COVID-19 response boosts Deutsche Post DHL’s Q2 profit – FreightWaves

Frank Appel, CEO of Deutsche Post DHL Group (OTCMKTS: DPSGY), said the German logistics company used its diverse services portfolio to outflank the coronavirus pandemic and significantly increase its second-quarter profit.

The company’s preliminary pretax profit for the quarter increased 16% to 890 million euros ($1 billion), compared to 769 million euros ($868 million) for the same period last year.

“Our fundamental strength and resilience as a group has paid off in recent months,” Appel said in a statement. “With our broad portfolio of leading logistics services, we have the right business model to form the backbone of global trade.”

To reward its employees for their work during COVID-19, Appel said the company has set aside about 200 million euros ($225 million) to cover a one-time pay bonus of 300 euros ($340) per employee worldwide.

DP DHL had earlier warned that its second-quarter profits were in jeopardy due to the coronavirus disrupting global supply chains. Since late March, however, the company has recorded increasing freight volumes in e-commerce orders.

The company said measures such as adjusting its service network and maintaining its own aircraft flight capacity also kept its operations positive.

Broken down by service, Express division profits rose to 560 million euros ($632 million) compared to 521 million euros ($588 million) for the previous-year period, while the German Post and parcel segments generated about 260 million euros ($293 million) in operating income, compared to 177 million euros ($200 million) a year ago.

DP DHL’s global forwarding unit recorded Q2 operating income of 190 million euros ($214 million) compared to 124 million euros ($140 million) during the same period last year.

The pandemic and a restructuring of the DP DHL’s electric cargo bikes unit, however, cut its supply chain earnings to about 30 million euros ($33 million) during the quarter, compared to 87 million euros ($93 million) in the 2019 period. The company’s eCommerce Solutions lost about 30 million euros ($33 million), but it broke even with the 2019 Q2 operating profit of about 18 million euros ($20 million).

The company said its 2020-2022 investment plans remain unchanged at between 8.5 billion euros ($9.6 billion) and 9.5 billion euros ($10.7 billion).

DP DHL will release more detailed Q2 financial results at its Aug. 5 general meeting.

The company said going forward that it will no longer differentiate between adjusted operating results before and after the coronavirus pandemic, saying “this distinction became increasingly artificial and less meaningful during the second quarter.”

In response to a “V-shaped” economic recovery from COVID-19, DP DHL said it anticipates a pretax profit for 2020 of 5.3 billion euros ($5.9 billion).

Related articles:

DHL tests ‘pop-up’ store concept in US

DHL prepares three 767 passenger planes for freight operations

Deutsche Post DHL posts pretax profit despite COVID-19 outbreak

Click for more FreightWaves/American Shipper articles by Chris Gillis.

Russian airline completes massive airlift of medical supplies for France – FreightWaves

The French government has ended a massive airlift of medical supplies from China to combat the spread of the deadly coronavirus after stockpiles were deemed sufficient.

Over the past three months, Russian carrier Volga-Dnepr operated 48 Antonov-124 freighter flights to deliver 3,000 tons of medical supplies. French logistics firm Geodis coordinated the operation.

The Cold War-era AN-124s, which were built in Ukraine, are the largest commercial cargo aircraft in use and are normally associated with irregular flights of large, heavy pieces of freight, including U.S. military equipment to the Middle East.

The French Ministry of Solidarity and Health hired Volga-Dnepr and Geodis to create an “air bridge” transporting much-needed face masks, surgical gowns and other protective gear from Shenzhen, China, to Paris for distribution to hospitals around the country.

According to Volga-Dnepr, its fleet of 12 AN-124s landed at Paris-Vatry airport every 48 hours from the start of April until the end of June. The carrier estimates it transported more than 1 million cubic feet of protective medical equipment from China to France during that time.

“This was a unique airlift challenge, given its size, frequency and the epidemiological factors that our operating crews and all stakeholders faced,” said Stuart Smith, Volga-Dnepr’s global director of humanitarian services, in a statement.

The airline said it also encountered flight crew quarantine restrictions, severe congestion at Chinese airports, and regulatory obstacles to Chinese exports. Geodis logistics staff worked closely with Volga-Dnepr to ease those burdens.

