Lufthansa Technik A Bright Spot for Group But Faces Pressure

Lufthansa Technik revenue was down 30% for the first half of the year, and down 57% in the second quarter.
Credit: Lufthansa Technik

Lufthansa has blamed the “almost complete grounding of [the] global commercial aircraft fleet,” for losses at its maintenance arm in the second quarter.

Lufthansa Technik swung to €126 million ($149 million) operating (EBIT) loss for the three months to 30 June, reversing a €112 million profit in the prior-year period.

Nonetheless, Deutsche Lufthansa chairman Carsten Spohr noted that Lufthansa Technik and Lufthansa Cargo had helped mitigate the losses of the group’s moribund airline businesses in the first half of the year.

“We were able to counteract the effects of the coronavirus pandemic in the first half of the year with strict cost management as well as with the revenues from Lufthansa Technik and Lufthansa Cargo.”

That said, Lufthansa Technik revenue was still down 30% for the first half of the year, and down 57% in the second quarter.

Write-downs of goodwill at the technical arm’s joint ventures were also a contributor to €219 million of goodwill impairment for the group in the quarter.

Lufthansa also wrote down the value of its receivables, although it said this was offset by a fall in the cost of materials and of staff costs.

Lufthansa noted that “flight hours planned but not carried out and growing pressure on airlines are increasingly having an impact on Lufthansa Technik.”

Furthermore, Lufthansa does not expect global passenger demand to return to 2019 levels until 2024 “at the earliest.”

One casualty of all this--at least in the short term--may be the company’s drive towards automation, with the second-quarter results showing a 73% fall in Lufthansa Technik’s capital expenditure, to €22 million, from the year-before period.

Still, it has some leeway in this respect: few MRO companies could match the German giant’s technology development before the crisis and even fewer will have the resources to play catch-up.

Alex Derber

Alex Derber, a UK-based aviation journalist, is editor of the Engine Yearbook and a contributor to Aviation Week and Inside MRO.