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Airline-Focused Parent Keeps Faith in Lufthansa Technik

MRO business was the highlight of the airline group's recent first quarter results.

Falling passenger yields in Europe and elsewhere meant a rocky first quarter for Lufthansa Group airlines, with Deutsche Lufthansa, SWISS, Austrian and Eurowings all posting lower profits or bigger losses than the prior-year quarter.

Lufthansa Technik provided the only real bright spot, with its operating profit climbing 17% to €125 million ($139 million) – versus a €336 million loss for the group as a whole.

Lufthansa Technik’s sales were also up 17% while operating margin was almost unchanged at 7.2%, and the MRO provider increased the number of aircraft it supports under exclusive contracts to 5,185.

Commenting on the improved performance Lufthansa chief financial officer Ulrik Svensson said it was “mainly to do with an improvement in the engine division where throughput was up markedly."

That remark is somewhat surprising given the global trend for engine overhaul delays due to parts shortage, but it could just be that overall engine maintenance demand is higher than last year, or that parts shortages were worse last year.

More interesting was an analyst question about whether Lufthansa would pursue further divestitures following its decision to sell catering arm LSG.

The company now defines itself as an ‘airline’ rather than ‘aviation’ group and Svensson acknowledged that “gradually just by the size of the airlines growing much more than the other business, it is going to be more an airline."

He also confirmed that several Lufthansa Technik functions would move into Deutsche Lufthansa’s responsibility, “which is already how it exists in most airlines in the world, including SWISS."

Svensson cited benefits such as better transparency and fleet planning, all of which might suggest the company is distancing itself from Lufthansa Technik.

However, he also scotched any speculation that Lufthansa Technik might be next on the block, saying: “We indeed are intending to keep that business going forward.”

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