Lufthansa Technik Addresses Labor, Margins

Lufthansa Technik has noted that despite its status as the world’s biggest MRO provider, its profitability remains under pressure due to cost inflation and shortages of materials and labor.

The company’s adjusted pre-tax profit for 2024 was broadly unchanged from the previous year at €635 million ($689 million) as costs tracked a 14% increase in revenue.

Outgoings for the year included an 18% rise in the cost of materials and services and 16% higher spending on external services. Some of this was due to extra volume, but the MRO provider also flagged "significant increases in materials prices due to the shortage of materials." Staff costs, meanwhile, rose 9% on 7% higher headcount.

Further recruitment is necessary, and Lufthansa Technik is responding with various national and international initiatives, stepping up its hiring activities outside Germany. It is also targeting people of retirement age through a “Senior Experts” program, which it launched in 2023.

Lufthansa Technik is also continuing to employ many apprentices and students on combined degree programs once they finish their training and courses. More than 300 junior staff started work at its German sites alone in the reporting year.

Another priority is to improve cash flow and profitability to reach a 10% adjusted EBIT margin by 2030, versus 8.5% in 2024. To achieve this, the company is pursuing various measures, including the development of new repair procedures and the use of alternative spare parts; further optimization of Lufthansa Technik’s site and service portfolio; digitalization; and ramped-up growth in areas such as engine parts repair and mobile engine services.

Like European MRO rival AFI KLM E&M, Lufthansa Technik noted that its 2024 performance was in part driven by engine services. It also highlighted aircraft component services as a strong contributor to revenue growth.