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IntellIgence Experience Pays for Lufthansa Technik

Lufthansa Technik is counting on years of experience, innovative programs and increased productivity to defend against growing competition and reduced industry margins. A slight growth of only 1.9 percent in 2011 sales revenues for Lufthansa Technik (LHT) revealed the fiscal pressures being brought about by a combination of weakening airline profits and stronger competition from OEMs entering the MRO market, according to LHT Chairman August Wilhelm Henningsen. The Hamburg-based company reported revenue of €4.09 billion ($5.46 billion) last year, compared to €4.02 billion ($5.36 billion) in 22010.

5-year component supply contract with SriLankan Airlines to support that carrier’s A320 fleet, established an aircraft component pool storage facility in Singapore to serve its Pacific Rim region, signed an agreement with Shenzhen Airlines to serve as the airline’s transportation management partner and renewed its commitment to Milan-Malpensa as the main provider of aircraft maintenance services on short- and long-haul aircraft at Malpensa Airport. LHT also extended, and significantly expanded, an existing Total Component Support agreement with Asiana Airlines. In February, Lufthansa Technik Philippines opened a third hangar in Manila, designed for maintenance on wide-body aircraft to include the A380 and 747-8. LHT Philippines invested $30 million in a joint venture with Philippine MacroAsia Corp. for the 8,500 sq. meters hangar. The company has also started work on two new maintenance hangars in Europe, one in Sofia and one at the new Berlin Brandenburg Airport. The second pillar in LHT’s plan to improve its bottom line is with a number of projects “to improve productivity, to develop a higher efficiency on material usage, using less man-hours, better quality, reducing work through new technology on the new airplanes as the systems become more modernized,” Henningsen said. “We are also making a very big effort toward identifying cost drivers, identifying system problems and determining how to avoid those problems in the future by modifying these components or specifying better components or better modification standards for the new airplane.” Peter Jansen, LHT CFO, noted that key profit indicators “have been sinking since 2007,” and that “we must greatly intensify our strict cost and efficiency management and the measures we have introduced to improve our result.” This is expected to be accomplished by 2014, he said. As part of its increased productivity and efficiency program, LHT was able to reduce its workforce slightly by 475 workers, which included workers going from semi-retirement to full retirement, plus programs or contracts that were terminated. However, the number also includes an added 400 workers, half from part-time employees moving into full time positions plus 200 young interns coming into the company.

Henningsen noted, however, that competition is not new, and that LHT has “a very broad band of experience in the day-to-day business” from providing maintenance for one of the largest airlines in the world, along with providing airframe and engine services for a wide variety of third-party customers. Henningsen noted that as of the end of March, the company looks after 770 customers and 2,125 aircraft worldwide. Last year, LHT concluded 400 new contracts and added 45 new customers. Total sales for fiscal year 2011 were €506 million ($674.4 million) Already one of the world’s largest technical services providers, LHT will

be improving its position with a combination of increased productivity and a series of joint-ventures agreements and acquisitions through its world-wide subsidiaries, Henningsen said. The fiscal improvement program is part of the Lufthansa Group’s SCORE program launched earlier this year, aimed at “synergy effects, cost reductions, structural adjustments and sustainable revenue growth,” the company said. The acquisitions and joint venture agreements are designed to

improve the company’s world-wide logistics support, providing better service for its customers, Henningsen said. It will also increase LHT’s capabilities in handling the new super wide-bodies such as the A380s and 747-8s now being delivered.

In just the first quarter 2012, LHT has signed an MRO agreement with Air Europa to support that airline’s GE CF34-10E engines, signed a

6 Aviation Maintenance | | June / July 2012

One of the major programs designed to improve productivity and customer service is “Manage/M,” a data management program designed so that customers can have access to every bit of data needed for maintenance of the aircraft. “We have complete overview of the life cycle of the airplane

(in order to) have full knowledge of every serial number of every component, of computers, of engines, of the entire airplane at the customer’s fingertips. This is something that we are really good at, ” Henningsen said.

The Manage/M (for Maintenance) program is a 15-year investment in data management, and operates similar to Apple’s “Cloud” concept, he said. With Cloud, a customer can go into his I-Phone, I-Pad, I-Mac or whatever Apple product he is using, and pull out the data he needs or transfer data between systems. “Ours is similar. We have all the data available, and our customer can look up whatever he needs, wherever he is and whenever he needs it.” The system is web-based and does not require any IT investment on the part of the customer. It uses a “toolbox” of 16 modules that provide the customer access to an array of options “complementing every aspect of their technical operations.” The modules include areas such as job control, job card, materials, modifications, archives, compliance, etc. These modules are tailored to the individual airline fleet and the MRO agreement between LHT and the airline. Specific production programs recently introduced by LHT include “Rapid Repair,” a computerized robotic grinding of engine fan

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