are now shipped by sea freight. It is already clear that there is demand for this middle segment. However, at the moment we are not seeing a collapse in demand for air freight. The strong trade growth from Asia is having a net positive effect on air freight.
In addition, the New Silk Road is still being subsidized by the Chinese government. It remains to be seen how sustainable this development is.

Lufthansa Cargo and cargo-partner are linked by a close and long-standing partnership and the fact that they are direct neighbors. How do you see the cooperation between the two companies – and how does working with a medium-sized logistics provider like us differ from working with the “giants” of the industry? 

For us, cargo-partner is a loyal customer and business partner who is flexible and open to new and personalized solutions. Together we can look back on many years of good cooperation and joint growth.
At Lufthansa Cargo, we enjoy working with medium-sized forwarders such as cargo-partner. The special focus on quality, reliability and trust, combined with the eagerness to find new solutions for our customers, is what unites us in this respect. We look forward to continuing to offer an attractive and tailor-made logistics service together with cargo-partner in the future.

Recently, plans to integrate Lufthansa Cargo into the parent company were reported – and similar plans are evidently being examined by other carriers in the industry as well. What actually distinguishes the cargo divisions of the “underbelly carriers” from the work of a standalone airfreight provider?

Lufthansa Cargo is a combi-carrier, which means that we operate our own freighters and also sell the extra loading capacity of our strong network of passenger aircraft. Pure freighter airlines are always independent companies. Pure belly organizations are usually part of their parent company. For us, being “in the middle,” both forms of organization are basically conceivable. The important thing is that there is a strong focus on air freight. Air freight has different customers, requirements and processes than the passenger business does. Doing justice to them is our top priority. We must and want to react quickly to changes in the market environment and meet the needs of logistics companies in the best possible way.
We are independently responsible for operating our freighters. We can flexibly adapt the network to meet the demand of our customers and offer more diverse transport solutions, e.g. for large freight volumes. “Underbelly carriers,” on the other hand, have much less influence on the destinations they serve and thus on their potential to exploit air freight. Under normal conditions, an airline is mainly guided by potential passenger capacity and cargo is a welcome “add on.” For us, the bellies are the ideal complement to freighters, because – in normal times – they mean connections to many additional destinations each day.

More than two years ago, Lufthansa Cargo and United Airlines launched their long-awaited transatlantic partnership. Since May 2018, the two carriers have been jointly managing the distribution and booking of standard and express shipments between Europe and the USA. Can you summarize the first two years and tell us whether the cooperation has proven successful? Can you imagine more partnerships like this with other carriers?

The cooperation has gone very well from the start. The combination of the two networks gives our customers not only the advantage of countless connections between Europe and the USA, but also faster transport times. This also means that, for the first time, we can offer our customers city connections that neither United Cargo nor Lufthansa Cargo could offer before, such as from Tallinn to Honolulu or to Buffalo. The coronavirus crisis has once again demonstrated the relevance of this close cooperation. We were able to use the advantages of the joint venture to deploy the limited capacities more flexibly and to react to customer needs.
With our joint venture partners, United Cargo, ANA Cargo and Cathay Pacific Cargo, we already cover three of the most important traffic flows. We are working to further expand these partnerships for our customers and, for example, to add additional services.

At the moment, everyone seems to be talking about the transport of goods with the help of drones. Do you see these younger cousins in the air freight industry as potential competitors? At what point do you think this will be a realistic option?

At present, drone transport is still very much in development and is not a realistic alternative to the large-volume intercontinental transport we provide. I do not see drones as suitable for such routes in the future either, and therefore I do not see them as competitors to classic air freight. I am not a drone expert, but for the last mile in developed and densely populated areas, I do still see obstacles for drones in comparison to classical logistics chains. These include the noise and the almost impossible control of airspace in cities when there are countless drones in the sky.
However, for markets that are difficult to reach due to a lack of ground infrastructure, drones could someday become a useful alternative. I am thinking, for example, of transporting vital goods to remote places that would be easier to reach with the help of drones.

Speaking of trends and challenges in the field of air freight – it seems to be quite clear which challenge is the biggest at the moment. But what will it be tomorrow? And, looking farther into the future – where do you see air freight and Lufthansa Cargo in, say, 10 years?

With the exception of a few brief slumps, air freight has grown steadily over the past 30 years and will, in my view, continue to do so in the future. World trade between national economies will not come to a standstill; quite the contrary – it seems to be increasing. Specialization and economies of scale, inexpensive production locations and the availability of raw materials continue to be the drivers of world trade. At the same time, the needs of end consumers will continue to develop dynamically. The personalization of products, faster product cycles and the rapid development of e-commerce are just some of the factors that require speedy logistics chains and play into the hands of air freight. The USPs of air freight will remain relevant: speed, reliability and security.

However, questions about the ecological footprint of air freight shipments will increase. Shippers, forwarders and airlines will work together to avoid carbon emissions and other greenhouse gases. In our case, the rollover to the B777 fleet is an important step with which we achieve a 25% CO₂ reduction compared to 2010. But that is not enough. In the Lufthansa Group, we are convinced that SAF (Sustainable Aviation Fuel) will be the future. This involves producing kerosene from electricity generated from renewable energies in a process called power-to-liquid. In ten years’ time there will be fully functional refineries for this purpose, whereas today we are still more in a test mode.

Digitalization and automation will continue to occupy the airfreight industry for the next 10 years, especially when it comes to the exchange of data between the different parties along the transport chain. For some time now, Lufthansa Cargo has been participating in various IATA working groups and projects to actively drive the digital transformation forward in the industry.

Thank you for this interview!