Lufthansa Technik Reports Significantly Improved Result Even with Stagnating Revenues

lufthansa1Lufthansa Technik Group was able to increase its result in 2012 in spite of a decline in revenues to 4.01 billion euros as announced at their annual press meeting in Hamburg on March 19, 2013. The annual report of the 23 consolidated Lufthansa Technik Group companies showed an operating result of 318 million euros.

“Considering the strained situation of many airlines, especially in Europe, the overcapacity in the maintenance, repair and overhaul (MRO) market and heavy pressure on price levels, Lufthansa Technik Group has developed very positively,” said August Wilhelm Henningsen, Chairman of the Executive Board of Lufthansa Technik. Highlights of the year included the successful entry into service of the Boeing 747-8 at Lufthansa and the start of technical services for the Boeing 787.

“We were able to achieve this good result because many of our cost reduction measures are taking effect and we have been able to reduce the work required in many processes. In addition, a large number of new contracts contributed to our result in 2012,” explained Henningsen. Further measures to reduce costs and increase revenues have been introduced as part of the Lufthansa Group program SCORE, including restructuring programs in their larger production areas as well as targeted sales activities and administration efficiencies.

“We have already implemented many innovations in production and optimized processes there, and we are now striving for similar improvements in administration.” This area of Lufthansa Technik was analyzed by more than 200 experts from across the company with the objective of greater efficiency in all functions that are not directly productive. LHT says the reorganization of its structure and processes will result in the elimination of up to 650 jobs by 2015. Approximately 400 of those jobs will be eliminated in Hamburg. “The measures we have taken as part of the SCORE program have already had a positive influence on the fiscal year 2012 result,” said Dr. Peter Jansen, Chief Executive Finance of Lufthansa Technik. “However, we are dealing with rising personnel and material expenses as well as high price and cost pressures in the maintenance, repair and overhaul (MRO) market. Our business risks also include an economic situation in Europe that continues to be difficult, and overcapacity in the MRO market. But with this good result, we have created a financial foundation for the further restructuring and growth of the Lufthansa Technik Group, with the foremost objective of continuing to improve our competitiveness.”

The development of the international Lufthansa Technik network in 2012 was marked by both portfolio streamlining and capacity expansions. LTQ Engineering in Melbourne, Australia was closed and Lufthansa Technik Switzerland in Basel will discontinue operations in April due to reduced demand for line maintenance services. In contrast, Lufthansa Technik Philippines is now offering comprehensive A380 services in its new widebody hangar in Manila and Lufthansa Technik Sofia has doubled its capacity to five overhaul lines through a new complex of hangars.

lufthansa2Currently Lufthansa Technik has more than 730 customers and encompassing 2,200 aircraft around the world. In 2012 the company says it won 45 new customers and concluded more than 500 new contracts. The total sales volume in 2012 from those contracts alone amounted to 480 million euros Jansen said at the event.   Lufthansa Technik enjoys a solid market position, according to Henningsen. “We will continue our course for growth, and set ourselves apart in the market through our quality, the strength of our innovations and our worldwide presence. And this market position will be solidified and expanded even more through the successful implementation of the SCORE measures. That is why Lufthansa Technik will emerge from the consolidation in the airline and MRO markets even stronger than it is today.”

New Joint Venture Announced
Also announced at the event in Hamburg on March 19 is a joint venture with McKinsey & Company. Lufthansa Technik will now offer consulting services for the optimization of complex processes and the operative implementation of transformation programs within the framework of a new association with the consulting firm McKinsey & Company.

The joint venture will be headquartered in Hamburg and is scheduled to begin its work during the first half of 2013 and will offer consultancy in the efficient design of complex processes in the maintenance and repair of aircraft for international customers in the airline industry and other sectors. Lufthansa Technik says it feels they can springboard their work in successfully structuring processes in its own global network for maximum streamlining and efficiency, particularly through lean management projects to help others both in and outside of the aviation industry. The company says it has long supported several of its customers in improving their own production and service processes and is ready to parlay this knowledge to help others.

New Construction in Hamburg
Additionally Lufthansa Technik announced that starting in February it began building work costing 20 million euros in the eastern section of the technical base to develop workshops, offices and facilities for the Central Materials Technology department. As a result, this high-tech area of the company will be concentrated in a single location. Construction work is expected to be completed in the spring of 2014.

The new six-story complex will provide 6,000 square meters of workshop floor space on two levels, with the Central Materials Technology department on the second floor. The four floors above this, totaling 8,000 square meters of gross floor space, will be used for offices. The building will benefit from efficient insulation and the use of rainwater and parts of it will have a green roof. “With this new building, rather than going for expensive renovation work and retaining inefficient structures, we are investing on a sustainable basis and financing our future,” said Ralf Aljes, head of Facility Management at Lufthansa Technik. The building will use the existing plot ten times more intensively than the one- to two-story old buildings, which have already been demolished.


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