Other countries, such as the U.S., U.K., Spain and Germany, used similar air bridges involving commercial aircraft this spring to rush protective medical supplies from Chinese manufacturers to front-line hospital workers fighting the spread of COVID-19.

The U.S. program, dubbed “Project Airbridge,” also finished last month.

Related Articles:

FEMA winds down Project Airbridge

Shanghai Pudong airport continues to choke on COVID cargo

New aircraft recruited for COVID mission; air cargo gets window seat

Click for more FreightWaves/American Shipper articles by Chris Gillis.

Commentary: COVID-19 severely impacts the ‘Blue Economy’ – FreightWaves

The views expressed here are solely those of the author and do not necessarily represent the views of FreightWaves or its affiliates. 

Since the beginnings of COVID-19, the political rhetoric masking the severity and economic impact of the virus has piled up to levels we have not seen since the U.S.-China trade war. Just as the flow of trade refuted the trade war promises and winning declarations, the same can be applied to the impact and ruthlessness of C-19.

A cargo ship being unloaded at PortMiami.
(Photo: PortMiami)

I have said since the beginning of the U.S.-China trade war that “containers don’t lie.” This is more than a catch phrase. It is the physical truth about a country’s economic health and its trade relationships. Globalization has connected the world. Trade has supported this relationship. It has also shown the crippling impact it can have when a country shuts its borders.

Millions of jobs are connected to this globalization. These occupations expand beyond maritime and logistics into retail, medicine, the local sandwich shop and more.  The list is nearly endless. The blue economy is the heartbeat of the world. The production and movement of trade is the oxygenated blood carried through every country’s economic veins.

This fiscal vitality can be measured by the productivity at the individual port systems. Every port is a microcosm of its society. Every port has its specialty and different trading partners. The Port of Miami (POM), known as the “Cruise Capital of the World,” transformed almost overnight into a rotating parking lot for ships with no places to go while servicing its trading partners.

Cruise ships docked on July 7, 2020 at PortMiami.
Cruise ships docked on July 7, 2020 at PortMiami.
(Photo: PortMiami) 

With the cruise industry landlocked, COVID-19’s impact on this segment goes beyond the travel industry. According to a 2019 POM impact study conducted by Martin Associates, the cruise industry consumed $336.1 million of food, liquor, flowers, logo items and bon voyage gifts. Most of the food and liquor being loaded onto these cruise ships is domestic, not imported.

“Approximately 4,000 containers of products are consumed by the cruise industry,” explained Juan M. Kuryla, Port Director and CEO of PortMiami. “About 60,000 to 70,000 people have a job directly or indirectly at the Port of Miami alone. In the state of Florida, 150,000 people are affected. Our container trade is paying the bills right now.”

Cargo terminals at PortMiami on July 7, 2020.
Cargo terminals at PortMiami on July 7, 2020.
(Photo: PortMiami)

For the fiscal year October 1st to March 15th, POM was up 7% compared to fiscal 2019. “That was before COVID-19 hit,” explained Kuryla. “Then we began to see the descent.”

PortMiami Overview FY 2020/Total Trade

The undulating wave of trade destruction caused by COVID-19 can be tracked through the timeline of the three trade routes POM serves – Asia, Europe and Caribbean/Latin America.

In March, the port saw a 52.2% drop in container volumes in and out of Asia. That region represents 36% of the POM annual trade. The pickup in volumes in April and May was the long-awaited backlog of containers accumulated between the Chinese New Year and the extension of manufacturing closures because of the coronavirus. This was not a reflection of consumer demand. The “surge” was the movement of trade playing “catch up.”

PortMiami Asia Trade FY2019 vs. FY2020

The upswing in trade falls in line with the decline in trade out of Europe. The trade timeline falls in lockstep with the pandemic spreading throughout the world and countries having to shut down to combat the spread.

Europe makes up 13% of POM annual trade. Volumes were up by 7.8% in March, and then dropped by 18% in April and 20% in May.

PortMiami Europe Trade FY 2019 vs FY2020

The most valuable trade lane for PortMiami is Latin American and Caribbean. This route generates 45% of the port’s total volume. The precipitous drop began in April – a fall of 18.2%, and a plunge of almost 40% in May. The trend continues. “Latin America is closed,” said Kuryla. “The quarantine orders in these countries were very stern. People couldn’t go out and go to restaurants, so consumption dropped, thus no export to these countries.”

