MRO giant Lufthansa Technik (LHT), saw sales rise 10% to reach a record €5.9 billion ($6.6 billion) in 2018, although like many maintenance businesses the German company faces ongoing margin pressures.
While pre-tax (EBIT) profit of €424 million was slightly above 2017’s result, LHT’s pre-tax margin has declined in each of the past four years, from 8.9% in 2015 to 7.2% last year.
Operating expenses in 2018 rose 8%, partly due to an 11% increase in the cost of materials and services.
“To safeguard the success and continued viability of Lufthansa Technik, ongoing projects are implemented in all operating segments and at the central level to improve the costs and efficiency of the Group and to increase its long-term earnings,” Lufthansa stated this week.
These projects include lowering throughput and logistics times in component maintenance, although some of the company’s best performance was in that segment, nonetheless. Regionally, LHT reported “strong growth” in America and “solid” performance in Europe.
Matters were less rosy in engine maintenance, where the company “suffered from capacity bottlenecks and unusually long throughput times because of market-wide shortages of spare parts.”
Its parent airline may have felt the effects of this more than most since LHT reported increased engine work for Lufthansa in 2018.
Altogether, LHT’s share of total revenues from third-parties (i.e. not from the Lufthansa Group) declined from 66% in 2017 to 64% in 2018.
The company is preparing for ongoing strong maintenance demand by adding capacity across its global operations. In June, it opened a new widebody tail dock at its maintenance site in Munich, while in a few weeks Lufthansa Technik Malta should receive its first A350 for overhaul, having won approval for the work last year.
In addition, the Lufthansa Technik Puerto Rico subsidiary was approved for the maintenance of the A320neo by U.S. regulator the FAA.