Deutsche Lufthansa AG's (FRA: LHA) cargo division reported a 26% gain in adjusted operating profit for the second quarter, fueled by robust shipping demand across Asia and from AI-driven cloud service providers. The results mark a sharp turnaround for an air cargo sector that has been recovering from a prolonged downturn, with global volumes only recently returning to growth after more than two years of contraction. The revenue growth came despite volatile market conditions and elevated fuel costs tied to the U.S.-Iran war.

Lufthansa Cargo also recently launched a full-service, cross-border e-commerce logistics subsidiary by merging two in-house companies, and completed the first phase of a large-scale modernization project at its primary hub at Frankfurt Airport.

The expansion and fresh investments prompted Chief Financial Officer Gregor Schleussner to declare that Lufthansa Cargo is on track to reclaim a position among the world's elite cargo airlines before the decade ends.

"Companies that want to succeed in the long term must be faster, more efficient, and more adaptable than their competitors. This is why we continue to work hard to create the foundation for Lufthansa Cargo's next phase of development through our Bold Moves strategy. Our goal is clear: by 2030, we aim to return to the ranks of the world's top three cargo airlines," Schleussner said in a news release accompanying the Group's financial results.

Lufthansa Cargo currently ranks as the world's No. 14 carrier by traffic volume, according to the International Air Transport Association. The top ranks are dominated by Qatar Airways Cargo, Emirates SkyCargo, and Cathay Pacific Cargo — carriers that have invested heavily in fleet expansion and digital logistics platforms over the past decade. Lufthansa Cargo operates 12 Boeing 777 freighter aircraft and markets capacity on an additional six 777s operated by AeroLogic, a joint venture between Lufthansa and DHL Express, giving it control of 18 widebody freighters in total. It also manages belly cargo capacity across sister carriers Lufthansa Airlines, Austrian Airlines, Brussels Airlines, Discover Airlines, and SunExpress.

FreightWaves previously reported that Lufthansa Cargo has quietly dropped plans to reinstate four Airbus A321 standard-size freighters that were pulled from European and North African regional service in April. The company did not disclose a reason, though analysts attribute the decision to operating and market conditions that make the aircraft difficult to operate profitably.

Financial Performance

Lufthansa Cargo revenue climbed 27% in the second quarter to €1 billion ($1.2 billion). Operating income rose 26% to $1.21 billion, while adjusted operating profit surged 58% to $133.6 million. For the first half of the year, revenue increased 16% and the profit margin gained 2.2 percentage points to reach 10.4%.

Second-quarter demand held firm, rising 3% despite disruptions and economic uncertainty stemming from the Middle East conflict. Lufthansa benefited from capacity reductions at Middle Eastern competitors such as Emirates and Qatar Airways Cargo, as well as a modal shift from ocean to air freight as businesses sought more reliable transport options. The modal shift has been accelerated by ongoing disruptions to ocean shipping through the Red Sea and Suez Canal, where security threats have forced many carriers to reroute vessels around Africa's Cape of Good Hope, adding transit time and unpredictability. These factors drove a 27% year-over-year increase in yields. Fuel surcharges helped offset higher fuel expenses and contributed additional revenue, further supporting yield growth.

The geopolitical crisis sparked a surge in demand on both passenger and freighter routes to Asia. Yields to Asia and on new intra-Asia routes jumped 30%, while yields to the Middle East rose even more sharply.

The company also credited its profitability to a sharpened focus on high-margin industry sectors, including pharmaceuticals, semiconductors, automotive, and artificial intelligence.

"The increased need for transportation of server racks indeed has almost become an industry-shaping element. We are allocating and reallocating our network to serve our customers who try and who want to move server racks around the world," Lufthansa Group CEO Carsten Spohr said on a call with analysts. "As you can imagine, for these high-risk and very expensive equipment, logistical costs are almost immeasurable, so this is a very profitable business. You do need freighter aircraft for this business by the sheer size of these racks."

The surge in AI hardware shipments reflects a broader global data center construction boom, with hyperscalers such as Amazon, Microsoft, Google, and Meta racing to build out infrastructure to support generative AI workloads. Server racks powered by next-generation GPUs can weigh over 3,000 pounds and span multiple pallet positions, making them among the most complex cargo moved by air today.

Strong demand for semiconductors and AI-related hardware contributed to a 7% increase in global air cargo industry volumes in June, according to research from Xeneta. Available cargo capacity grew 2%, driven by a 6% expansion in passenger aircraft belly space, particularly from the marketing of capacity on ITA Airways. Lufthansa Group acquired a minority stake in the Italian carrier in 2025.

Hub Modernization

A core element of Lufthansa Cargo's premium strategy is the modernization of its ground-side cargo infrastructure. Frankfurt Airport already ranks among Europe's busiest cargo hubs, handling roughly 2 million tonnes of freight and mail annually, and the upgrade is designed to help the carrier close the gap with rivals at Amsterdam Schiphol and in the Gulf that have invested heavily in automated cargo processing. The airline is constructing a $682 million, 3.5-million-square-foot cargo terminal at Frankfurt Airport featuring high-bay storage for pallets and an automated transport system designed to substantially boost handling capacity and efficiency.

The initial building, regarded as the most critical phase of the project, spans 860,000 square feet — an area equivalent to 11 soccer fields. Lufthansa Cargo says the terminal will be Europe's most modern air cargo hub when it is completed in 2030.

The facility will incorporate advanced warehouse management systems and conveyor networks for efficient goods routing, a fully automated 131-foot-tall high-bay warehouse with nearly 3,000 storage slots for large pallets, and a dedicated automated pallet warehouse for temperature-sensitive and specialized shipments. The high-bay section alone will support more than 300 storage and retrieval operations per hour, effectively doubling existing capacity, according to the company.

Lufthansa Cargo also consolidated its heyworld GmbH and CB Customs Broker subsidiaries under the newly formed brand GlobeCross. The combined entity integrates e-commerce logistics services, including last-mile delivery, with customs clearance expertise to offer businesses end-to-end transport for small-parcel shipments. The move extends Lufthansa Cargo beyond the traditional airport-to-airport model, enabling the carrier to capture additional revenue in the expanding parcel logistics market, a segment that has grown rapidly as cross-border e-commerce volumes — particularly from China to Europe — have surged in recent years.

Group-Level Impact

At the broader Lufthansa Group level, profits were weighed down by $864 million in additional fuel costs compared with the prior year. Group operating profit fell 56% to $441 million, while net income dropped nearly 90% to $141.7 million. The steep decline underscores how the cargo division's strong performance helped offset weakness elsewhere in the Group, where passenger airlines have faced pressure from elevated fuel prices, labor disputes, and softening premium leisure demand.