PortMiami Latin American Trade FY 2019 vs. FY 2020

“Until Latin America opens up, this loss in trade will continue,” said Kuryla. “We are down 150,000 containers. That’s an overall loss of $9 to $10 million in revenue directly to the port. It does not include the loss of revenue generated for the entire supply chain – trucking, banks and the post-financing letter of credit of warehouses and manufacturing. That’s a loss of $20 million in trade.”

Kuryla says the June volumes are estimated to be down by 15%. He expects the peak season to be down as well.

A cargo ship docked at PortMiami with the City of Miami in the background.
A cargo ship docked at PortMiami with the City of Miami in the background.
(Photo: PortMiami)

“Thankfully the container volumes were stronger earlier in the fiscal year to help offset these losses,” said Kuryla. “But for 2020, we’ll end up being down about 10 to 12%. It’s not terrible, but clearly not good.”

The heartbeat of trade is still beating. But the strength of that rhythm is dependent on the actions of global leaders trying to strike a balance between health, safety and reopening. We are seeing the stumbles. Hopefully lessons from those missteps will be learned.

Lufthansa Cargo taps 3PL to run Frankfurt hub – FreightWaves

(Correction: This story has been updated to reflect that new arrangement’s at Lufthansa’s facility would involve do not impact digital communications with customers or IT links with other contractors).

Lufthansa Airlines (OTC US: DLAKY) is consolidating outsourced operation of its main cargo hub in Frankfurt, Germany, turning the facility over to third-party logistics provider Fiege Group as part of a larger effort to increase efficiency through use of technology.

Several small- and medium-size handling partners previously carried out physical movement of inbound and outbound shipments, but their functions will gradually transition to  Fiege’s new air cargo logistics subsidiary, the airline’s cargo division said Monday. Other providers, however, will still be involved to handle non-standard shipments and other specialized processes.

The Lufthansa Cargo Center at Frankfurt International Airport is the heart of the company’s airfreight network and the base for its fleet of MD-11 and Boeing 777 freighters. The facility also has some of the industry’s most sophisticated cargo X-ray equipment for security and is home to one of the largest temperature-controlled warehouses on airport property. It handles import and export freight, transfers, and exchanges to the road feeder network.

Lufthansa Cargo recently implemented a number of IT upgrades for production planning and control at the hub. Fiege’s experience in contract logistics implementing warehouse processes will build on those advances, spokesman Andreas Pauker explained in an email. The new cooperation with Fiege reduces the number of contractors Lufthansa has to interface with, enabling the company to optimize the digital enhancements and improve internal communication, he added.

Fiege Group, based in Greven, Westphalia, partnered this spring with Lufthansa to deliver tens of millions of face masks from China to Germany. Last year, the company generated 1.7 billion euros ($1.9 billion) in revenue.

Restructuring

Parent company Deutsche Lufthansa AG ensured its near-term financial security at the end of June with a $10 billion stabilization package backed by the German government, but the board of directors said Tuesday more cost reductions are needed to ensure the company can quickly repay the loans and investments so as to avoid any increase in interest rates.

A restructuring strategy, ReNew, will guide the airline through the end of 2023 as it recovers from coronavirus-related losses. In addition to reducing the fleet by 100 aircraft and shuttering regional carrier Germanwings, as announced in April, the German flag carrier is streamlining management positions by 20% and eliminating 1,000 other jobs, as well as accelerating the transformation of Lufthansa Airlines into a separate corporate entity.

Lufthansa has already phased out 22 aircraft ahead of schedule, including six Airbus A380 super-jumbo jets, 11 A320s and five Boeing 747-400 aircraft. It is also cutting in half, to 80, the maximum number of new aircraft the company will accept through 2023. 

Lufthansa said it still has a surplus of 22,000 employees for the smaller operational footprint but will try to avoid layoffs by working with unions. The company said so far it has only been able to negotiate concessions with the union representing flight attendants.

