Bruce Barnard, Special Correspondent | Dec 16, 2011 10:37AM EST
Lufthansa Cargo is considering a reduction of operations in China, which accounts for a fifth of the company’s sales, as the German carrier struggles to make a profit in the world’s second-largest economy.
“We are leaving all options open,” chief executive Karl Ulrich Garnadt told the Reuters Global Manufacturing and Transportation summit in Frankfurt. Despite the large share of Chinese business, the “market share and strategic importance come only after economic viability,” he said.
Lufthansa Cargo is also reviewing its investment in Chinese joint venture carrier Jade Cargo International in which it has a 25 percent stake.
Lufthansa Cargo’s sales director Andreas Otto last month gave China’s Shenzhen Airlines, which owns 51 percent of Jade, until the end of 2011 to reach an agreement on plans inject fresh funds into the all-cargo airline.
Garnadt didn’t set a date for a deal, but he said Lufthansa Cargo had long known that Jade, which was established in 2006, was undercapitalized. The airline is currently in “very constructive” negotiations with the Bank of China, he said.
“This needs to be dealt with soon,” Garnadt said.
Jade, which has a fleet of six 747-400 extended range freighters, does not publish its figures but is known to be suffering from the downturn in Chinese cargo volumes in recent months.
The Lufthansa group, which includes Lufthansa Cargo and SwissCargo, said freight traffic fell 8.8 percent in November from a year ago while Asia-Pacific shipments slumped 11.5 percent.
Hong Kong-based Cathay Pacific blamed a soft Chinese market and the absence of a peak season for a 13.8 percent drop in cargo traffic in November.
-- Contact Bruce Barnard at brucebarnard47@hotmail.com.
