Graham Warwick/WASHINGTON DC Justin Wastnage/HAMBURG
Lufthansa Technik (LHT) says it is in talks over a major US acquisition as it moves to position itself for an anticipated consolidation of the aircraft maintenance, repair and overhaul (MRO) sector. US company Aviation Sales, which has suffered heavy losses, meanwhile reveals that it may come up for sale in a few months after completing a radical restructuring.
LHT, a subsidiary of the German flag-carrier, says it is negotiating a transatlantic purchase despite having seen losses double last year, although chairman August Wilhelm Henningsen says it is "not in a hurry" to complete a deal. LHT has already made forays into Asia this year and bought land for its Hamburg workshops, but Henningsen denies that it is overstretched, and says it has enough liquidity to make a purchase anywhere, with North America most attractive.
The MRO heavyweight, which derives the bulk of sales from third party work, now has only a marginal US presence via its subsidiaries Hawker Pacific of Sun Valley, California and BizJet of Tulsa, Oklahoma, which specialise in business jet maintenance, up to and including the Boeing Business Jet and Airbus Corporate Jetliner. With LHT posting a €40.6 million ($35.7 million) loss last year on sales of €2.3 billion, partly due to exchange rate fluctuations, Henningsen is keen to see it generate more of its revenue in dollars.
LHT is ramping up work at LHT Philippines and its Aveco joint venture with Air China. The sites will be upgraded and work transferred in, partly at the expense of its three bases in Hamburg, Frankfurt and Munich, where it is struggling to recruit engineers.
Aviation Sales expects to conclude its restructuring in the next 60-90 days, and while chief executive Dale Baker says it would prefer to remain independent, it has already been approached by "several people" interested in a take-over. He adds that when the restructuring is complete, its board "will be prepared to look at any proposals".
Miramar, Florida-based Aviation Sales expects to return to profitability this quarter after 15 months of disposals, consolidations and cost cuts which have reduced its debts from $268 million to around $20 million. Consolidation of the remaining facilities, a 10% workforce reduction and across-the-board pay cuts will save another $22-24 million, Baker says, and virtually eliminate the company's debt.
Even after its restructuring, Aviation Sales remains the second largest third-party maintenance and modification provider in North America, after Goodrich. Most players in the sector fared relatively badly last year, however, and Aviation Sales is not the only company vulnerable to take-over.
In Europe, for example, FLS Aerospace continues to make losses, and could attract attention from across the Atlantic. Henningsen suggests the picture could be complicated further if more airlines establish their maintenance activities as stand-alone units in the manner of LHT and SR Technics, and complains at the "increasingly monopolistic practices" of original equipment manufacturers, which have led to spiralling costs.
Source: Flight International
