MRO, Cargo Push Lufthansa Back Into Profit
Despite significant recovery across its core airline operations, Lufthansa relied on its MRO and cargo segments to finally return to profit in the second quarter of the year.
The group reported pre-tax profit of €340 million ($346 million) for the three months to Jun. 30, versus €979 million loss in the prior-year period.
Lufthansa Technik (LHT) contributed €112 million to group earnings before interest and tax, versus negative €120 million from the airlines. It noted that “demand for MRO and catering services is picking up again overall on the back of rising booking numbers, especially in North America.”
Lufthansa added: “Lufthansa Technik’s business in the first half of 2022 was shaped by recovery from the coronavirus crisis, increasing demand for flights, and thus increasing demand from airlines for maintenance and repair services.”
However, the recovery of maintenance demand was tempered by loss of business in Russia—where the company has Lufthansa Technik Vostok Services in Moscow—as well as supply chain challenges and higher prices for materials.
Driven by the price- and volume-related increase in the cost of materials and services and higher staff costs due to the reduction in short-time work, operating expenses climbed 40% in the quarter while revenues rose 42% to reach €1.27 billion.
Management noted that strict cost controls had helped keep the rise in expenses under control.
With the Russia crisis weighing on some external business, Lufthansa Group-linked activity grew fastest for the MRO provider, rising 75%, while third-party revenue increased 33% year on year.
Nonetheless, third-party customers are still the bulk of LHT’s business, accounting for almost three-quarters of its revenue in the recent quarter.
In fact, LHT claims to service one out of every five passenger aircraft in the global commercial fleet, and it is looking forward to benefiting through the ongoing global recovery in demand.