Lufthansa Technik’s corporate/VIP completions business is booming, sales and marketing chief Walter Heerdt tells BRENDAN GALLAGHER. But he warns that an approaching wave of widebody work could catch out the industry as a whole.
The Airbus reorganisation unveiled earlier this month names the airframer’s Hamburg site as part of its new fuselage and cabin “axis of excellence”. But that’s not the city’s only claim to fame as a centre of cabin expertise – it’s also home to Lufthansa Technik, one of the world’s leading specialists in luxury completions of green airliners for heads of state and other VIPs.
The company’s North German roots are in full evidence here: it’s displaying its wares at the Hamburg Business Development Corporation booth. Visitors will hear about LHT’s ideas for VIP versions of the Airbus A380 and Boeing 787, not to mention the up-and-running Airbus A318 Elite programme. The company is the exclusive supplier of interiors for the corporate/VIP version of the smallest Airbus – last month it was contracted for the tenth in the series.
The smallest member of the Airbus Corporate Jetliner family – which also includes the A319-based ACJ and the A320 Prestige – the A318 Elite was launched in autumn 2005 and has since won more than 30 orders and commitments.
The first, with its LHT-installed interior, was delivered to Zurich-based VIP charter company Comlux last month and is now engaged in a promotional tour. It features seating for up to 18 passengers in four separate cabin zones, including a lounge, dining/workspace, private office/bedroom and entourage/crew area.
“The aircraft is very roomy inside, with a warm atmosphere and a high quality of craftsmanship - it will absolutely meet the demands of the owner,” says Walter Heerdt, the company’s senior VP for sales and marketing. “I believe it will attract a lot of attention, not least because it is very attractively priced for what it offers.”
The company expects to receive the next airframe from Airbus soon and plans to boost capacity in Hamburg so that it can handle two aircraft simultaneously from next year.
Production capacity is very much at the front of Heerdt’s mind these days. Besides the burgeoning Elite programme, Lufthansa Technik is also contracted to install its NICE cabin entertainment network in Bombardier Challenger 300 mid-size bizjets and to complete the Canadian company’s CRJ-based Challenger 850 corporate transports, at the same time pushing on with the VIP widebody work for which it is famous.
That last market has prompted some big decisions in Hamburg recently. “We expect to see 18-20 widebodies – Boeing 747-8s and 787s, Airbus A330s, A340s, even an A380 - coming on to the global completions market between now and 2014,” says Heerdt. “We’re aiming to win our share of this business, and to handle it we have decided to add a second widebody completion line to enter service in 2009, when the 787 should start to come into the equation.”
His company’s move reflects a growing industry-wide shortage of completions capacity across all aircraft classes, Heerdt believes. “Right now the manufacturers are selling new aircraft that will be available for completion in 2011-13, and that is pushing up overall activity in the market,” he says. “I also see the new higher level being sustained in the longer term, rather than peaking for two or three years. It all adds up to a shortage of capacity.”
That’s not something that industry as a whole will be able to put right quickly, says Heerdt. “Building up completions capability isn’t something you can do overnight,” he cautions. “Anybody can build a hangar, but you also need qualified engineers, mechanics, project managers, craftsmen, backshops and so on. Even we, who are already in the business, estimate that it will take 24 months to add another widebody line and make it fully operational.”
Heerdt’s fears are shared by another leading completions house, as well as Boeing Business Jet president Steve Hill. “We’re running into a shortage, particularly on the widebody side,” says Patricio Altuna, executive VP at Dallas-based Associated Air Centre. Steve Hill believes that steep growth in the number of people with very high levels of personal wealth is driving up demand for VIP aircraft. “At the moment there is enough completions capacity, but I worry about 2010 and beyond.”
Another leading completions supplier, Jet Aviation Basel, is about to break ground for a new widebody hangar to enter service next spring. It will add close to 35,000m2 of space to the company’s Basel facility and will be big enough to house an Airbus A380 and a Boeing 787-8 simultaneously.
Steve Hill sees some of the slack being taken up by new players looking to break into the charmed circle comprising the two European companies and US equivalents Associated Air Centre and Gore Design Completions. “We expect to see new completions centres emerging to cover the demand generated by the widebodies,” he says.
With the memory of the 2003-04 downturn in the VIP market still fresh, Heerdt points to another potential hazard. “If we’re not careful, the industry could run into overcapacity,” he says. “That would lead to a huge fight over every aircraft and deals done at dumping prices as the providers tried to keep their expensive new lines loaded. If that happens, the new entrants could be the first to suffer.”
When the coming wave of widebodies starts rolling off the lines they will end up much more geographically dispersed than has been the case in recent years, according to Heerdt. “They’ll go to the Middle East, of course, but also to western and eastern Europe, North America and, in the longer term, to Asia. Right now Asia is more of a narrowbody market, but I can see widebodies going there eventually.”
Lufthansa Technik makes no secret of its desire to land the biggest widebody conversion of all time – the first VIP A380. But the signs are that it is even closer to winning a Boeing 787 contract. “We are in discussions with a potential 787 customer,” Heerdt reveals. “And we have firmly set aside a slot on our widebody line so that the customer has the security of knowing that when the aircraft is delivered by Boeing there will be somewhere to get it completed.”
The company is now working with the customer on aspects such as the design and any special engineering provision.
“He could still walk away and give the work to someone else,” Heerdt concedes. “But everything is ready in Hamburg - if a contract is signed, all we have to do is receive the aircraft and get started.”
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