Lufthansa subsidiary Austrian Airlines on Monday also received approval from the European Commission for a 150 million euro ($169.5 million) grant from the Austrian government, part of a 600 million rescue package of loans and capital from Lufthansa Group and banks. The airline only needs Germany’s endorsement to proceed with the plan.

Lufthansa and Austrian are in the process of ramping up flight operations following a long shut down because of travel restrictions designed to contain COVID-19’s spread. 

Click for more FreightWaves/American Shipper stories by Eric Kulisch.

RECOMMENDED READING:

Lufthansa mothballs entire A340 fleet as downsizing continues

Lufthansa inches toward restart, seeks German government bailout

Airlines restore some services, but finances remain grim

Commentary: Never let a good crisis go to waste – FreightWaves

The views expressed here are solely those of the author and do not necessarily represent the views of FreightWaves or its affiliates.  

Attention all logistics and supply chain professionals – it’s time to keep a laser focus on recovery. We’ve all been put to the test by COVID-19 – particularly in our supply chains. My hat is off to those of you who successfully navigated the unforeseen changes in demand and had the flexibility to rebound.

And for those of you operating with manual processes and limited visibility into your operations, I feel your pain.

It’s not easy to respond to market changes when you’re blinded by the weak points – especially those producing personal protective equipment (PPE) supplies and medical equipment. This crisis is a big wake-up call for all of us. It’s also time to have full visibility into every aspect of our operations.  

A cargo ship ready to be unloaded lies at a dockside.
(Photo: Jim Allen/FreightWaves)

Where do your breakdowns occur?

It’s time to collaborate across all your teams and conduct a deep dive into your business. Remember, every department involved in your operation plays an essential part moving forward. Logistics and supply chain professionals should take a hard look at what actually broke down during the crisis. 

Questions you should ask yourself:

  • Was it that raw materials were not available for your vendors and factories?
  • Did your vendors and factories need to shut down?
  • How was transportation and distribution affected?
  • What about visibility for your team/supply chain partners, working mostly from home?        
  • Did your demand and supply chain planning need your team to make quick changes?
  • How was the overall communication within your teams and with your supply chain partners?  
A tractor with

 Take a holistic look at your supply chain and logistics operation

These are just some of the questions you should be asking. Make sure you fully understand each tier of production and the partners you engage with and where they source their raw materials.

For example, certain industries have been suffering under the reinstated U.S. tariffs and began to diversify their vendor portfolios long before COVID-19 hit. They may have moved some, or all production out of China. However, they may have only looked at their Tier 1 partners, only to realize that essential raw materials are still being exported from China to their new production partners in other countries. This may have helped you escape tariffs, but prevented you from having products delivered during the crisis.

Use this knowledge to gather as much real data about your products, materials, and direct and indirect partners as you can. When you analyze your findings, I guarantee your top priorities will reveal themselves. Some of my clients are using this time as an opportunity to score their strengths and weaknesses; and some even apply a rating for overall flexibility.

It’s also a good time to look for additional production partners and raw material suppliers. Many of them are faced with order cancellations under current contracts and welcome new opportunities.

A container comes off a ship and is loaded onto a flatbed trailer.
A container comes off a ship and is loaded onto a flatbed trailer.
(Photo: Jim Allen/FreightWaves)

Make your supply chain truly resilient

Logistics and supply chain management tends to be 100% cost-driven, focusing on limited partners to gain more efficiency, cut costs and negotiate lower product prices. This philosophy, while cost-conscious, puts all your eggs into one basket. COVID-19 has helped senior management to shift priorities and encourage their operations teams to incorporate risk management, and demand more resilient supply chains.

My advice? First calculate the landed costs for your products from your present operation overseas. Compare this with the landed costs for the same products (domestic or near-shored produced). If these costs are higher, consider moving a percentage of them to increase your supply chain resilience.

In some cases, diversification, risk management and supply chain resilience may actually increase the number of vendors you will manage.  It has a price and therefore goes against the natural instinct to design your supply chain to be as lean as possible. However, it pays off in the long run – especially in times of crisis. 

The answer? Go digital and leverage technology to unlock the hidden efficiency potential in your organization.

