Lufthansa Technik returns to profitability in 2021 after “rigorous but painful” restructuring

Lufthansa Technik has returned to profitability, recording a seven per cent revenue increase to €4.003 billion in financial year 2021 compared to 2020.

The company also generated a positive adjusted EBIT of €210 million (where its 2020 figure was €-383 million).

Lufthansa Technik said the results marked a “big step out of the pandemic-related aviation crisis”, and attributed the turnaround to “comprehensive restructuring, a clear customer focus and the further development of its product portfolio”.

Chairman of the executive board Dr. Johannes Bussmann commented: “2021 was another tough year that demanded everything from all of us. We have rigorously reorganised and restructured painfully, but today Lufthansa Technik is better, more efficient and more powerful than before the crisis. We owe this not least to the commitment and flexibility of our employees.”

Key figures. Click to enlarge.

Lufthansa Technik’s ‘RISE’ programme, which was launched in 2020, included measures such as a more streamlined organisation with only five segments instead of eight business units, as well as structural changes that included the closure or sale of maintenance and overhaul sites. There were no compulsory redundancies in Germany.

“The necessary measures, some of which were really tough, have deeply affected the core of Lufthansa Technik’s identity. Nevertheless, I am relieved that we were able to spare our workforce the worst effects,” said Bussmann.

The 2021 result was “extensively supported” by government aid such as the short-time working allowance in Germany, the company said.

All images supplied by Lufthansa Technik.

Lufthansa Technik also noted “a noticeable upturn” in the maintenance business due to the recovery of global air traffic. “The Aircraft Component Services business segment in particular, which is heavily dependent on the number of hours flown, felt the effects of this through significantly better capacity utilisation in its workshops,” the company stated. “In contrast, there was only a slight recovery in the engine business, with airlines still often taking advantage of the remaining ‘green time’ service life of parked engines in 2021 in order to avoid overhauls.”

Over the course of 2021, the company won 42 new customers and signed over 620 contracts with a total volume of €4.7 billion. At the end of the 2021 fiscal year, Lufthansa Technik had exclusive contracts governing over 4,200 aircraft owned by more than 800 customers.

“The fact that we still service the largest share of the world’s commercial aircraft fleet is no coincidence,” said Bussmann. “In terms of sales, it is now paying off that before the crisis, we systematically invested in capabilities for the major new aircraft and engine types and in state-of-the-art technologies. This puts us in the unique position today of being able to support any customer’s aircraft fleet immediately – without any investment backlog.”

Lufthansa Technik said it was planning to increase its workforce worldwide by more than 1,500 this year, bringing it back up to about 22,000 employees. Of these, approximately 700 full-time positions will be in Germany, approximately 600 in the Americas region and approximately 200 in the Asia-Pacific region.

Bussmann noted that Lufthansa Technik will continue to put further focus on digitalisation and sustainability, with the company’s ‘AVIATAR’ platform marking its fifth anniversary this year. More than 3,000 aircraft are now supported on the platform.

“AVIATAR has finally established itself on the market as the only manufacturer-independent digital solution,” said Bussmann. “And demand has once again increased significantly, especially during and after the crisis.”

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Lufthansa Technik is maintaining its earlier estimate that the overall global MRO market will return to pre-crisis levels by 2023.

However, the company noted that timeframes were difficult to predict given “the current geopolitical situation, the still unclear prospects for opening up many regions of the world, and the rising prices of raw materials, fuel and spare parts”.

The global MRO market has performed US$6 billion better last year than was forecast at the beginning of 2021, Lufthansa Technik noted. Total market volume is currently estimated to be US$79 billion, distributed “relatively evenly” among the Americas, Europe-Middle East-Africa (EMEA) and Asia Pacific

The medium- and long-term consequences of the Ukraine crisis remain unclear, Bussmann noted. “The war against Ukraine has shown us how fragile peace in the world is, and how quickly an order that was thought to be secure can fundamentally change. We very much hope that the war and the suffering of the people there will come to a swift end,” he said.

Lufthansa Technik has also begun preparations for possible changes in its ownership structure, Bussmann said. By the end of 2023, the Lufthansa Group is aiming either to sell a minority stake to an investor or to initiate a partial IPO.

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