Premium – Lufthansa Group Fleet Review

Lufthansa, which started in business in 1926, is one of the grand old names in commercial aviation.  Today its is Europe’s largest airline group by fleet size. As we will show below, this fleet is diverse and highly complex.  To support that fleet the company as one of the premier MRO operations, known as Lufthansa Technik.  Indeed, despite denials from people in fleet planning at Lufthansa, it seems as though Technik has some influence over the group’s fleet choices.  The Lufthansa Group (LG) is a diverse and complex structure. In addition to ownership or co-ownership in 14 airline brands, the group also own Technik,  Lufthansa Systems, and Lufthansa Consulting.  It also owns SkyChefs, a flight training operation, and other related business units.  Indeed, it seems the only thing LG does not do is make aircraft.  The following chart shows how large the LG fleet has become.

The chart on the left shows actual fleet size and the chart on the right shows the breakdown in percent.  What we can see is that Lufthansa is becoming relatively smaller – in 2000 Lufthansa and Lufthansa City

were 83% of the fleet, and this dropped to 50% by 2016.  This is because of adding more new brands such as Swiss, but it also perhaps shows the group moving away from higher cost structures to lower cost structures.  All the network EU-based airlines are facing this problem because of labor costs.  It is a smart choice but also a painful and necessary one.  As we have seen Lufthansa has had a long struggle with its pilot union.

We alluded to the role Technik might have with regard to fleet selection.  In the next chart, we see that the group has almost every western OEM involved.  The obvious question is why?  How does it make sense for an airline not to seek economies of scale?  Especially if it already has a high-cost structure.  We think it only makes sense if one takes the view that providing Technik with experience in every potential model ensures it can offer services to any airline using any engine.   As an example of this, we note that the A320 fleet uses CFM engines.  But on the A321 fleet, 91% of fleet uses IAE (P&W).   Moreover, the A320neo fleet has P&W GTF engines for the first batch ordered.  The second batch ordered has CFM LEAP.  When asked about this, we were told it made sense at such volumes to spread the orders to ensure OEMs kept their prices aggressive.  We were further told that Technik has no influence on fleet choices.  Fair enough, but still it sure looks odd.  And to us only makes sense if we throw Technik into the mix.