Lufthansa prefers to keep growth Technik for itself

Lufthansa has decided not to sell part of its MRO business unit Lufthansa Technik to a third party. After considering all options, the airline group wants to retain a 100 percent share of LHT, for which it has set out a new growth strategy. Over the past two years, Lufthansa has explored options to sell off a part of Lufthansa Technik. The German airline group said earlier this year that it was in discussions with potential buyers, but changed its view over the past months. CEO Carsten Spohr said during the Q3 earnings call in November that a decision would be taken before the end of the year. That decision is not to pursue the partial sale, but instead invest extra in LHT and benefit from the strong demand for maintenance, repair, and overhaul (MRO) capacity in the market. This has been evident this year in the financial results: Lufthansa Technik generated €4.814 billion in total revenues between January and September, up 20 percent year on year. Of this, €1.565 billion came from airlines within Lufthansa Group, the rest from third-party maintenance. Adjusted EBIT was €459 million, up 7 percent, with an EBIT margin of 9.5 percent. In the first nine months, LHT already signed 580 new contracts this year compared to 700 for the whole of 2022. Lufthansa Technik currently has some 4.500 aircraft under contract. The parent expected further growth for Q4 and close 2023 with around €6.0 in revenues compared to €5.6 billion in 2022. Engines will drive over-proportional growth Looking ahead, Lufthansa Technik sees strong growth opportunities not just in aircraft maintenance, but especially for engine overhaul. In a media statement on the Ambition 2023 strategy, the company says that engines and aircraft components will be the “over-proportional growth driver” in the coming years. LHT expects not just growing demand for MRO work on older-generation engines, but also on new-generation turbofans that suffer from reduced durability. While the OEMs are doing their best to improve durability, engines will be subject to more frequent inspections and repairs in the years to come. This is a market that Lufthansa Technik wishes to capture themselves and not share with others. LHT said last month that it is expanding MRO work for the CFM LEAP by including the -1B to its portfolio. This version powers the Boeing MAX. Lufthansa Technik already has extensive experience with the -1A that powers the Airbus A320neo family as well as with the CFM56. Through the joint venture with MTU Aero Engines in EME Aero in Poland, Lufthansa Technik also offers MRO for the Pratt & Whitney Geared Turbofan. Expanding around the world Ambition 2030 seeks to expand the core business of support for engines and aircraft. For aircraft components, the business unit plans to grow activities in the US. In Europe, existing facilities will be expanded and modernized, while a new location is planned. A spokesperson can't share in which country the new facility is planned, as this is still under evaluation. Neither can he disclose how much LHT will invest as part of the new strategy. Lufthansa Technik will also actively pursue mergers and acquisitions and invest heavily in existing and new digital solutions, like the Aviatar analytics platform. Another growth area is defense, where it wants to advance cooperation with the German Air Force in technical support and military outfitting of aircraft. Lufthansa Technik already has outfitted Airbus A350s and A321neo’s for the Air Force. Another growth market is aircraft interiors through its CelestialSTAR cabin design team that recently unveiled designs for the Boeing BBJ 777-9 Other divisions within LHT have been involved in the new cabin of the Pilatus PC-24 corporate jet and the government version of the Airbus ACJ TwoTwenty. The latest project is the Allegris First Class in the Boeing 747-8I of Lufthansa, which requires a bespoke solution as it is located in the nose section of the aircraft. The 747-8 will be a special project within LHT. As Chairman Detlef Kayser said in a media statement: “We see this as a great opportunity to further develop our MRO division strategically with an ambitious growth program and to further increase its profitability. As the first address for airlines from all over the world and an attractive employer for many thousands of people, Lufthansa Technik will continue to be an integral part of the Lufthansa Group's economic success in the future. We have big plans for Lufthansa Technik!"

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