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Lufthansa Technik (LHT) has warned that fuel-related flight reductions could hit profits later this year, although the Iran war had little impact on its first-quarter results.
The German MRO provider reported a 12% rise in revenue for the three months ending March 31, compared with the year-ago period, while pretax earnings (EBIT) were “stable” at €158 million ($186 million).
However, profitability suffered due to materials shortages, particularly for engine maintenance, as adjusted EBIT margin dropped to 7% from 8%.
LHT also suffered from higher materials costs and unfavorable exchange rate movements.
Christian Leifeld, CFO of Lufthansa Technik, said it was monitoring closely developments in the Middle East.
“The extent to which this will affect our MRO business obviously depends largely on how long the conflict lasts and how it impacts our customers. So far, the crisis has not had a significant impact on our results. However, we are seeing the first airlines reduce their flight capacity. This, in turn, could dampen our growth and profit momentum, at least temporarily.”
In April, parent company Lufthansa said it would cut 20,000 European flights over the summer period due to rising fuel costs making them unprofitable.
Handily for LHT, it is becoming even less reliant on the parent airline group, noting that in the first quarter its share of external business climbed from 72% to 78%. Of course, it is likely that other customers will cut services too.
For now, though, LHT remains a rock within the wider group, posting the highest earnings of any Lufthansa subsidiary in the first quarter.
“Lufthansa Technik ... continues to be characterized by strong resilience with its revenues providing a sustainable stabilizing effect across our portfolio for quite some time now,” Lufthansa Group CEO Carsten Spohr said.
“Its recurring revenue streams stabilize our portfolio, and Lufthansa Technik continues to experience robust demand and takes actions to mitigate headwinds, for example, from a weak U.S. dollar, U.S. tariffs, and still ongoing supply chain burdens.”
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