LHT aims to lift earnings by €110 million by 2015

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Lufthansa Technik (LHT) has detailed some of its cost-cutting targets under its parent group's 'Score' efficiency programme.

The German MRO provider aims to raise its annual earnings by €110 million ($142 million) by 2015, chief executive August Wilhelm Henningsen said during the company's financial results in Hamburg on 19 March.

In 2012 - the first year of Lufthansa Group's 'Score' programme - LHT registered sales of around €4 billion, marking an €80 million reduction on the previous year. However, its operating profit was up nearly 24% to €318 million.

Henningsen says that LHT's various initiatives have delivered combined savings exceeding the €110 million target, but that progress has been offset by lower MRO market prices and rising labour and material costs.

Around two-thirds of the performance uplift will be achieved through cost cutting, while the remaining third will come from revenue growth fuelled by targeted sales campaigns in different regions.

One of the aims is to reduce technical costs per flight hour for Lufthansa's passenger fleet by 5% compared with 2011, which Henningsen says will be a significant challenge.

LHT revealed earlier this year that it will shed around 650 administrative jobs across its German locations by 2015, as well as closing its Swiss facility in Basle in April. An engine overhaul joint venture with Qantas in Melbourne, Australia was already shut down last year.

Henningsen says that management has no concrete plans to close other locations at the moment. But given LHT's shareholding in 56 international subsidiaries, he adds that the company is permanently evaluating the prospects of these investments, and it will make adjustments if the respective markets develop differently than expected.

However, Henningsen also says that LHT wants to grow its business further and invest in facilities with growth potential.

The MRO group has identified four core strategies of how it wants to expand its business. This includes more strategic partnerships with airlines for wide-ranging support packages to benefit from the respective carriers' growth.

LHT wants to build up its market position to service the most popular aircraft and engine families - including the Airbus A320 and A350 as well as the Boeing 737 and 787 - which are expected to generate almost two thirds of the future MRO market over the next 10 years.

LHT also wants to expand partnerships with manufacturers and other MRO providers "where it makes sense" and to "play in the top [industry] league" with regard to service quality and innovative processes, repairs and IT applications.

The targeted €110 million increase in earnings will be LHT's contribution to Lufthansa Group's plans to raise its total operating result by €1.5 billion by 2015.