LHT warns of tough MRO market

Lufthansa Technik Group recorded slight growth of 1.9 percent in sales revenue in 2011to €4.1 billion (US$5.4 billion), but earnings before tax (EBT) declined by 14.5 percent to €241 million with an operating margin of 6.7 percent as the MRO provider warned of toughening market conditions.

23rd Mar 2012


Lufthansa Technik Group recorded slight growth of 1.9 percent in sales revenue in 2011to €4.1 billion (US$5.4 billion), but earnings before tax (EBT) declined by 14.5 percent to €241 million with an operating margin of 6.7 percent as the MRO provider warned of toughening market conditions. Operating expenses rose by 2.7 percent to €4.1 billion in line with revenue developments.
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The result was much helped by large modification programs undertaken by Lufthansa and new contracts with Lufthansa Group companies (up 8.7 percent). In contrast, revenues from business with external customers sank 2.9 percent, reducing the share of external business in total revenues to 56.3 percent.

Chairman, August Wilhelm Henningsen says that in the face of various challenges "there is a certain reserve among customers when it comes to concluding new contracts." He adds, "With an annual growth rate of approximately 4 percent, the market in technical services for aviation companies continues to swell, but the decline in revenues in some markets and the valuation of the dollar have both slowed growth in customer business."

He adds, "Then, too, aircraft and engine manufacturers are pushing onto the MRO market in ever greater numbers, and the combination of these new capacities and the improved quality of competitor services has resulted in additional price pressure on the MRO industry."

Middle East and North Africa's share of revenues fell from 10% to 7% in the wake of the unrest in that region. Asia, maintained its 13% and the company says: "This will continue to increase in the years to come. In addition, a strengthened regional commitment in Asia, including the expansion of Lufthansa Technik Shenzhen and the establishment of a material warehouse in Singapore, will ensure solid participation for Lufthansa Technik in the growth of the Asian MRO market."

Lufthansa Technic says: "Owing to the growth in aircraft fleets around the world, the MRO industry expects medium-term growth of approximately 4 percent per year. Lufthansa Technik’s portfolio will enjoy even higher growth through its concentration on modern aircraft types. However, this increase in demand will be met by a significantly higher availability of services, and in this environment only MRO operations with competitive cost positions and high-value, innovative product portfolios will continue to grow profitably. In addition, there is the short-term risk that the worsening economic situation around the world will also have an effect on the demand for MRO services."

The company says it, "considers it particularly important to be present in the markets with the greatest growth dynamic – Asia and South America – and to continue to grow successfully in these regions. With its extensive product spectrum and worldwide presence, Lufthansa Technik was roughly able to maintain its position in fiscal year 2011 as the world’s market leader, with a market share of 14 percent."

On the basis of current economic forecasts, Lufthansa Technik expects that during fiscal years 2012 and 2013 revenues will rise moderately and operating results will increase once again.

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