Lufthansa Cargo To Exit China JV Jade
Lufthansa Cargo will finally draw a line under its troubled Jade Cargo joint venture in China by selling its 25 percent stake in the company, its chief executive said.
"As long as we get permission from the authorities, we intend to exit our stake," Lufthansa Cargo CEO Karl Ulrich Garnadt said, adding that the company took a loss of almost EUR€16 million (USD$21.2 million) from the joint venture in 2011.
Jade Cargo, whose operations have been grounded since January as its owners held talks on financing, announced at the end of February that Chinese transport group UniTop had agreed to come on board as a partner.
Garnadt, who said Jade Cargo was preparing to restart flights, declined to say if the restructuring deal would involve UniTop buying the Lufthansa Cargo stake in Jade.
Lufthansa Cargo holds 25 percent of Jade Cargo, Shenzhen Airlines owns 51 percent, and 24 percent is held by German development bank DEG.
Garnadt said that after taking capacity out of the market at the start of the year, he expected a pick-up in freight demand over 2012, driven by the Americas, with sea freight trends indicating a more positive development in Asia.
The Asia market has been plagued by price wars over the last year, resulting in Lufthansa Cargo shifting capacity west to routes to the Americas instead.
Lufthansa Cargo reduced its overall capacity by 20 percent in January and 15 percent in February, Garnadt said.
The group made an operating profit of EUR€249 million in 2011, but said it would be unable to repeat this in 2012 due to overcapacity, a weak Chinese market and the night flight ban at its Frankfurt hub.
Garnadt said the night flight ban at Frankfurt, imposed in October, would hurt earnings by around EUR€40 million a year and sales by over EUR€100 million if it were made permanent by a court in Leipzig on April 4.
Lufthansa Cargo also said on Wednesday it hoped to improve earnings by a minimum of EUR€70 million a year from 2015 as part of the SCORE savings initiative being carried out across the Lufthansa group.