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Lufthansa Cargo Believes Alternative Pricing Structure Is More Realistic

Lufthansa Cargo is hoping to regain their market share and boost their new business in this difficult trade year for many in the industry. From October 25, Lufthansa Cargo is all set to charge their customers only a net rate and an airfreight surcharge. The company will not be adding any fuel or security charges which were add-ons earlier. This winter season, Lufthansa Cargo will just charge a net rate. This latest development will be beneficial and easier to deal with as well as more relatable to the current market realities. Lufthansa Cargo has experienced a loss of about €2 million in the second quarter and is estimating lower profits for the full year since the demand is insufficient and the market is weak.

While some are supporting the new surcharge policy, there are some members and customers who are disappointed with the current developments. Some believe that the pricing model is a reflection on the inadequacies of the surcharges and are not pleased with the developments. They believe that since the oil prices have dropped significantly, many airlines have come up with all inclusive surcharges which are not really advantageous for the customer but are rather confusing. The surcharge of about €1.30 per kilo will soon come down to about 60 cents which will be based on the airport charges as well as fuel and adjustments in currency.

With different air freight pricing models in the market, extreme surcharges and all inclusive rates, Lufthansa is trying to make things simpler for forwarders with their model. The company believes that there are fewer negative rates now and are aiming for a smoother as well as faster negotiation and closing of contracts. Lufthansa Cargo took about 7 months to finalize this plan and decided to go against the all-in rates due to the frequent changes in the external cost factors. There is a misconception that the industry is aiming for all-in rates, but this is a misconception, only about 10 airlines have moved to all-in rates. Most companies are aiming for a more efficient way of changing costs.

There will be no set frequency for the adjusting of the surcharge and the customers will get about 2 weeks’ notice before the change occurs. Brussels Airlines, another Lufthansa subsidiary was focused on changing their GSA arrangements and are considering the pricing issue over the coming months rather than jumping onto any decision. Forwarders will be able to fix prices for capacity purchase contracts based on specific contracts if they choose to do so. Alexis von Hoensbroech, LC board member also added that they are focused on giving their customers more flexibility. The organization is working on coming to terms with the net rates and surcharges and striking total stability and also work on enabling to evade the fuel surcharges.

Lufthansa along with Gulf carriers are aiming for simplification of the tariffs and finding alternative solutions to the net rate issue. Their model is an alternative to the current scenario, but the industry hasn’t come to terms on whether it’s the best alternative or not. They need to prove to the market that their system is effective and beneficial to the industry.