Lufthansa Technik (LHT) has warned that it is growing increasingly concerned by the infiltration of engine manufacturers into the maintenance, repair and overhaul (MRO) market. However, the Hamburg-headquartered maintenance arm of Lufthansa is eyeing the new business opportunities generated by low-fare operators.

"As aircraft orders have dropped due to the crisis, OEMs [original equipment manufacturers] have turned to the after-sales market to make up for the decline in revenue," says LHT chairman August Wilhelm Henningsen. He says the increasing number of players in the market has led to "excess capacity and rock-bottom prices that are not covering costs".

According to LHT, one study forecasts that over the next three years the OEMs' share of after-sales engine support will increase by almost 20 percentage points to 65%. "The OEMs don't offer the experience and understanding of the MRO market that the airlines and maintenance companies can," says Henningsen.

Henningsen says that the MRObusiness has been "at the receiving end of the crisis", with sales worldwide falling by 15% in 2002 to around $30 billion. Despite the crisis, LHT's pre-tax profits grew 66% to €148 million ($158 million) last year. Sales were flat at €2.8 billion, but gains came from cost reductions and the incorporation of its Hawker Pacific Aerospace, Lufthansa Technik Philippines and Shannon Aerospace divisions as wholly owned subsidiaries.

Although Henningsen says that "virtually no-one predicts a turnaround before 2004, possibly 2005", he is confident LHT will continue to maintain profitabilty this year through more cost savings and increased activities in other areas. The company is negotiating with the low-fare airlines about their specific maintenance requirements.

Source: Flight International