LHT expects moderate revenue increase in 2013

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Lufthansa Technik's (LHT) revenues were flat in 2012 but operating profit was up nearly 24%, as the German MRO group aims to raise efficiency with several hundred job cuts and facility closures.

Turnover at the Hamburg-based maintenance provider dropped 2% to just over €4 billion ($5.2 billion), says Lufthansa Group in its 2012 financial report, while operating profit grew 23.7% to €318 million compared with 2011.

The revenue drop was largely caused by less custom for the parent airline group - down 11.4% - following the completion of Lufthansa's narrowbody cabin interior refurbishment programme in 2011 and the sale of BMI to International Airlines Group last year.

The MRO company also registered less demand for lucrative engine overhaul work.

Third-party revenues were up 5.4% to €2.4 billion, which tipped the business share with external customers to 61%, up five percentage points. The company inked 513 contracts worth around €484 million with 45 new customers last year.

EBITDA was up just over 30% to €491 million, while capital expenditure was down 7.2% to €129 million partly due to less engine overhaul work and, hence, less demand for costly spare parts.

LHT plans to slash 650 administrative jobs through its "NETwork" cost-cutting programme to 2015. This will be one among several savings schemes under the parent group's efficiency programme "Score".

Other LHT initiatives include "iSave" to cut engine MRO unit costs by 20% - overhaul capacity at the company's shops in Hamburg has been "sharply" reduced - and a similar efficiency programme, dubbed "Kick15", for the component support segment.

LHT revealed earlier this year that it will close its facility in Basle, Switzerland, following last year's decision to shut down Lufthansa Technik Qantas Engineering in Melbourne, Australia.

But the MRO provider is expanding its activities and facilities in growth markets, including its US component repair services in Tulsa, extension of its site in Shenzen, China, and a new material depot in Singapore.

Customers in Europe and the CIS account for 68% of revenue, slightly down from 2011. Africa and the Middle East also registered slight declines to a share of just under 6%. But the Americas and Asia-Pacific regions showed increases to 11% and 15% respectively.

Total number of staff - including subsidiaries - was up 1.5% to around 20,280 at the end of 2012. For 2013 and 2014, LHT expects "moderate" revenue increases, with earnings due to remain stable in the current year and improve in 2014.