Europe’s MRO Giants Boost Airline Revenues In Q2
This week cast further light on the recovering fortunes of some of Europe’s largest airline-affiliated MRO providers as they revealed their results for the second quarter of 2022.
At a time of gradual, if unspectacular recovery levels in Europe, the Q2 revenues provide further guidance about the current shape of the commercial aftermarket—not just on the continent, but also beyond.
Airline affiliated MROs, which typically have a balanced mix of in-house carrier and third-party maintenance work, have experienced mixed fortunes over the past two and a half years.
While suffering from the downturn in commercial flights and the loss of in-house revenues this brings, they have also provided something of a lifeline to their airline parents in terms of much needed MRO revenues. Many have also homed in on maintenance services for the buoyant cargo segment, which is cited with regularity by airlines as an increasingly valuable revenue driver.
Among the most significant contributors to an airline group is Germany’s Lufthansa Technik (LHT). The company, still subject to ongoing speculation about being spun off by the end of 2022 from Lufthansa Group, helped return its airline parent to profit for the three months up to June 30, 2022.
The airline group reported a pre-tax profit of €340 million ($346 million), a significant turnaround from the €979 million loss it posted in the same period last year.
Lufthansa highlighted the MRO business’s contribution due to demand picking up for MRO services as COVID-19 restrictions continue to lift and demand for cross-border flying picks up. In Q2, LHT contributed €112 million ($114 million) to the group’s earnings before interest and tax, in contrast to the -€120 million attributed to Lufthansa’s airline network.
A similar picture of recovery is evident at French-Dutch airline group Air France-KLM, which returned to profit in the Q2 of this year.
Its maintenance unit, Air France Industries-KLM Engineering & Maintenance (AFI KLM E&M), also returned to profit in Q2 to the tune of €57 million ($58 million), with revenues up 35% year-on-year to €911 million ($928.5 million).
Crucially, third party services played an important role, with 38% of these revenues emanated from work for customers outside of the Air France-KLM Group.
Also worth noting is the maintenance business of Spanish airline Iberia, part of the IAG Group network with the likes of British Airways and Aer Lingus.
Madrid-headquartered Iberia Maintenance contributed to its parent airline group’s non-core revenues in the first half of 2022, mostly through third-party MRO services. Iberia reported non-core revenues of €904 million ($921 million) for the six months to June 30.
Non-core revenues are now higher than pre-COVID levels and have trebled since the same period last year.
The narrowbody aircraft segment driving much of the recovery seen over the past 12 months was cited in the results, with approximately 38 narrowbodies returned to service since last October, according to Iberia.