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Lufthansa Technik targets stable earnings amid industry challenges

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Lufthansa Technik targets stable earnings amid industry challenges
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Stephanie Painter International Sales | AviationPros

Lufthansa Technik had a mixed economic picture after the first half of the year. While the global market leader in aircraft maintenance, repair, and overhaul (MRO) once again achieved a record result for the period from January to the end of June thanks to a very strong second quarter, the company is also experiencing strong pressure on the aviation industry as a whole.

"Of course we are always pleased to see record figures," says Dr. William Willms, CFO of Lufthansa Technik. "But part of the truth is that non-operational special factors and one-off effects were significant contributors. We still expect to deliver results at the previous year's level for the year as a whole." By 2023, Lufthansa Technik had achieved a total Adjusted EBIT of 628 million euros.

After the first half of 2024, earnings now amount to 319 million euros. Lufthansa Technik saw a further 9.6 percent increase compared to the previous record figure of 291 million euros from the previous year - despite strike costs that significantly impacted the first quarter. Revenue at the end of June amounted to 3.6 billion euros (previous year: 3.1 billion euros, +16.5%). The adjusted EBIT margin dropped accordingly, from 9.3% to 8.8%. This trend must be reversed in order to achieve the goal of the "Ambition 2030" corporate strategy, namely a sustained double-digit margin.

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"We are still on course to grow further from a strong position," says William Willms. "However, it won't be a walk in the park. We are negatively impacted by disproportionately high cost increases and ongoing difficulties in material supply across the industry." Both of Lufthansa Technik's traditional core segments, Engine and Aircraft Component Services, are feeling these effects in particular. "On the positive side, there is definitely no lack of demand," says William Willms. The company concluded some 320 new contracts in the first half of the year.

Digital activities are also developing well with regard to expanding their product portfolio, customer base, and revenue. The AMOS software developed by Lufthansa Technik subsidiary Swiss-AS is used extensively by airlines around the world - and those who are not yet using AMOS are still very interested in it. AVIATAR, a platform for airline operations with various digital products and services, continues its positive trend with contracts now including nearly 4,000 aircraft from paying customers.

The expansion of their defense business is attracting significant attention. Lufthansa Technik has been servicing aircraft for Germany's government fleet for more than 60 years; recently handing over a third modern Airbus A350 government aircraft to Germany's air force last quarter should help maintain their key player status in MRO while contributing technical expertise towards security efforts within Germany and among partners.

An extended cooperation agreement was signed between Lufthansa Technik and US-based Lockheed Martin Group just days ago.

Recruitment measures continue proving effective: employee numbers surpassed over 23 thousand by June-end compared against last year's same-time figure at around twenty-one thousand five hundred staff members while continuing strong commitment towards promoting young talent seen through early August training commencement involving over three hundred youth at German locations.

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