17467902_10154743898733884_1324823482_n.jpg Lufthansa Technik

Lufthansa Technik Bullish After Reduced 2016 Profit

EBIT falls in 2016 but German MRO giant foresees long-term opportunities for business growth.

Lufthansa Technik says it remains committed to investing in new innovation projects, maintaining efficiency drives and continuing its internationalisation strategy after reporting a reduced earnings before interest and taxes (EBIT) for 2016.

The group’s EBIT amounted to €411.3 million (444.2 million) in 2016, an 8% reduction on 2015’s €454.4 million ($490.8 million). However, sales revenue rose by €45 million ($48.6 million) from €5.1 billion ($5.5 billion) to €5.2 billion ($5.6 billion). In 2016, its investment in projects and resources increased by 40%, totalling €216 million ($232.9 million).

Speaking at a press conference at its Hamburg headquarters on Mar. 22 to unveil the results of the group and its 22 affiliates, Lufthansa Technik chairman Johannes Bussmann said the company remains “fit for the next decade” despite ongoing pricing pressures and market competition.

The German MRO reported increased revenues with third-party customers, a factor it said overcompensated reduced in-house work with the Lufthansa airline group. Outside business increased by 8% to €3.5 billion, while in-house revenues dropped 11.7% - a fact Lufthansa Technik attributed to the finalization of a largescale modification program on the German airline’s long-haul fleet. Customer aircraft under contract now amount to more than 4,100 – a company record.

From a regional perspective, its largest revenue spurts were generated in Asia-Pacific, which showed a 23% year-on-year upturn from €500 million ($538.7 million) to €600 million ($646.5 million). Lufthansa Technik currently operates a facility in the Philippines, which it will expand to service the wider region from this year.

Asia-Pacific growth was followed by North America, which expanded by 14% last year to €900 million ($969.3 million). However, despite being Lufthansa Technik’s biggest sales region, the Europe, Middle East and Africa segment declined by 4%.

According to Bussman, Lufthansa Technik will continue to look beyond its Hamburg base and by establishing presences in global destinations. Its component services arm will add a facility in Hong Kong, while its landing gear repair division will relocate from Hamburg to London.

New component facilities are being formalized in London, Hong Kong, the U.S., Dusseldorf and Munich while this year will see the company push ahead with two new regional divisions confirmed in 2016: Lufthansa Technik Component Services Asia Pacific and Lufthansa Technik Middle East.

Focus on innovation projects will also continue, with Lufthansa Technik hoping to explore new technologies and products, mastering new materials and automated repair processes. Digitalization was identified by Bussmann as a key area, with a Digital Fleet Solutions division established in Hamburg last year.

“Data will determine the future of our business to a large degree,” Bussman said. “New technologies means a deluge of data and the value lies in sorting this to analyze and transform data into sensible maintenance programs.”

Bussmann added that the maintenance provider hopes to drive efficiency through digital initiatives. Cost reduction targets remain in place up to 2018, with Lufthansa Technik looking to achieve €70 million ($75.5 million) of permanent savings by then. Restructuring drives also include plans for reducing man power in its engine overhaul network by around 700 jobs – taking its workforce in the division from 2,000 employees to 1,300.

The Hamburg-headquartered company also plans to explore more joint venture opportunities in future. In the past year alone, it has established partnerships with GE Aviation on Xeos, a GE9X and GEnx-2B-focused engine shop based in Poland, and a Pratt & Whitney geared turbofan engine repair joint venture with fellow German company MTU Aero Engines.

Bussman confirmed to MRO Network that Lufthansa Technik is currently reviewing potential sites with MTU for the JV, with three possible destinations identified within Europe and another located outside of the continent.

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