Long and winding road
The 9/11 terrorist attacks may have crippled several aviation players, but MRO operator Lufthansa Technik bounced back quicker than most.
Senior executive Walter Heerdt reveals the secret behind the company's speedy revival.
The road to recovery following 9/11 has been an arduous journey for the aviation industry.
More than six years have passed since the World Trade Centre attacks, but it's taken several companies just as long to bounce back.
Amid the aftermath, profit margins plummeted overnight as air travellers, fearing further terrorist assaults, stopped flying. An industry downturn soon followed, with most companies feeling the pinch.
German maintenance, repair and overhaul provider Lufthansa Technik was no exception, according to Walter Heerdt. But the senior vice president for marketing and sales insists the MRO company was better equipped than most.
"When the downturn in 2001 happened, we saw lots of companies struggling, especially those that were buying or working on older planes," he says.
"But we weren't just relying on older models and engines - we also had the capabilities to repair and maintain newer components. It gave us a quicker rate of recovery and helped the company overcome the initial shock following the attacks."
Having emerged relatively unscathed, Lufthansa' management has since focused on expanding the company's operation. In Germany alone, the directors oversee nine offices covering logistics and technical training, engine overhaul and cargo.
Elsewhere in Europe, it has several facilities providing similar services across Italy, Malta, Ireland, Belgium and Hungary.
Further a field, the MRO provider's network covers Asia and the US. It also has a sales office with four workers in Dubai and line maintenance stations across the Middle East.
Since 2001, the company's global operation has grown to some 12,500 employees, 450 customers and several partnerships.
Its finances have also improved, with the group generating US$5 million in 2006 compared to $4.5 million the previous year. On the downside, operating results for the same period dropped to $363,182 from $379,658 in 2005.
According to Heerdt, Europe and the US are Lufthansa's biggest markets. But he insists other regions will eventually prove just as lucrative. "We are seeing emerging markets and that's not just Dubai," he says.
"China is another one with opportunities to help customers and provide MRO assistance if, for example, a client is introducing new aircraft to its fleet. The network that we started building in the early 1990s is growing."
As a regular visitor to the region, Heerdt is well aware of the Middle East's strong aviation industry.
The company provides maintenance services to established carriers, including Emirates Airline, Etihad Airways and Gulf Air.
It also works with Qatar Airways and Saudi Arabian Airlines, as well as clients in the VIP business jet market. Work ranges from landing gear and component maintenance to engineering and support services for new and established carriers.
Elsewhere, the group offers a Total Component Solution (TCS) service, supplying aircraft parts to Middle East clients.
This ensures all airlines working with Lufthansa have a steady supply of aircraft parts to replace used or old components.
"The customers pay for their components, as well as flights per hour," Heerdt says. "They also pay for tool access and MRO service, which ensures we are on hand to help out."
Nevertheless, despite its Middle East presence and TCS offering, Lufthansa continues to maintain and repair aircraft equipment in Europe.
Indeed, if Gulf Air needs an engine or landing gear component checked, for example, the part is transported outside the region. The airline then has to wait an unspecified time before the component returns.
Heerdt: "We work closely with our clients, such as Gulf Air, and handle the logistics.
This isn't a Lufthansa MRO facility in the region; it's simply an operation with our people helping airlines send components back and forth. We've also supported Etihad with mechanics in the past, helping them as a partner.
We're just assisting customers in the MRO business." While local carriers appear satisfied with the current operation, Heerdt admits Lufthansa's management has considered establishing an MRO facility in the Middle East.
"It's something we have thought about, but you have to understand there are strategic regulations in place, which I can't disclose," he says.
It's unclear what's stopping the company's directors from launching a new operation, with Heerdt refusing to elaborate.
But the German director reveals certain obstacles have prevented management from getting beyond preliminary discussions.
"We are not holding talks at this time, although I wouldn't exclude anything," he adds.
"But there is a growing market for new aircraft with new technology and that's something we want to be a part of. It could be through customer-vendor relationships or partnerships where Lufthansa people work with the airlines."
"It could even go beyond that and it's something we would have to explore."
With local airlines expecting A380 deliveries in the coming years, Lufthansa is keen to extend its maintenance services.
To that end, the company's management recently launched a Frankfurt-based facility specialising in the super-jumbo.
According to the group's directors, the operation will provide technical support for the A380, Lufthansa airline's future flag carrier, and other wide-bodied aircraft.