Another important area for supply chain professionals to monitor is the financial risk of their counter-parties. According to Brian Sanders, Senior Research Analyst at CreditRiskMonitor, “Many companies, especially now, have little cash on hand and their collection cycles on receivables are slower. Since companies are dealing with much lower sales and cash flow, they’re having difficulty satisfying their current obligations. Bankruptcies from one industry can negatively impact other industries.”

According to Bain and Company, in an April brief, they claim it’s time to refocus on resilience. In just one example, they say that advanced analytics can improve supply forecast accuracy by 20% to 60%.

At Setlog we do this analysis with every client. Too often data is scattered throughout the organization – on paper, some electronically, and mostly, in the heads (anecdotal information) of select employees. This is a recipe for disaster – even without COVID-19.

According to my colleague Brian Aoaeh, co-founder of The Worldwide Supply Chain Federation, their members report three things businesses across industries are doing to navigate the crisis:

1.  Logistics companies and organizations are taking greater interest in software for digitization, automation and collaboration as they try to stay operational in the face of shelter-in-place and social-distancing regulations. For example, CargoX is providing blockchain document transfer capabilities for a project with the Ministry of Shipping in India focused on digitizing trade documentation.

2.  Second, many companies are pursuing discussions with alternative suppliers more seriously. This is especially true where these new suppliers are based in markets that are relatively unaffected by import and export restrictions or other breakdowns in the flow of goods and services.

3.  Third, especially in retail, companies are embracing the idea of omnichannel and multichannel sales. The companies that have done okay during the pandemic are those that have been able to quickly move their sales to channels their customers can use during the pandemic.

Containers rise five-high at a dockyard holding area.
Containers rise five-high at a dockyard holding area.
(Photo: Jim Allen/FreightWaves)

What doesn’t kill you makes you stronger

When a crisis like this happens, everyone suffers – suppliers, buyers, employees, customers, investors and society. I like the saying “don’t let a good crisis go to waste.” There are numerous lessons to be learned here, but mostly, keep an open mind by fixing the weak links of your supply chain and diversify smartly by calculating landed costs.

And, if you haven’t done it already, on-board and leverage technology to gain full visibility into every aspect of your operation. You’ll come out a winner, I promise!

Russian airline completes massive airlift of medical supplies for France – FreightWaves

The French government has ended a massive airlift of medical supplies from China to combat the spread of the deadly coronavirus after stockpiles were deemed sufficient.

Over the past three months, Russian carrier Volga-Dnepr operated 48 Antonov-124 freighter flights to deliver 3,000 tons of medical supplies. French logistics firm Geodis coordinated the operation.

The Cold War-era AN-124s, which were built in Ukraine, are the largest commercial cargo aircraft in use and are normally associated with irregular flights of large, heavy pieces of freight, including U.S. military equipment to the Middle East.

The French Ministry of Solidarity and Health hired Volga-Dnepr and Geodis to create an “air bridge” transporting much-needed face masks, surgical gowns and other protective gear from Shenzhen, China, to Paris for distribution to hospitals around the country.

According to Volga-Dnepr, its fleet of 12 AN-124s landed at Paris-Vatry airport every 48 hours from the start of April until the end of June. The carrier estimates it transported more than 1 million cubic feet of protective medical equipment from China to France during that time.

“This was a unique airlift challenge, given its size, frequency and the epidemiological factors that our operating crews and all stakeholders faced,” said Stuart Smith, Volga-Dnepr’s global director of humanitarian services, in a statement.

The airline said it also encountered flight crew quarantine restrictions, severe congestion at Chinese airports, and regulatory obstacles to Chinese exports. Geodis logistics staff worked closely with Volga-Dnepr to ease those burdens.

Other countries, such as the U.S., U.K., Spain and Germany, used similar air bridges involving commercial aircraft this spring to rush protective medical supplies from Chinese manufacturers to front-line hospital workers fighting the spread of COVID-19.

The U.S. program, dubbed “Project Airbridge,” also finished last month.

Related Articles:

FEMA winds down Project Airbridge

Shanghai Pudong airport continues to choke on COVID cargo

New aircraft recruited for COVID mission; air cargo gets window seat

Click for more FreightWaves/American Shipper articles by Chris Gillis.

