News #104 - Lufthansa Cargo predicts a year of volatility, growth and space constraints

Lufthansa Cargo projects that the air cargo market will experience growth in 2025, even as geopolitical events and economic uncertainties fuel ongoing market volatility. The pressure on capacity is also anticipated to persist.

Speaking during a recent webinar, Heike Woerner, Senior Director of Business Development, outlined the airline’s outlook, highlighting expected cargo demand growth of 3-5% this year. This optimism is underpinned by forecasts of global economic growth of 3.3% and notable improvements in emerging markets like Vietnam and India, where GDP is expected to rise by 4.3%.

Driving Factors for Growth

E-commerce Demand: E-commerce continues to be a key driver of air cargo growth, with volumes entering Europe increasing by approximately 12% annually.

Pharmaceutical and High-Tech Shipments: Demand for pharmaceutical shipments is expected to grow at 3.3% annually, driven by an aging global population. High-tech cargo, such as semiconductor-related products, is projected to expand at a similar rate.

Navigating Market Volatility

While growth prospects are positive, Woerner acknowledged that the air cargo sector faces significant challenges:

Economic and Political Volatility: The current geopolitical environment continues to create uncertainty, particularly for European carriers grappling with airspace restrictions over Russia. These restrictions are increasing operational costs and extending flight durations.

Protectionism and Tariffs: Rising protectionism, including U.S.-imposed tariffs and countermeasures by other nations, is disrupting trade flows.

Regulatory Hurdles: Regulatory challenges in the e-commerce sector are mounting. For example, the EU is set to implement a major customs reform in 2028, which could strain the capacity of customs authorities. Currently, the EU processes approximately 10 million parcels from China daily.

Opportunities Amid Challenges

Despite these hurdles, Woerner emphasized that the air cargo industry’s resilience and adaptability position it to capitalize on emerging opportunities.

Flexible Networks: Airlines with adaptable networks can seize opportunities created by shifting trade dynamics. For instance, Lufthansa Cargo launched operations between Ho Chi Minh City (SGN) and Los Angeles (LAX) to tap into growing trade flows.

Emerging Trade Lanes: Growth is expected in trade lanes such as intra-Asia, Asia Pacific-Middle East, Asia Pacific-Europe, Middle East-Europe, and Africa-Europe.

Customized Solutions: The ability to offer tailored solutions for fast-growing sectors, such as e-commerce and high-tech, will benefit airlines.

Regional Dynamics and Market Trends

Woerner highlighted the uneven performance across global markets:

Asia: Markets such as Vietnam are experiencing remarkable growth, with a 20% increase in exports last year.

Europe: In contrast, European markets, including Germany, are seeing stagnation in growth rates.

Capacity Constraints and Industry Challenges

The air cargo industry faces significant capacity challenges:

Widebody Freighter Fleet: Capacity is projected to grow at just 2% annually through 2030. Moreover, 30% of in-service freighters are over 30 years old, signaling an aging fleet.

Belly Capacity: Widebody belly capacity remains 19% below 2019 levels.

Production Delays: Supply chain disruptions have limited the production of freighters, with delays in the launch of the Airbus A350 freighter and Boeing 777-8 freighter.

Adapting to Market Dynamics

To address these challenges and cater to market needs, Lufthansa Cargo remains committed to its traditional strengths—speed, reliability, and high security standards. Additionally, the airline is placing greater emphasis on:

Global Reach: Expanding its network to ensure comprehensive coverage.

Flexibility: Developing adaptive strategies to respond to dynamic market conditions.

Conclusion

The air cargo industry continues to navigate a complex and volatile environment. However, with resilience, adaptability, and a focus on emerging opportunities, Lufthansa Cargo is optimistic about growth prospects. By leveraging its strengths and addressing capacity constraints, the airline aims to remain at the forefront of the evolving market landscape.

Source: https://www.aircargonews.net/airlines/lufthansa-cargo-predicts-a-year-of-volatility-growth-and-space-constraints/1079826.article

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