lufthansa technik – accelerate and brake
TRANSCRIPT
Dr. Peter JansenChief Executive FinanceLufthansa Technik AG
Lufthansa Technik –Accelerate and Brake
Lufthansa Training & ConferenceCenter Seeheim June 25, 2009
Lufthansa Group2
Agenda
Lufthansa Technik Group at a glance
Lufthansa Technik Group figures
Measures of Lufthansa Technik
Crisis of airline industry has reached MRO-business
Lufthansa Group3
Agenda
Lufthansa Technik Group at a glance
Lufthansa Technik Group figures
Measures of Lufthansa Technik
Crisis of airline industry has reached MRO-business
Lufthansa Group4
• About 670 customers worldwide
• More than 450 jetliners in Total Technical Support TTS® program, about 1,980 aircraft under exclusive contracts
• More than 1,700 aircraft inspections per day;60 line maintenance stations with Lufthansa Technik staff worldwide
• Global network of 56 subsidiaries and affiliates
• About 19,784 employees worldwide
• 3.7 billion euros in revenue
• Product-oriented management approach
Key facts about Lufthansa Technik Group:„More than an independent MRO-provider“
Lufthansa Group5
Lufthansa Technik AG:Global presence for 670 customers
Selected customers, March 2009
Lufthansa Group6
864
959 980
1,070
1,279
1,5511,616
1,646
1,776
1,985
Dec 02 Dec 03 Dec 04 Dec 05 Dec 06 Dec 07 Mar 08 Jun 08 Dec 08 Apr 09
LHT AG: Supported fleet increased by 12% year to date 2009 and has more than doubled since 2002
Number of AC supported by LH Technik Group
Lufthansa Group7
Support includes services for two new fleets: A380 und Q400
235
238
96
46
36
160
19
22
66
786
205
28
18
3
B737CL
B737NG
B747
B757
B767
CRJ
B777
MD11
A300/310
A320Fam.
A330/340
ERJ
Q400
A380
Status: Apr. 2009
Number of AC supported by LH Technik Group
Lufthansa Group8
Lufthansa Technik Group (56 legal entities)
Germany: America: Europe:Aviation Power STARS GmbH LTAIH LTNALTIV STARS KG LTVH BelacLTOV SAEMS GmbH LTAIL LTLAHGF SAEMS KG LTAS LLTTTrainico N3 GmbH Hawker UK Asia:LTLS Jasen LRTT LTIN
LTTH
Status: May 2009
Lufthansa Group9
Aircraft Maintenance
Services
Aircraft Component
Services
Engine Services
Aircraft Base
Maintenance
VIP & Executive Jet
Solutions
Landing Gear Services
68 m€
3 Locations983 LDG2
SVs pa
178 m€
3 Locations94 Complet. since 1980
964 m€
6 Locations1,057 Engine 1
SVs pa
382 m€
9 Locations50 Heavy
Checks pa
734 m€
70 Stations110,000 Line Checks pa
818 m€
12 Locations300,000
Events pa
1 Incl. minor events2 Landing gears inhouse
Technical services of 6 product divisions –global services around the clock – 24/7/365
LHT AG revenue 2008
Lufthansa Group10
Product portfolio of Lufthansa Technik Group
Special Services
Aircraft Services
Component Services
Engine Services
Landing Gear Services
VIP & ExecutiveJet Services
TOS®
TAS®TTS®
TMO®
TLS™TES® TCS®
Inflight Entertainment
Patient Transport Solutions
Communication
Cabin EquipmentARC® - Services
EPAR
Total Support Services
Manufactured ProductsSingle Services
AOG-Services
Supplementary Services
Dedicated Customer Segment Services
Tools
TOS®: Total Operational Support
TTS®: Total Technical Support
TAS®: Total Asset Support
TMO®: Total Material Operations
TES®: Total Engine Support
TCS®: Total Component Support
TLS™: Total Landing Gear Support
EPAR: Engine Parts & AccessoriesRepair
ARC®: Airframe Related ComponentServices
Lufthansa Group11
Lufthansa Technik – more than an independent MRO-provider
More than 50 years of technical support of aircraft, engines and components – for theLufthansa Airlines and 670 customers worldwide.