Commentary: COVID-19 severely impacts the ‘Blue Economy’ – FreightWaves

The views expressed here are solely those of the author and do not necessarily represent the views of FreightWaves or its affiliates. 

Since the beginnings of COVID-19, the political rhetoric masking the severity and economic impact of the virus has piled up to levels we have not seen since the U.S.-China trade war. Just as the flow of trade refuted the trade war promises and winning declarations, the same can be applied to the impact and ruthlessness of C-19.

A cargo ship being unloaded at PortMiami.
(Photo: PortMiami)

I have said since the beginning of the U.S.-China trade war that “containers don’t lie.” This is more than a catch phrase. It is the physical truth about a country’s economic health and its trade relationships. Globalization has connected the world. Trade has supported this relationship. It has also shown the crippling impact it can have when a country shuts its borders.

Millions of jobs are connected to this globalization. These occupations expand beyond maritime and logistics into retail, medicine, the local sandwich shop and more.  The list is nearly endless. The blue economy is the heartbeat of the world. The production and movement of trade is the oxygenated blood carried through every country’s economic veins.

This fiscal vitality can be measured by the productivity at the individual port systems. Every port is a microcosm of its society. Every port has its specialty and different trading partners. The Port of Miami (POM), known as the “Cruise Capital of the World,” transformed almost overnight into a rotating parking lot for ships with no places to go while servicing its trading partners.

Cruise ships docked on July 7, 2020 at PortMiami.
Cruise ships docked on July 7, 2020 at PortMiami.
(Photo: PortMiami) 

With the cruise industry landlocked, COVID-19’s impact on this segment goes beyond the travel industry. According to a 2019 POM impact study conducted by Martin Associates, the cruise industry consumed $336.1 million of food, liquor, flowers, logo items and bon voyage gifts. Most of the food and liquor being loaded onto these cruise ships is domestic, not imported.

“Approximately 4,000 containers of products are consumed by the cruise industry,” explained Juan M. Kuryla, Port Director and CEO of PortMiami. “About 60,000 to 70,000 people have a job directly or indirectly at the Port of Miami alone. In the state of Florida, 150,000 people are affected. Our container trade is paying the bills right now.”

Cargo terminals at PortMiami on July 7, 2020.
Cargo terminals at PortMiami on July 7, 2020.
(Photo: PortMiami)

For the fiscal year October 1st to March 15th, POM was up 7% compared to fiscal 2019. “That was before COVID-19 hit,” explained Kuryla. “Then we began to see the descent.”

PortMiami Overview FY 2020/Total Trade

The undulating wave of trade destruction caused by COVID-19 can be tracked through the timeline of the three trade routes POM serves – Asia, Europe and Caribbean/Latin America.

In March, the port saw a 52.2% drop in container volumes in and out of Asia. That region represents 36% of the POM annual trade. The pickup in volumes in April and May was the long-awaited backlog of containers accumulated between the Chinese New Year and the extension of manufacturing closures because of the coronavirus. This was not a reflection of consumer demand. The “surge” was the movement of trade playing “catch up.”

PortMiami Asia Trade FY2019 vs. FY2020

The upswing in trade falls in line with the decline in trade out of Europe. The trade timeline falls in lockstep with the pandemic spreading throughout the world and countries having to shut down to combat the spread.

Europe makes up 13% of POM annual trade. Volumes were up by 7.8% in March, and then dropped by 18% in April and 20% in May.

PortMiami Europe Trade FY 2019 vs FY2020

The most valuable trade lane for PortMiami is Latin American and Caribbean. This route generates 45% of the port’s total volume. The precipitous drop began in April – a fall of 18.2%, and a plunge of almost 40% in May. The trend continues. “Latin America is closed,” said Kuryla. “The quarantine orders in these countries were very stern. People couldn’t go out and go to restaurants, so consumption dropped, thus no export to these countries.”

PortMiami Latin American Trade FY 2019 vs. FY 2020

“Until Latin America opens up, this loss in trade will continue,” said Kuryla. “We are down 150,000 containers. That’s an overall loss of $9 to $10 million in revenue directly to the port. It does not include the loss of revenue generated for the entire supply chain – trucking, banks and the post-financing letter of credit of warehouses and manufacturing. That’s a loss of $20 million in trade.”

