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LHT is investing €1.2 billion in company growth over the next four years.
After posting a strong financial performance for last year, German MRO giant Lufthansa Technik has signaled it intends to invest heavily in its network over the next four years and is considering “inorganic” growth through acquisitions.
On March 12, the Hamburg-based company revealed revenue of €6.5 billion ($7 billion) in 2023, up 18% from €5.5 billion in the previous year. Its before-tax earnings increased to €628 million, up 13% from 2022.
Lufthansa Technik (LHT) CEO Soeren Stark says the strong results were delivered against a backdrop of “dramatic” material cost increases. In 2023, LHT achieved its second-best sales year ever, securing about 1,000 new contracts and 27 new customers, with a collective value of €8 billion.
Last year also clarified the future of the MRO provider’s ownership after parent company Lufthansa Group decided against divesting a stake to an outside investor, speculated to be a venture capitalist firm. Stark cited a reluctance of the would-be investor to pay the asking price for a 20-25% share, along with concerns about preserving the culture of the business and its parent company.
With LHT’s ownership confirmed in the long term, Stark revealed that the MRO plans to invest €1.2 billion over the next four years as part of its Ambition 2030 growth strategy, which it has begun implementing. As part of this, LHT is looking to grow its revenue to more than €10 billion with a double-
digit earnings margin by 2030. The goal is to generate more than €1 billion in profit ultimately, Stark says.
To achieve these lofty targets, LHT aims to accommodate greater maintenance demand with increased capacity across its network. The MRO plans to establish a new component repair facility by 2027 that will include engine component repair capabilities. A location is expected to be chosen in the next few months. It will likely be in southwestern Europe.
The repair specialist is considering acquisitions in North America and the Asia-Pacific region as well, which could progress this year as LHT looks to grow “inorganically,” Stark says. “I would assume it’s only a question of months rather than years that we will find a suitable target not only in the Americas but also in [the] Asia-Pacific,” he says.
LHT also intends to expand digital MRO platforms, such as Aviatar, while advancing its plans to start a defense maintenance business. Stark is confident about finding additional funding that may be required.
The engine maintenance segment is projected to account for about 50% of the commercial aftermarket between now and 2030. Its growth will be “of the essence,” Stark says, as new-generation models replace legacy ones. He says LHT is looking to prioritize growth, particularly for CFM International Leap 1A and 1B engine types, which are expected to comprise the largest share of the new-generation narrowbody engine segment.
LHT is seeing ongoing challenges from the Leap’s competitor, the Pratt & Whitney geared turbofan (GTF), at its Hamburg engine shop and in its Poland-based EME Aero joint venture. Throughput times on engine overhauls remain at around 150 days—originally meant to be half of that. The MRO cites shortages of parts from the OEM as a cause of the lengthened engine overall times. Stark says the GTF program, for which LHT has conducted hospital shop visits in Hamburg, represents a “pain point and an opportunity at the same time.”
He also notes an unexpected uptick in Airbus A380 maintenance. Operators had been sending the aircraft in decreasing volumes since A380 production ceased in 2019, but in the past year, several carriers have reactivated more of the very large widebodies, indicating longer-term operation than industry had anticipated.
Lately, Stark says LHT also has won base maintenance contracts and landing gear repair agreements with British Airways, Korean Air and its Luft-hansa airline affiliate.
“Given production difficulties, I think we will see the A380 for another five, six, maybe seven years, and then it will be down to the carriers to see which alternatives are available to phase out the A380,” he says of the large widebody’s fleet prospects.
Stark is doubtful about a near-term fix to supply chain issues that have dogged industry since the COVID-19 pandemic began four years ago. “There’s not much we can do about the situation,” he says. “We’ve tried to build up buffers by increasing material stock, but this can only be done if this is available on the market.”
Staff shortages also are expected to persist. Stark pointed to a high churn of staff at its LHT Philippines location, where technicians are being poached by competitors in the Middle East and North Asia. In North America, it is still reeling from the workforce exodus during the pandemic.
However, LHT has continued to grow its apprenticeship program in Europe, reporting last year that 321 apprentices had begun training at its German locations. In March, it said it has added about 2,500 new employees in 2023 and expects to open nearly 25,000 new positions this year.
The MRO provider is exploring several hiring initiatives, including a Senior Experts program targeting people of retirement age with relevant experience and a Women@LHT program to strengthen gender diversity within its workforce.
