Lufthansa Technik posts record EBIT and €9.6bn of new contracts

The FY22 results show revenues of €5.6 billion (up 39% on FT21’s Euro 4.0 billion), representing the third-best revenue figure in the company’s history. The adjusted EBIT set a new record at €511 million (up 41% from FY21’s €362 million), with EBIT being €456 million (€163 million in FY21).

“The strong dynamics of the aviation industry also shaped Lufthansa Technik’s financial year. This has been another year that has demanded everything of us. While we have not quite returned to our former dimensions, we will continue to grow from a position of strength,” said Soeren Stark, CEO of Lufthansa Technik, discussing the results. “I would like to thank all our employees for their special commitment and their willingness to constantly change and improve our company.”

LHT says the positive results were achieved in part thanks to the systematic implementation of the RISE development programme, which saw measures introduced to help the company organise itself more efficiently, with simplified processes and reduced expenses for the long term. As with many companies in aviation and other sectors, LHT has had to overcome several operational challenges since Covid-19, for example in personnel and supply chains, but it reports it has succeeded in significantly ramping up operations again.

€9.6 billion of new contracts

LHT is confident in further growth activity, having signed 706 new contracts worth a total of €9.6 billion last year, including deals with 28 new customers. As with revenue, the EMEA region (Europe, Middle East and Africa) accounted for almost two-thirds of this new business – more than twice as much as from the Americas region and around five-times as much as the APAC region (Asia Pacific), though the company foresees “major opportunities” for future growth in APAC.

“Our success remains founded on the partnerships with our customers. And these customers, who we often accommodated in partnership during the Corona crisis despite our own challenges, are now returning the favour with new business and contract renewals,” Stark stated. “We were not only servicing more than 800 customers by the end of 2022, but also again more than 4,200 aircraft, even though we had previously removed hundreds from our order books due to the discontinued business in Russia.”

A notable example from FY2022 is the component contracts signed with three ultra-low-cost carriers in the Indigo Partners group, under which Lufthansa Technik will service 1,000 Airbus A320 family aircraft over the next 10 years alone.

Contracts with the Lufthansa Group’s airlines accounted for roughly one-third of new business last year; two-thirds came from customers outside the Group.

Ongoing personnel and supply chain challenges

Lufthansa Technik has been tackling what it calls “the still strained” global supply chains in some areas, as well as a continuing shortage of skilled personnel, which it regards as the greatest current challenge in coping with “enormous customer demand”.

Lufthansa Technik is offering vocational training to attract new hires

One initiative to tackle the workforce shortfall was a recruitment offensive launched in the second half of 2022, which the company reports has already gone some way toward countering the personnel shortage. In Germany alone, for example, in 2022 LHT succeeded in filling more than 2,100 vacancies, both internally and externally. The company plans to hire around 2,000 new employees in Germany this year, and a total of around 4,000 worldwide.

LHT’s recruitment drive will also be supported by Aviationeers (a portmanteau of ‘aviation’ and ‘pioneers’), a new employer brand which will be positioned across a wide range of LHT’s business channels and will also support the increasingly international recruitment of specialists.

LHT is also working to make itself more attractive as an employer, through measures such as the resumption of wage increases and profit-sharing schemes (these were suspended during the pandemic). Innovative solutions for work-life balance such as converting bonus payments into time off are also part of the large-scale package of measures.

Sustainability: Technology moving forward

The 2022 financial year again saw themes of digitisation and sustainability: for Lufthansa Technik, it became the only MRO company to offer customers its own range of solutions for reducing their ecological footprint. For example, AeroSHARK, developed jointly with BASF. In December, the European Union Aviation Safety Agency (EASA) issued a Supplemental Type Certificate for the sharkskin modification, which will enable Lufthansa Technik to make every Boeing 777-300ER and 777F about 1% more fuel-efficient and lower in emissions. The Boeing 777 fleets of the launch customers SWISS and Lufthansa Cargo are currently being converted at full capacity, with eight freighters and passenger aircraft fitted with AeroSHARK already in service.

The AeroSHARK sharkskin modification being applied to a SWISS aircraft

LHT’s Hydrogen Aviation Lab in Hamburg is looking further to the future. This field laboratory, based on an Airbus A320, funded by the Hanseatic City of Hamburg, was presented in October 2022. The aircraft is currently being fitted with various technical installations that will allow research into a wide range of maintenance and ground processes for future commercial aircraft powered by hydrogen. These activities are set to start this summer.