Kuryla says the June volumes are estimated to be down by 15%. He expects the peak season to be down as well.

A cargo ship docked at PortMiami with the City of Miami in the background.
A cargo ship docked at PortMiami with the City of Miami in the background.
(Photo: PortMiami)

“Thankfully the container volumes were stronger earlier in the fiscal year to help offset these losses,” said Kuryla. “But for 2020, we’ll end up being down about 10 to 12%. It’s not terrible, but clearly not good.”

The heartbeat of trade is still beating. But the strength of that rhythm is dependent on the actions of global leaders trying to strike a balance between health, safety and reopening. We are seeing the stumbles. Hopefully lessons from those missteps will be learned.

Lufthansa Cargo taps 3PL to run Frankfurt hub – FreightWaves

(Correction: This story has been updated to reflect that new arrangement’s at Lufthansa’s facility would involve do not impact digital communications with customers or IT links with other contractors).

Lufthansa Airlines (OTC US: DLAKY) is consolidating outsourced operation of its main cargo hub in Frankfurt, Germany, turning the facility over to third-party logistics provider Fiege Group as part of a larger effort to increase efficiency through use of technology.

Several small- and medium-size handling partners previously carried out physical movement of inbound and outbound shipments, but their functions will gradually transition to  Fiege’s new air cargo logistics subsidiary, the airline’s cargo division said Monday. Other providers, however, will still be involved to handle non-standard shipments and other specialized processes.

The Lufthansa Cargo Center at Frankfurt International Airport is the heart of the company’s airfreight network and the base for its fleet of MD-11 and Boeing 777 freighters. The facility also has some of the industry’s most sophisticated cargo X-ray equipment for security and is home to one of the largest temperature-controlled warehouses on airport property. It handles import and export freight, transfers, and exchanges to the road feeder network.

Lufthansa Cargo recently implemented a number of IT upgrades for production planning and control at the hub. Fiege’s experience in contract logistics implementing warehouse processes will build on those advances, spokesman Andreas Pauker explained in an email. The new cooperation with Fiege reduces the number of contractors Lufthansa has to interface with, enabling the company to optimize the digital enhancements and improve internal communication, he added.

Fiege Group, based in Greven, Westphalia, partnered this spring with Lufthansa to deliver tens of millions of face masks from China to Germany. Last year, the company generated 1.7 billion euros ($1.9 billion) in revenue.

Restructuring

Parent company Deutsche Lufthansa AG ensured its near-term financial security at the end of June with a $10 billion stabilization package backed by the German government, but the board of directors said Tuesday more cost reductions are needed to ensure the company can quickly repay the loans and investments so as to avoid any increase in interest rates.

A restructuring strategy, ReNew, will guide the airline through the end of 2023 as it recovers from coronavirus-related losses. In addition to reducing the fleet by 100 aircraft and shuttering regional carrier Germanwings, as announced in April, the German flag carrier is streamlining management positions by 20% and eliminating 1,000 other jobs, as well as accelerating the transformation of Lufthansa Airlines into a separate corporate entity.

Lufthansa has already phased out 22 aircraft ahead of schedule, including six Airbus A380 super-jumbo jets, 11 A320s and five Boeing 747-400 aircraft. It is also cutting in half, to 80, the maximum number of new aircraft the company will accept through 2023. 

Lufthansa said it still has a surplus of 22,000 employees for the smaller operational footprint but will try to avoid layoffs by working with unions. The company said so far it has only been able to negotiate concessions with the union representing flight attendants.

Lufthansa subsidiary Austrian Airlines on Monday also received approval from the European Commission for a 150 million euro ($169.5 million) grant from the Austrian government, part of a 600 million rescue package of loans and capital from Lufthansa Group and banks. The airline only needs Germany’s endorsement to proceed with the plan.

Lufthansa and Austrian are in the process of ramping up flight operations following a long shut down because of travel restrictions designed to contain COVID-19’s spread. 

Click for more FreightWaves/American Shipper stories by Eric Kulisch.

