Michael Gubisch/London
Lufthansa Technik Budapest has seen its business model change significantly during the past 10 years, with a much greater emphasis placed on third-party customers.
As it moves into its next decade, it will need to find the right balance between growing the business and reacting competitively to changing maintenance, repair and overhaul requirements.
Speaking to Flight International as the company celebrated its 10th anniversary in mid-June, LHT Budapest chief executive Elmar Lutter pointed to a fundamental change in the business environment.
While Lufthansa generated 50-70% of the workload during the early days, the balance has since tipped to third-party clients and the parent airline now occupies about 30% of the custom.
LHT owns 85% of the company. The remainder was initially held by Malév, but since 2009 it has been in the hands of Budapest Airport. Today, the hangar has 350 employees and annual revenues of about €32 million ($46 million).
The shift towards more third-party MRO has increasingly exposed the maintenance provider to competition which, especially in Eastern Europe, is driven by low labour rates.
"Prices and yields are constantly under strong pressure, so we have to become continuously better to ensure our survival," Lutter said.
Another trend the company has noted is that classic overhaul events, which typically take four weeks, are becoming rarer as operators try to phase traditional D-check tasks into multiple C-checks on the newer generation aircraft.
These usually take eight to 10 days and involve less labour and material. Therefore, if hangar utilisation does not increase accordingly, business turnover will start to decline.
Lutter said that while the facility is continuously working to improve efficiency, it has reached a "natural limit" with its four bays.
Large utilisation improvements will not be possible without jeopardising flexibility for sudden scheduling changes, such as an aircraft which generates more work than expected.
As a consequence, Lutter expects only "moderate growth" during the coming years.
However, he said the company is considering building additional hangar capacity in the future. This would depend on favourable market conditions, although he declined to provide further details.
Catering for multiple customers with varying support arrangements, such as material supply contracts, without creating excessive administrative work is another bugbear of the growing third-party business.
"The challenge is to streamline our administrative processes in this increasingly complex environment so that we can do more with fewer heads," Lutter said.
With the wider trend from D- to more C-checks, it will also be important to strike the right balance in terms of team size and skills on the hangar floor.
While the shorter C-checks increasingly involve structural repair tasks, there will be a long-term shift among the workforce from traditional airframe maintenance jobs, such as structural technicians and painters, to more licensed mechanics and avionics experts.
Lutter said the MRO provider started a training initiative two years ago to qualify some of its staff for the future demand.
However, the challenge will be to plan the maintenance events in advance and allocate the appropriate teams.
For example, wing corrosion has become a typical issue on ageing Airbus A320-family aircraft.
Discovery of this can easily jeopardise the downtime for a regular C-check as the intensive repair requires zero-stress jacking with several jacks per wing. Nevertheless, while the aircraft occupies the hangar bay for an extended time, repairing the damage requires only a small team.
Greater harmonisation and co-operation with its sister companies in LHT's European network is of central importance for the future growth of the Budapest hangar, as well as the entire group, Lutter said.
A possible avenue is to provide line maintenance services at Eastern European airports for Frankfurt-based Lufthansa Technik Maintenance International.
No concrete steps have been taken yet, but Lutter said he is in "intensive talks" with LTMI.
Such extended services could also help to build up relationships with customers that employ the Budapest hangar mainly for individual maintenance events.
Long-term partnerships, where the MRO provider not only accomplishes single checks but has to respond to unexpected situations and take the customer's specific operational circumstances into account, is where Lutter thinks his company can play out its main strengths.
"Rather than trying to compete with the cheapest competitor in the market for individual checks, our value proposition is that we can ultimately take better control of [the customers' maintenance] costs if we look after their entire fleets on a long-term basis," he said.
Source: Flight International
