By Ian Harbison
While Lufthansa Technik has got over the worst of the effects of the pandemic, it still has a way to go. That was the view of CEO Soeren Stark as he announced the 2022 annual results on 7 March.
Headline figures were record-breaking revenues of €5.6 billion for Lufthansa Technik AG and its fully consolidated companies, up 41% from €362 million the previous year; adjusted EBIT with a new record at €511 million (up 39% from €4.0 billion); and 706 contracts concluded with new business worth €9.6 billion, including 28 new customers By the end of 2022, the company was looking after more than 4,200 aircraft for more than 800 customers, even with the loss of contracts with Russian operators worth €240 million covering 450 aircraft that were cancelled in the wake of the invasion of Ukraine.
Europe, Middle East and Africa (EMEA) accounted for €6.127 million of new business, with €2.373 million from the Americas region and just €1.060 million Asia Pacific, where the company sees major opportunities for future growth. In fact, it sees the global MRO market exceeding its pre-pandemic level as early as this year, with a total volume of around €96 billion and distributed evenly across the three sales regions.
The improvements came from increased flying from a recovering airline industry, which meant increased maintenance requirements and an advantageous US dollar exchange rate. Internally, the RISE cost cutting program saw the disposal of Lufthansa Technik Shannon to Atlantic Aviation Group; the disposal of Lufthansa Technik Brussels and LTMI to Sabena Aerospace; the transfer of line maintenance in Munich to the parent airline; and the closure of a wheels and brakes shop in Frankfurt.
However, the effect of the pandemic meant that around 20% of the workforce were lost through disposals and redundancies. Those staff shortages, and those suffered by suppliers, have slowed down work, a situation that is likely to last until 2024. A massive recruitment drive is now under way, including the rehiring of experienced former employees. In Germany alone, it filled more than 2,100 vacancies last year, both internally and externally, and plans to hire around 2,000 new employees in Germany this year, and a total of around 4,000 worldwide. New employees will become ‘Aviationeers’ (a combination of ‘Aviation’ and ‘Pioneers’), covering a wide range of skills and international specialists. In addition, compensation increases and profit-sharing schemes are being resumed after the crisis, as well as work-life balance solutions such as converting bonus payments into time off. Some €50 million has been allocated for training and qualifications overall.
Another financial aftershock from the pandemic is that the company is looking to secure a minority shareholder. Discussions are being held with interested parties with a decision expected by Q3 at the latest. Stark hinted that bankruptcy had been looming during the crisis. However, with improved figures, the company is significantly expanding its investment activities. While the past fiscal year saw only a slight increase of 4% in total investment to €99 million, a much higher level of capital expenditure is planned for the coming years. A total of €65 million is earmarked for the continued construction of a hydraulics workshop at the Hamburg site, which was suspended during the pandemic and is now scheduled for completion by 2025. With continuing high demand for cabin completions and maintenance for VIP aircraft, a ‘high-double-digit million’ euro investment will be made in new interior workshops in Hamburg, along with an adjoining paint center.
The company is also looking to further increase its share of what Stark called the ‘gray aircraft market, having signed letters of intent with strategic partners in the past fiscal year on the Boeing CH-47 Chinook and P-8A Poseidon. Close cooperation with the Special Air Mission Wing of the German Federal Ministry of Defense is extremely important, with medevac conversions of two Airbus A321LR handed over last year and a third A350 VIP aircraft delivered shortly after the results announcement. The company is also working with Bombardier on three Global 6000 aircraft for the PEGASUS program for the German armed forces. The company will integrate the Kalætron Integral SIGINT system developed by project leader HENSOLDT.
Over the next few years, the Aircraft Component Services division is expected to continue its recovery and a positive trend in demand is also expected in the Aircraft Maintenance Services division, which will also be accompanied by rising prices due to the global shortage of hangar capacities for major checks. In fact, to the company’s surprise, A380 demand will see a third overhaul line established at Lufthansa Technik Philippines. In the Engine Services division, Lufthansa Technik anticipates significant catchup effects from the crisis period in 2023 and 2024, while the first shop visits will become due for the LEAP-1A and LEAP-1B engines and N3, the joint venture with Rolls-Royce, has added the Trent 1000 TEN engine for the Boeing 787.