RECOMMENDED READING:

Lufthansa mothballs entire A340 fleet as downsizing continues

Lufthansa inches toward restart, seeks German government bailout

Airlines restore some services, but finances remain grim

Maersk aims to expand European customs brokerage footprint – FreightWaves

A.P. Moller-Maersk Group (OTCMKTS: AMKBY) has reached an agreement with Bridgepoint Development Capital to acquire the Swedish customs broker, KGH Customs Services, for an estimated $279 million.

The liner carrier said the acquisition of the Gothenberg, Sweden-based company, which is subject to regulatory approval, will expand its customs services offerings to European shippers.

“We achieve all this in one go instead of having to build our expertise through multiple acquisitions,” said Vincent Clerc, CEO of ocean and logistics at A.P. Moller-Maersk, in a statement released on Monday, July 6.

“KGH has a strategy focused on digital solutions and technology as an enabler for a more seamless customer experience, which also corresponds with Maersk’s own digital transformation journey,” Maersk added in a press release.

According to Maersk, KGH has in the past years achieved double-digit annual growth resulting in revenue of about $95.5 million, recurring earnings before interest, taxes, depreciation and amortization (EBITDA) of about $17.2 million, and an EBITDA margin of about 18%. KGH has 775 employees and a yearly business of 1.98 million import clearances.

With the acquisition, Maersk estimates that it will have 960 customs services employees across offices in 22 European countries. This will result in an estimated 2.38 million import customs clearances, and a combined turnover of $109.4 million.

Maersk has expanded its logistics and customs brokerage service offerings worldwide in recent years through acquisition.

In February 2019, the company acquired Vandegrift Inc., a Clark, New Jersey-based customs broker, increasing its North American customs services staff from 80 to 250 people and added 25 more licensed customs brokers.

On April 1, Maersk completed a $545 million acquisition of U.S. warehouse and distribution firm Performance Team, which more than doubled its warehouses in the North American market to 46.

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COVID-19 response boosts Deutsche Post DHL’s Q2 profit – FreightWaves

Frank Appel, CEO of Deutsche Post DHL Group (OTCMKTS: DPSGY), said the German logistics company used its diverse services portfolio to outflank the coronavirus pandemic and significantly increase its second-quarter profit.

The company’s preliminary pretax profit for the quarter increased 16% to 890 million euros ($1 billion), compared to 769 million euros ($868 million) for the same period last year.

“Our fundamental strength and resilience as a group has paid off in recent months,” Appel said in a statement. “With our broad portfolio of leading logistics services, we have the right business model to form the backbone of global trade.”

To reward its employees for their work during COVID-19, Appel said the company has set aside about 200 million euros ($225 million) to cover a one-time pay bonus of 300 euros ($340) per employee worldwide.

DP DHL had earlier warned that its second-quarter profits were in jeopardy due to the coronavirus disrupting global supply chains. Since late March, however, the company has recorded increasing freight volumes in e-commerce orders.

The company said measures such as adjusting its service network and maintaining its own aircraft flight capacity also kept its operations positive.

Broken down by service, Express division profits rose to 560 million euros ($632 million) compared to 521 million euros ($588 million) for the previous-year period, while the German Post and parcel segments generated about 260 million euros ($293 million) in operating income, compared to 177 million euros ($200 million) a year ago.

DP DHL’s global forwarding unit recorded Q2 operating income of 190 million euros ($214 million) compared to 124 million euros ($140 million) during the same period last year.

The pandemic and a restructuring of the DP DHL’s electric cargo bikes unit, however, cut its supply chain earnings to about 30 million euros ($33 million) during the quarter, compared to 87 million euros ($93 million) in the 2019 period. The company’s eCommerce Solutions lost about 30 million euros ($33 million), but it broke even with the 2019 Q2 operating profit of about 18 million euros ($20 million).

The company said its 2020-2022 investment plans remain unchanged at between 8.5 billion euros ($9.6 billion) and 9.5 billion euros ($10.7 billion).

DP DHL will release more detailed Q2 financial results at its Aug. 5 general meeting.

The company said going forward that it will no longer differentiate between adjusted operating results before and after the coronavirus pandemic, saying “this distinction became increasingly artificial and less meaningful during the second quarter.”

In response to a “V-shaped” economic recovery from COVID-19, DP DHL said it anticipates a pretax profit for 2020 of 5.3 billion euros ($5.9 billion).

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