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Lufthansa Technik Prioritizes Middle East LCC Business

 - November 14, 2021, 10:33 PM
Lufthansa Technik Middle East specializes in a number of business fields, primarily maintenance and repair services on composite structural components, nacelles, radomes, and the full range of flight controls. (Photo: LTME)

Germany’s Lufthansa Technik Group (LHT) has turned much of its attention toward low-cost airlines for new business opportunities in the Middle East, as regional flag carriers forge ahead with efforts to develop in-house capabilities.

“Especially in the Middle East, the industry is definitely picking up," Lufthansa Technik sales director for the Middle East and Africa Tim Butzmann told AIN. "Low-cost carriers like Air Arabia, Flydubai, and Jazeera Airways report a very nice return of capacity and load factors, which is quite encouraging.” 

LHT performs base maintenance services for Flydubai and has expressed interest in further integration in engines and components. “Air Arabia, for example, returned to profit in 2021," he said. "They are managing really well, and that's encouraging. The domestic market in Saudi Arabia has come back more quickly than elsewhere, which provides quite some loads for the local carriers; we support a number of operators there—Flyadeal and Flynas, primarily. There is a good position to recover from the crisis from an MRO perspective.”

State-owned carriers have tried to develop their own capabilities; for example, Saudi Arabian Engineering Industries, flag carrier Saudia’s dedicated MRO, had an ambitious strategic plan. “[Y]ou need to see where [you] fit in," added Butzmann. "That is very often in the area of components services. Emirates, for example, subcontracts the majority of their component MRO requirements. Their sheer range tends to create complexity an airline does not necessarily want to deal with. That is the opportunity for MROs with carriers like this.”

In some areas, regional traffic has begun to resume its growth, as has MRO, Butzmann said. “For carriers in North Africa, it is still a little more difficult," he explained. "There is quite a bit of volume in the Maghreb states, from Morocco to Egypt. In some areas, the regional traffic is picking up again and there is also interest in developing further.”

In sub-Saharan Africa, Butzmann said the picture appeared a little more diverse and much more regionalized. Ethiopian Airlines had weathered the crisis relatively well, supported by the cargo business generated during the crisis.

The global group maintains a large MRO portfolio, spanning almost everything from engine and aircraft components services to line and base maintenance, as well as digital solutions and VIP completions. Portfolio diversity helped shield it against the impact of Covid as some business segments performed more strongly than others, all but neutralizing the pandemic’s adverse effects.

LHT plans additional facilities in the region, but it has not decided on a location, Butzmann said, adding that the company also based small resident teams in Saudi Arabia for ease of access.

“We know that the regulations are going to change in Saudi Arabia," he explained. "It will require companies who want to enter into contracts with public organizations to have regional headquarters in-kingdom. This is something that we will have to look into, as to how to accommodate that need. The focus, for the time being, is on our existing subsidiary in Dubai.”

Lufthansa Technik Middle East (LTME) came into being at Dubai South in 2017. “We were seeing tremendous growth, up to the end of 2019,” LTME chief executive Ziad Al Hazmi told AIN. “With the volume of growth in fleets, it made sense to open a facility in the region. [W]e quickly expanded as the requests for repairs poured in. LTME’s growth definitely correlates with growth in the region.”

LTME specializes in a number of business fields, primarily maintenance and repair services on composite structural components, nacelles, radomes, and the full range of flight controls.

Al Hazmi expects the region’s 2021 MRO budget to total $7 billion, projected to grow at a compound annual growth rate of 2.9 percent. In 2020, the pandemic had a huge impact. “In many areas, we were down 50 percent,”  he said.

“[Since] the early stages of the crisis, we have recovered some of the losses and are at about 75 percent of where we were [in 2019]. In 2021, we have seen month-on-month improvements, with higher requests for maintenance and repair services, a great reflection of how the aviation market is doing.”

LHT employs predictive algorithms to not only detect, but predict aircraft faults using its Aviatar platform. It also promotes its ‘Aeroshark’ riblet film, which helps reduce friction and aerodynamic drag when affixed to an aircraft's fuselage and wings. “Applied in large quantities, this can reduce fuel consumption by one to one-and-a-half percent, a substantial amount in overall airline calculations," said Butzmann. "That is something we will first introduce on Boeing 777s in the Lufthansa Technik cargo fleet.” 

Mike Stengel of Ann Arbor, Michigan-based Aerodynamic Advisory told AIN that the pandemic's effects varied with MRO activity type. “Engine overhauls, for example, are high-ticket events that can be deferred or avoided outright through engine swapping or accelerated aircraft retirements,” he said. “Some component repairs can also be deferred or avoided by destocking, but this inventory will have to be replenished down the line. Other activities were more resilient, like calendar-driven maintenance events that are harder to avoid, such as landing gear overhauls and some airframe heavy maintenance.”

He said Lufthansa Technik’s addressed markets were rather fragmented with dozens of suppliers, but some of their largest competitors included Air France/KLM E&M, SR Technics, ST Aerospace, AAR, Delta TechOps, AJ Walter, HAECO, and SIA Engineering. "Within the Middle East, some competitors in commercial MRO would include Etihad Engineering, Israel Aerospace Industries, Joramco, and Turkish Technic," he added.

LHT’s Middle East customers have generally expressed great interest in innovation, especially in the area of sustainability, according to Butzmann. “We already have a number of different partnerships, and expanding cooperation is something that we are discussing with them right now,” he concluded.