KAREN WALKER / FRANKFURT
IT provider takes comfort from ongoing contracts and Starnet potential in tough year
Airline industry IT provider Lufthansa Systems is looking to broaden its portfolio, focusing especially on North American markets and small and medium-sized carriers.
Lufthansa Systems is enduring another tough year, chief executive Peter Franke admits, as the industry downturn and additional impacts of SARS and the Iraq war have forced airline customers to delay decisions on new investments or IT projects. Franke believes 2003 revenues will be flat on 2002, while profit "will go down a little bit, although we will still be in profit".
Last year the company posted operating income of €55 million ($63.2 million) and €27 million after-tax profit on revenues of €557 million.
"We are able to adjust our costs to a certain extent, but SARS and the Iraq war have made customers even more reluctant to sign new contracts," says Franke. "There is no clear view yet of the future. We are having a lot of talks with customers, but they are reluctant to make decisions."
Franke says, however, that ongoing contracts, such as the provision and support of passenger check-in systems, provide stable business for Lufthansa Systems and there is potential for growth in North America and among small and medium-sized carriers worldwide.
"Airlines don't want to run their own systems, they want a service provider. This is where there is a good growth market," he says. "In this business you have to be aware of all sizes of airlines and not just concentrate on the large airlines because they already have their own systems."
Franke says his company is in talks with some medium-sized carriers about taking over all their IT needs. Lufthansa Systems already provides "a lot, but not quite all" of the IT systems for Austrian Airlines, BMI British Midland and LOT Polish Airlines.
Lufthansa Systems could also create new business licensing out the Starnet software it developed for the Star Alliance and which allows real-time, seamless operations across member carriers. "We built Starnet for the Star Alliance and it is unique and a very good application," says Franke, "It is middleware that makes systems work. We would license the expertise to other carriers. The system is owned by Star Alliance, but we build and run it and if someone else wanted it we could do the same for them."
Source: Flight International
