FLUG REVUE May 2003: Lufthansa Technik expands worldwide

LUFTHANSA TECHNIK – GLOBAL MRO PROVIDER

By Matthias Gründer

Henningsen

For anyone in need of technical support for their aircraft, Lufthansa Technik AG (LHT) is the place to turn. Support can mean full coverage in a hangar or maintenance on-site, equipment supply, engine support or maintenance and overhaul work on the avionics, in whole or in part – as the customer prefers. The wide-ranging service spectrum offered by the globe-spanning LHT network covers some 370 customers and is tailored precisely to their individual needs.

The growing Lufthansa Technik group no longer consists solely of maintenance providers such as Shannon Aerospace in Ireland (100 percent under LHT ownership), AMECO Peking (40 percent), Lufthansa Technik Budapest (85 percent) or Lufthansa Technik Philippines (51 percent). Today the network consists of specialists who offer top-class services to airlines around the world, generating annual revenues of 1.5 billion Euros through 37 affiliates and employing an international workforce of 11,000, with the same number again employed in Germany. Between them they contribute about one-quarter of the total turnover of the Lufthansa group and make a significant contribution to group profits.

Such partnerships and joint ventures play an ever more important role in the expansion of this group of affiliated companies: for example, together with United Airlines LHT offers technical support for the Boeing 777, with SAS Component it has a teaming agreement on the repair of Boeing 737 equipment, Hawker in the USA is a landing gear specialist, in Brussels qualified staff maintain short haul aircraft, in Malta C checks are offered for the Boeing 737 and Airbus A320, and in Chenzhen near Hong Kong high-value components are overhauled and repaired. This is just the tip of the iceberg. Moreover, new partners are being added all the time despite the difficult market situation, in line with LHT's strategy of moving to the customer and expanding continuously.

Like everyone else, the company is having to increase its productivity, but the same high quality standards apply everywhere, and it is on their account that the customers keep coming. The only problem is that sometimes customers are reluctant to pay the prices asked, and this is where the flexibility of LHT comes in: if the service offered in Hamburg is too expensive for an airline due to the high incidental wage costs in Germany, it is directed to another location – offering the same quality, please note – in a different location, where the highly skilled personnel and technical facilities are available but without Germany's high labour costs, so that the same work can be carried out at lower cost.

Accordingly, LHT monitors attentively three aspects of the market: what is the competition situation like with regard to aircraft maintenance and repair? what new materials and equipment are coming onto the market and how can they be rapidly integrated into production? and where are there new opportunities for participation that would enable the global network to be expanded still further?

The selection of locations naturally depends primarily on the available local pool of labour. If the local workforce is not sufficiently qualified, then help is provided through LHT's Lufthansa Technical Training subsidiary, which will train the necessary specialists, not necessarily in Hamburg. A dedicated technical school already exists in Peking, so that the basic training can be given either in Hamburg or in the subsidiary, in the form of either basic or on-the-job training.

For the customer this single-minded internationalisation means greater proximity, local contact with competent points of contact, greater flexibility and short response times. Expansion of logistics centres means that parts urgently needed can be taken where they are needed in a matter of hours.

Experience indicates that many maintenance and repair jobs are placed in the local region, as this saves time and money. For this reason LHT has set up a new paintshop in Ireland, in the Philippines it has created a second Asian foothold along with Peking, and in North America the acquisition of BizJet International has significantly boosted its involvement in the area of business jet maintenance. Moreover, a financial stake in the spare parts manufacturer HEICO Aerospace in Florida provides a vehicle for participating in the growth of the American maintenance market.

This strategy is naturally strengthening the company's competitive position, as LHT can operate like a regional provider in all its bases. These location advantages in turn have a favourable effect on the domestic cost structure as well. Time-consuming and material-intensive activities are migrated, while technology-intensive activities are concentrated in the German operations.

As well as Hamburg, these are AERO in Alzey, which concentrates mainly on the overhaul of turboprops and small jet engines, the ground handling services specialist LEOS in Frankfurt, Condor/Cargo Technik in Frankfurt, LHT Logistik in Hamburg for sophisticated supply services, Lufthansa Bombardier Aviation Services in Berlin for business jet support and LHT Intercoat in Kaltenkirchen for the repair of damaged or worn-out aircraft components.

So has LHT escaped the slump in demand that has beset the entire industry? No, even LHT is finding market conditions difficult and the company is feeling the effects of the crisis. Over the last year it has experienced a 5 percent drop in orders. Yet, thanks to its flexible strategy, the company is still making a healthy profit.

From FLUG REVUE 5/2003

Last updated 7 April 2003

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