*Authority approvals
ProductionOrganisation*
DesignOrganisation*
Customer
Maintenance, Repair and OverhaulOrganisation*
Lufthansa Group12
• Design Organisation (DO) in accordance with EASA Part-21 J:
• is approved • to design in accordance with the
applicable specifications and environmental protection requirements
- changes on aeroplanes related to cabin, avionics, electric/electronic/mechanical systems or airframe/structures and repairs
- changes on engines and repairs to engines
• showing and verifying the compliances with the applicable certification specifications and environmental requirements, and
• demonstrating to the agency (EASA) this compliance.*Authority approvals
Lufthansa Technik – more than an independent MRO-Provider
DesignOrganisation*
Customer
Back-up
Lufthansa Group13
• Production Organisation (PO) in accordance with EASA Part-21 G:
• is approved
• to manufacture aircraft components listed in the approval and
• to issue related certificates of release to service
• using the approval reference number or certificates of conformity prior to the approval of the design of a product by using EASA Form 1.
*Authority approvals
Lufthansa Technik – more than an independent MRO-Provider
ProductionOrganisation*
Customer
Back-up
Lufthansa Group14
Agenda
Lufthansa Technik Group at a glance
Lufthansa Technik Group figures
Measures of Lufthansa Technik
Crisis of airline industry has reached MRO-business
Lufthansa Group15
Key figures and ratios of LHT Group show profitable growth and value creation
+ 903
+ 45.0%
- 48.8%
- 2.2PP
- 14.1%
+ 19.7%
% Chg. PY
19,784
29
22
5.6%
61
1,093
Q1 2009
- 37.1%122Segment capital expenditure
- 8.3%188Cash Value Added (CVA)
+ 46619,199 Employees (year average)
+ 0.1PP8.8% Adjusted* operating margin
+ 2.0%299 Operating result
+ 4.1%3,717 Revenue
% Chg. PY2008Key figures and ratios( in million €)
* Ratio for comparability with other airlines: (operating result + reversals of provisions) / revenue
Lufthansa Group16
Revenue increase of 146 mio € in 2008 (+ 4.1 %) in spite of $-ratio due to new customers and additional contracts
m €
2,8082,835 2,8523,060 3,121
3,4153,571
3,717
2,000
2,200
2,400
2,600
2,800
3,000
3,200
3,400
3,600
3,800
2001 2002 2003 2004 2005 2006 2007 2008
Lufthansa Group17
Long-term increase of third party revenue ratio of LHT Group reflects success of 1995’s strategy
59.661.260.058.055.255.657.854.4
5.67.0 7.3 7.3 5.6 5.6 6.56.0
33.932.834.436.437.537.135.240.1
2001 2002 2003 2004 2005 2006 2007 2008
Lufthansa PassengerAirlines
Other GroupCustomers
Third Party
Lufthansa Group18
298.6259.3
206.5176.4
130.3
292.8248.3
157.5
0
40
80
120
160
200
240
280
320
2001 2002 2003 2004 2005 2006 2007 2008
Operating result LHT-Group: Continuous and steady profit contributions for Lufthansa Group
m €
Lufthansa Group19
Agenda
Lufthansa Technik Group at a glance
Lufthansa Technik Group figures
Measures of Lufthansa Technik
Crisis of airline industry has reached MRO-business
Lufthansa Group20
Preparing for “Strong and Icy Winter”
Lufthansa Group21
Airlines suffer from high losses: drop in passengers/cargo and yields; capacity- and cost-cutting measures as well as financial problems of customer airlines are hitting all MRO-suppliers
• Internal staff reduction and inhouse cost cutting initiatives
• Reduction of capacities :- Fleet- and flight hours (Fh)-reductions- Deferred aircraft deliveries and payments to OEM
• Cost reduction through re-negotiations of all contracts, especially MRO-conditions- formal re-negotiations of product, pricing and payment-conditions- outstanding payment volumes without willingness of paying interests- disputing invoice strategies- forcing price reductions by freezing payments- “letters from purchasing”
Lufthansa Group22
About 130 deferrals of deliveries have been announcedin 2009 after 330 in 2008
Source: Ascend 06/2009, ATI, Speednews
Remarks: Reliable data on deferrals is difficult to obtain as neither the aircraft manufacturers nor airlines (with a very few exceptions) are willing to disclose details of their deferral agreements. The above listed deferrals represent the officially announced deferrals.
