FRANKFURT—After three years of talks with potential investors, Lufthansa Group has finally abandoned plans to sell a minority stake in Lufthansa Technik.
Instead, management has now committed to major investment in its MRO business in an attempt to grow the unit.
Plans to add “a further shareholder in Lufthansa Technik are no longer pursued,” Lufthansa said Nov. 30, as the company embarks on its “Ambition 2030” strategic plan.
Lufthansa had decided in early 2020, shortly after the outbreak of the coronavirus pandemic and as it was facing imminent bankruptcy, that it would sell a minority stake in its MRO arm, essentially to improve its balance sheet.
The decision was also made in the context of management’s view that the group should in the future focus more on the airline side of the business and thus sell off or at least reduce exposure to adjacent activities.
With Lufthansa long having returned to strong levels of profitability and its cash reserves more than restored, the need to sell assets has disappeared. By contrast, the group has now determined that having a large MRO unit is actually proving to be a big advantage.
“In view of the ongoing manufacturer problems—especially with engines—the strategic value of our Lufthansa Technik as an integral part of the Lufthansa Group has again increased significantly in recent months,” Lufthansa Technik’s supervisory board chairman Detlef Kayser said. “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.”
Lufthansa Technik plans to expand and modernize several of its sites globally. In particular it wants to rapidly build another facility in Europe “to meet the expected high demand and to achieve a higher level of vertical integration.”
Kayser, who is also executive board member for fleet and technology of Lufthansa Group, pointed out that the latest generation of jet engines has traded fuel efficiency for reliability. Therefore, demand for engine overhauls in particular will remain high.
Also, many older generation engines are expected to remain in service for longer as airlines continue to operate legacy fleets to backfill capacity lost to lengthy overhauls.
Lufthansa did not say where and when the additional facility will be built. Takeovers of existing MRO shops are now also a real possibility, according to Kayser.