LHT’s hydrogen-powered A320 field laboratory

Acquisitions lead to a digital tech ops ecosystem

LHT says it has taken an important step forward In digitalising the MRO industry, through the acquisition of Swiss Aviation Software (Swiss-AS) and its widely used AMOS MRO software, as well as the takeover of Lufthansa Industry Solutions (LHIND), which will allow the company to further expand its existing digital offer. The gained capabilities of these companies will supplement AVIATAR, an independent digital solution for technical fleet support, and will be expanded into a Digital Tech Ops Ecosystem. The entire value chain of aircraft technical support can thus be mapped digitally in the future.

Lufthansa Technik’s digital tech ops ecosystem

A further building block is the digitisation of internal production and administrative processes throughout the Lufthansa Technik Group. Under the company’s ‘Digitize the Core’ programme, a triple-digit number of transformation projects have already been initiated.

One of the many technological building blocks for this is the company’s own 5G mobile network, which continues to grow. Following the connection of several production shops in engine maintenance, one of the projects currently underway is the 5G connectivity coverage of the dozens of hectares of apron areas at the company’s Hamburg base.

AVIATARis beinng expanded into LHT’s Digital Tech Ops Ecosystem

Investing in digital workshops and product portfolio

LHT is also significantly expanding its investment activities in support of its growth strategy. While the past fiscal year saw only a slight increase of 4% in total investment of €99 million, a much higher level of capital expenditure is planned for the coming years. A total of €65 million alone 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.

Until then, new VIP cabin interior workshops with an adjoining paint centre will also be built at the same location, which will likewise involve an investment in the high-double-digit million Euro range.

LHT’s VIP cabin interior workshop in Hamburg

There will be further investments in the high-double-digit million Euro range in the expansion of overhaul capacities for the CFM LEAP engine type and in demand-driven smart repair solutions (Mobile Engine Services or MES) by 2026. After last year’s inauguration of a new, much larger repair station outside Dublin for these services, which have recently seen ever increasing demand, the MES network will soon be expanded to include a sixth international location.

Investments are also being made in aircraft maintenance. Preparations are underway at Lufthansa Technik Philippines for a third overhaul line for the Airbus A380. This investment is in response to a recent sharp increase in demand for MRO services on the superjumbo, which various airlines are now reactivating. The third line is planned to be operational in the second half of 2023.

Celebrations as a Lufthansa A380 arrives at LHT’s Manila site for maintenance

Comprehensive digitisation measures will continue to account for an enormous share of investments in the future. A high-double-digit million Euro figure alone has been earmarked for the above-mentioned ‘Digitize the Core’ programme up to the end of 2026.

Outlook: Pre-crisis market level to be exceeded in 2023

LHT has shared how it predicts the MRO market will develop. The ongoing steep upward trend in air travel will also continue to fuel the demand for maintenance services. Lufthansa Technik therefore expects the global MRO market not only to reach its pre-pandemic level as early as this year, with a total volume of around Euros 96 billion, but then to surpass it. The forecast market volume will be distributed evenly across the three sales regions Americas, EMEA and APAC. EMEA will remain the company’s core market.

The company’s goal is to expand its presence in the other two regions. “There’s no reason why we shouldn’t have the same presence in the Americas and APAC as we do in EMEA,” Stark says. “Regardless of regions, I’m happy to say: We are well prepared for a market that is as attractive again now as it was before the crisis.”

Over the next few years, Lufthansa Technik says its “classic” MRO business fields will be subject to various industry-cyclical developments, with mainly positive effects. The Aircraft Component Services division is expected to continue its recovery. A positive trend in demand is also expected in the Aircraft Maintenance Services division, but that will also be accompanied by rising prices due to the global shortage of hangar capacities for major checks. In the Engine Services division, Lufthansa Technik anticipates significant catch-up effects during 2023 and 2024. In addition, many new engines will then be due for their first major check.

Lufthansa Technik unveiling its latest work for the German Federal Ministry of Defence

Lufthansa Technik continues to experience high demand for cabin completions and maintenance for VIP, government and special mission aircraft. The company is looking to further increase its share of the defence market in particular. After having successfully entered the CH-47 Chinook (heavy transport helicopter) and P-8A Poseidon (maritime patrol aircraft) military programs through letters of intent with strategic partners in the past fiscal year, Lufthansa Technik hopes for further positive developments in this area. Central to this remains the close cooperation with the Special Air Mission Wing of the German Federal Ministry of Defence. Here, upcoming milestones for example encompass the additional MedEvac conversion (medical evacuation) of two Airbus A321LR troop transports handed over the past year.

Lufthansa Technik’s complete Annual Report is available at this link.