Perishable Transports and Airline Networks. Martin Schlingensiepen, Vice President Product Management, Lufthansa Cargo

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1 Perishable Transports and Airline Networks A look at Capacity Management, Networks and Sea/Air Solutions Martin Schlingensiepen, Vice President Product Management, Lufthansa Cargo Radisson Blu, Hamburg, 22-SEP

2 Table of contents Air freight capacity management and its effects on perishable sector and product categories Freight operations vs. belly cargo model Sea/air // Multi-modal transportation 1

3 Perishables and Aviation Lufthansa Cargo transports approx. 65,000 tons of perishables annually Our most important routes for perishables are from South America to Europe from Africa to Europe from Europe to North America from Europe to Asia Our main commodities transported are Fruits and Vegetables Flowers and Plants Fish and Seafood 2

Meeting the Perishable Requirements in Air Transport Special requirements of

Transportation ti only to and from stations ti with appropriate cooling facilities.

Temperature-control t per compartment t onboard the aircraft Reduction of transit

temperature controlled transportation: Variety of cool containers Icecooler mainly

4 Meeting the Perishable Requirements in Air Transport Special requirements of perishables to be met in aviation: Temperature-controlled ground storage: Transportation ti only to and from stations ti with appropriate cooling facilities. Dedicated Perishable Centers at our hub Frankfurt, Nairobi, Cairo and Miami. Temperature-control t per compartment t onboard the aircraft Reduction of transit points: Fresh to Door Service to European destinations Suitable solutions for temperature controlled transportation: Variety of cool containers Icecooler mainly for perishables Unicooler and latest Opticooler (in operation since September 2010) e.g. for pharmaceuticals / high tech 3

5 Air Freight Capacity Management Strong focus on profitability of independent Cargo Carriers (vs Passenger-Cargo Combi-Carriers) Aim of aircraft capacity management is to fill the aircraft with a best mix of shipments (due to the perishable nature of capacity) As a result, cargo is most attractive to airlines if it has - regular character / Long-term contracts t (enabling the airline to plan capacity long- and medium-term) - high revenue per space used (optimal mix of load) long-term allotments t td.flash allotment t Ad hoc businesses for optimizaton i t 4

6 The Value of Perishable Shipments from an Airline s Point of View Attractiveness to cargo airlines Limitations cargo to access airline s cargo capacities Good product to balance trade lanes Pre-built units Revenue per cubic meter Other high-value cargo competing for aircraft capacity on certain routes Unpredictability of business due to seasonality and limited usage of long-term capacity contracts High costs for reefer feeder trucks 5

7 Table of contents Air freight capacity management and its effects on perishable sector and product categories Freight operations vs. belly cargo model Sea/air // Multi-modal transportation 6

8 Why Freighter Services? = Consol-Centers of Forwarders = LH passenger destinations = Network offer with LH partners DUS YVR SEA SFO LAX YYC DEN IAH MEX GDL DFW ORD ATL YUL DTW JFK IAD PHL CLT YYZ BOS EWR MCO MIA CCS MUC FRA High demand passenger destinations are not necessarily high demand cargo destinations Freighter services offer greater flexibility Certain cargo needs freighters due to size or other special requirements 7

9 Outlook on Capacity Development through 2015 Projected Air Cargo Capacity Development (Market Total) +11% Global Long-haul capacities set to grow approx. 11% 58% Demand will grow by approx. 31% over the same period There will be a shortage of capacities 42% Pax Freighter Projection refers to the sum of all markets relevant to LH Cargo Group members 8

10 Structural Changes After Crisis: Decreasing Overcapacities Development of air freight overcapacities, indexed on % 23% Forecast % Forecast % Crisis had a dramatic impact on aircraft on order and number of market players; Forecast regarding capacity growth 12% reduced significantly % 1% 1% -1% -3% -5% -6% Likely upward trend for net-yield in coming years Perspective of capacity shortage instead of overcapacities temporary or permanent? 9

11 Lufthansa Cargo Group: Our Strategic Response to The Capacity Challenge BRU: 4x Intercont LHR: 3x Intercont 1% LEJ: 8x 777F 8% Share of group capacity VIE: 10x Intercont 1% 4% FRA: 18x MD11-F 67x Intercont ZRH: 26x Intercont MUC: 25x Intercont SZX: 6x 744-F 29% MD11-F 9% 10% 13% 25% Belly 10

12 Table of contents Air freight capacity management and its effects on perishable sector and product categories Freight operations vs. belly cargo model Sea/air // Multi-modal transportation 11

13 Multi-modal transportation: first lanes established, exploration of new ideas to Europe US domestic 12

14 AirShip by Lufthansa Cargo: Best of both worlds with a single AirWayBill One stop Shopping: Lufthansa Cargo in cooperation with Hamburg-Süd offers the complete transportation chain under one AWB (020). Transportation time reduced by approx. 50 % Working capital reduced and insurance costs lowered Cost efficient alternative to direct air freight service Dedicated Lufthansa Cargo AirShip terminals in Shenzhen and Hongkong. 13

15 Are our structures ready for multi-modal transportation? Fine-tuning of the logistic chain is the challenge of today Ecological and economical reasons call for more combinations of different transportation modes Functional silos throughout the industry prevent optimization of supply chain Experts needed for the intelligent cross-linking of different carriers in cooperation with the forwarders 14

16 Cooperation of carriers Hamburg Süd and Lufthansa Cargo in Shenzhen 15

17 Thank you for your attention! M ti S hli i Martin Schlingensiepen Vice President Product Management martin.schlingensiepen@dlh.de

MIA Cargo Facilities and Needs Workshop June 29 th, 2011

MIA Cargo Facilities and Needs Workshop June 29 th, 2011 SMP Overview 1. Prior Studies 2. Current MIA Capital Improvement Program (CIP) 3. SMP Goals and Objectives 4. SMP Study Approach 2 SMP Background