Feet on the ground

Feet on the ground

Lufthansa Cargo is getting its feet wet. When the airline took over freight handling at the Atlanta warehouse of Atlanta forwarder Kuehne & Nagel last spring, it began handling a small volume of ocean cargo as well as air cargo at the forwarder's warehouse.

The German airline is apparently the first airline to handle a forwarder's cargo in the forwarder's facility. "If Kuehne & Nagel wants us to manage their warehouse for them, then we have to do both," said Werner Schuessler, worldwide handling manager of Lufthansa Cargo. "We can't say, 'We're not doing ocean, only air.'"

Though it was Lufthansa's first involvement with ocean cargo, it may not be the last. Schuessler said he hopes Lufthansa's contract with Kuehne & Nagel will lead to similar cargo-handling arrangements with Kuehne & Nagel and other forwarders. He said Lufthansa hopes to generate 50 million euros (about $56 million) worth of such business by 2007.

Lufthansa bid unsuccessfully for the cargo-handling work at Kuehne & Nagel's Frankfurt hub, which opened this year. K&N's handling contract in Frankfurt went to a joint bid from Fraport, the Frankfurt airport authority's cargo-handling unit, and LUG (Luftumschlagsgelsellschaft), a long-established handler at the airport.

Schuessler said Lufthansa's handling of Kuehne & Nagel's cargo at Atlanta has improved security, quality and punctuality and reduced duplication in data input and in weighing and measuring of cargo. Previously, the forwarder would weigh and measure cargo and input data before delivering the cargo, and Lufthansa would repeat the process after receiving the shipment. Now it's done only once.

Before it contracted with Lufthansa, Kuehne & Nagel had been using a third party at Atlanta for cargo handling, as the forwarder does at other U.S. points. Rainer Wunn, Kuehne & Nagel's senior vice president of airfreight for the U.S., said the cooperation may be expanded to other cities, but not yet. "A joint review for further activities is planned for the fourth quarter of 2003 at the earliest," he said.

Schuessler said Lufthansa is pursuing opportunities with other forwarders and said the carrier also wants to put its cargo-handling skills to work directly for shippers, beginning with hazardous cargoes.

Working with forwarder partners, Lufthansa wants to handle this type of traffic on shippers' premises. This would shorten the paper trail and reduce the checks that have to be carried out at each handoff of the cargo, Schuessler said. Initially he said he intends to develop this with forwarders that participate in Lufthansa Cargo's partnership program.

Not everybody is convinced that the concept of a cargo-handling operation moving into a forwarder's or shipper's premises is a good idea. George Martin, president of Toronto-based handler VCC Cargo, which performs ground handling for 17 airlines, said such arrangements might strain a forwarder's relationships with other carriers. "I'd rather not do that, because other airlines would not be particularly happy, nor would their customers be," he said.

And, while Lufthansa Cargo is trying to expand its handling reach, other carriers are moving in the opposite direction. In July United Airlines signed agreements with two private contractors to take over the cargo handling at its 17 largest stations in the U.S. The airline plans to strike similar deals soon for another 20 stations, said Roger Gibson, United's vice president for cargo.

Gibson said farming out its cargo-handling operation in the U.S. is part of a broad restructuring for the Chicago-based carrier and will reduce the airline's cargo-handling costs by $100 million a year. When United awarded the contracts last month, one of the unsuccessful finalists in the bidding was Lufthansa Cargo.