The 25,000 sq m facility is capable of accommodating two Airbus A380s or three Boeing 747s. It can also handle aircraft traffic, with 72,000 sq m of apron, taxiways and parking positions available.
Work to extend the base, enabling it to deal with four A380s simultaneously, will be completed by 2015.
Heerdt says the maintenance facility is already operational - 18 months before Lufthansa's airline is expected to launch A380 flights. "We opened the A380 hangar in Frankfurt and are building another in China.
"The group already has 45 people in training to work on the plane. Other programmes will come at a later stage, although some employees have been taught how to maintain and repair Trent engines."
"Once the training is complete, our technicians will be ready to work on the A380 and Boeing 747-8s."
Elsewhere, the group's management has also agreed to launch a joint venture with Abu Dhabi-based investment vehicle Mubadala Development Company.
The partnership was formed to establish an aviation training centre that offers courses throughout the Middle East and North Africa.
"The aim is for the joint venture to ultimately become the benchmark for training in the region across a wide spectrum of aviation functions, including MRO, airport security, and ground handling," says Waleed Al Mokarrab Al Muhairi, Mubadala's chief operating officer.
"We aim to provide value-enhanced professional training and qualification programmes to meet the growing demands of many of the leading airlines, including Etihad Airways."
Al Muhairi added the courses will be available to airport operations personnel and Middle East-based MRO facilities, such as Abu Dhabi Aircraft Technologies (formerly GAMCO).
Putting the plan into action may take time, with Mubadala and Lufthansa only signing a memorandum of understanding during the Dubai Airshow last November.
But directors from both companies are already considering a roll-out strategy. The long-term goal is to introduce a university degree for undergraduates in the Middle East and North Africa.
While the timescale for establishing an aviation training centre is unknown, Heerdt insists management will concentrate on other plans.
In the Middle East, Lufthansa's directors are keen to retain clients by making regular visits to the region.
Heerdt, who is charged with this responsibility, agrees, saying it's important to "stay in touch" with companies linked to the MRO group. He adds regular contact ensures any issues or customer queries are dealt with swiftly.
Keeping clients onside may be a key objective but securing new business is further down the scale, according to Heerdt. As sales director, he would like nothing more than to bring additional airlines on board.
But most unsigned carriers either work with rivals or have modest fleets requiring little maintenance for long periods.
"You probably won't see anything in the next three years," Heerdt says. Despite having few opportunities to secure new clients, Heerdt is upbeat about the coming months.
He believes Lufthansa's global operation will continue expanding outside the region. "We have a wide spectrum of services compared to other MRO providers," he adds.
"Lufthansa is the only MRO facility in the world that can handle VIP aeroplanes and large commercial fleets. The group has facilities across the globe and experienced technicians that will be able to handle A380s.
"Lufthansa Technik is also an MRO facility and development agency accredited by the authorities, including the FAA."
"Aside from the usual services we provide, the company has started manufacturing certain in-flight entertainment systems - I don't know any other facility or MRO provider worldwide that has the same capabilities as us."
Lufthansa technik dates back to the early fifties when the company's parent was re-launched following the second world war. At the time, the foundations for the airline's technical base were laid at hamburg airport.
By 1955, the first double hangar, able to accommodate three four-engine propeller-driven super constellations, was in place.
On march 2, 1960 the jet age was ushered in following the first lufthansa boeing 707 landing in hamburg. Frankfurt airport became the home base for the new long-haul jets and lufthansa's daily maintenance operation. Throughout the decade, the company started repairing other aircraft, including american airlines' fleet.
Despite the economic setbacks caused by oil crises during the seventies, incoming orders continued rising at double-digit rates. Meanwhile, more airlines were using high-flying jumbo jets containing microelectronics and new-style computers.
The new equipment required more modern maintenance procedures. By the 1980s, lufthansa's engineering division was expanded to keep pace with the new aircraft. Following the fall of the berlin wall in 1989, lufthansa returned to the capital. It then established an mro facility at berlin-schönefeld airport.
Eye on the future
The lufthansa group was reorganised into seven separate operating divisions by the mid-1990s. Its former engineering division was converted into a standalone subsidiary called lufthansa technik, which quickly secured clients from across the globe.
Today, lufthansa technik has branched out to manufacturing aircraft parts. It has also expanded internationally, with offices in several locations across the globe.