Lufthansa Technik: Cost management and investment strength are the foundation for profitable growth

In fiscal year 2014, the Lufthansa Technik Group increased its sales
revenue by 3.8% to EUR 4.3 billion. Owing to a large modification
program for Lufthansa, the 5% increase in Lufthansa Group business
was higher this year than growth in business with the company’s
nearly 800 non-Lufthansa Group customers around the world, whose
share in total revenues was 61.7%. With a margin of 9.4%, the
operating result of EUR 392 million lay just under the previous
year’s high level.

According to Chief Executive Finance, Dr. Peter Jansen, an important
factor in securing Lufthansa Technik’s economic success was the
company’s contributions to Lufthansa’s efficiency-enhancing future
program SCORE: a variety of projects for reducing costs in all the
product divisions, the restructuring and streamlining of Lufthansa
Technik’s administration, the consolidation and development of its
network, and a sales approach that concentrates on growth regions.

Jansen described the key financial figures at the Lufthansa Technik
Group as solid, as they were the previous year. At EUR 118 million,
investments were not quite as high as last year, but remained higher
than the long-term average. The largest share went for the purchase
of spare engines and technical facilities as well as for technology
and innovation projects that are part of the company’s growth
strategy.

Operating expenses climbed by 2.9% in 2014 to reach EUR 4.1 billion.
Owing to the higher volume of modifications and an increase in engine
maintenance business, the cost of materials rose 4.1% to EUR 2.2
billion. Personnel costs (EUR 1.2 billion) declined slightly as a
result of consolidation within the network and the shift of
administrative work.

Despite growth in revenues, Lufthansa Technik is continuing its
restrictive policy as regards new hires. This and the closures and
restructurings of some of its companies resulted in the average
workforce remaining stable at 20,085 employees, which is comparable
to last year (+ 0.8%).

“Following our successful cost and efficiency management in 2014, the
continuation and implementation of all the various SCORE measures
will naturally remain on the agenda,” Jansen emphasized. The volume
of the measures planned for this year amounts to EUR 175 million.
“Part of securing a course for growth that is at least as strong as
the market is the implementation of our core project ‘We Grow’, which
is intended to result in significant increases in revenue by 2018.”
It focuses primarily on strengthening sales in the growth regions
Asia and the Americas as well as expanded cooperation management with
all the Group’s airlines.

“Sustainably profitable growth assumes that we can strike a balance
between new growth and innovation projects, additions to our staff,
new IT projects, etc., and yet continue to pursue our long-term
requirement of increased cost efficiency in all our administrative
and production areas. This is the only way to remain competitive and
grow steadily and continually.”