Lufthansa Technik optimistic despite profit decline

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Lufthansa Group is beginning to see signs of an upturn in its MRO business segment, although the recovery continues to lag behind the economy as a whole.

Lufthansa Technik's operating profit declined by more than 15% to €268 million ($375 million) in 2010, despite revenues edging up 1.4% to €4.02 billion. Operating costs rose 4.1%, mainly due to more expensive "materials and services".

"Lufthansa Technik again delivered a high earnings contribution for the group, albeit lower than the record set in 2009," says Lufthansa. "With a slight delay, the unbroken recovery in global air traffic also increased demand worldwide for technical maintenance services."

The division's share of the global maintenance market fell slightly, to 14%.

"Competition is getting tougher, as new MRO capacities enter the market and increase price pressure, while cost and margin pressure on the airlines remains high," says the company.

The proportion of Lufthansa Technik's revenue sourced from outside the Lufthansa Group last year increased by 1.1 percentage points, to 59.1%. The signing of 34 new customers and 460 new contracts brought in €504 million of new business, up 2.3% compared with the previous year, and resulted in a net increase of 27 in the serviced fleet, to 2,055 aircraft.

Looking ahead, Lufthansa expects the MRO market to deliver average annual growth of 4.6% "in the medium term", although "the continuous entry of new capacities will make existing competition even tougher", it adds.