Deferrals announced January – May 2009
*) no definite agreement yet
**) in negotiations with manufacturers to defer deliveries of further new aircrafts
***) Air France: up to 6 ACThe Chinese 787 customers are working to renegotiate delivery of their share of the first 20 production aircraft "officially for payload reasons".
Customer AircraftType Deferred ACAlaska Airlines 737 (NG) 4Horizon Air* Q400 7-8FedEx 777 3Interjet A320 2JetBlue Airways 190 3Southwest Airlines 737 (NG) 9Volaris A319 3Aircastle Advisor LLC A330 1Gol 737 20In total 52
Customer AircraftType Deferred ACAir France*** 777 3Air France A380 2easyJet A319 2British Airways 737 19In total 26
Customer AircraftType Deferred ACBangkok Airways A319 1Cathay Pacific** 747 2Cathay Pacific** 777 2China Southern Airlines 777 2China Southern Airlines A380 5Shandong Airlines ARJ21 10Kingfisher Airlines A380 4LoadAir Cargo 747 2Qantas 737 (NG) 12Qantas A380 4V Australia 777 2Thai Airways* A330 unknownJet Airways* 787 10In total 56
Lufthansa Group23
0
500
1,000
1,500
2,000
2,500
3,000
2000
2001
2002
2003
2004
2005
2006
2007
2008
Jan 0
9Feb
09Mrz
09Apr
09
May 09
Num
ber
of p
arke
d A
C
The number of parked aircrafts (AC) increased at the end of 2008by almost 600 – slight decrease during the last two months
Source: Ascend 06/2009
12-2007: 1,820 AC
12-2008: 2,400 AC
05-2009: 2,511 AC
Lufthansa Group24
Various crisis scenarios exist – LHT prepares itself for a “Strong and Icy Winter” in MRO-industry
„Frost“reduction of capacity 2009
vs. 2008:-PAX: -5% (-817 a/c)-Cargo: -10% (-130a/c)
- = 5.2% of portfolio fleetadditionally parked in 2009(technology of 70‘s)
- slow recovery of aviation in 2010, back to standard in 2011
„Ice Age“reduction of capacity 2009 vs. 2008:
-PAX: -20% (-3,264 a/c)-Cargo: -30% (-390 a/c )
- = 27.5% of portfolio fleetadditionally parked in 2009(technology of 70‘s + 80‘s)
- recovery of aviation not before 2012
„Strong Winter“reduction of capacity 2009vs. 2008:
- PAX: -20% (-3,264 a/c)- Cargo: -20% (-260 a/c)
- = 19.2% of portfolio fleetadditionally parked in 2009(technology of 70‘s + 80‘s)
- slow recovery of aviation in 2011, back to standard in 2012
Lufthansa Group25
MRO-revenue development: scenario ‘Strong Winter’
40.5
32.634.5
38.737.436.7
47.3
43.941.4
37.4
33.9
51.7
32.8
31.229.6
0
5
10
15
20
25
30
35
40
45
50
55
2008 2009 2010 2011 2012 2013 2014
Bill
ion
US
D
NEW FC AS LHT Portfolio Feb '09 NEW FC LHT Portfolio (with price escalation) "Strong Winter" escalated
Source: AeroStrategyCAMRO NEW 2009 –2018
Lufthansa Group26
62 Airlines are in insolvency-process up to now –14 have been our customers
Source: TS/M
Maestro
Peace Air
Customer LHT AG
Aerolinas de Baleares
Interavia Airlines
East Star Airlines
Lufthansa Group27
Early warning: MRO-market indicator of LHT
Traffic Development (SKO + FTKO)
Aircraft
���� Active fleet ����
���� Parked aircraft ����
���� Average fleet age ����
���� Fight hour development ����
Market Indicator LHT
Compression with market forecast (Index)
Feb 09:95
Mar 09:96
Apr 09:93
tendency May 09:slightly falling
Last AeroStrategy Market Forecast
41 bnUS$(Total)
33 bnUS$
(LHT Portf.)29,6 bn
US$(LHT Portf.
“Strong Winter escaleted”)
Lufthansa Group28
Crisis has reached LHT MRO-segments:maintenance and components
+ 24%
∆ vs. 07 ∆ vs. 08
Flight hours of LHT Flatrate Customers
+ 1%*+ 4%
+ 8%
+ 8%
* preliminary
150,000
200,000
250,000
300,000
350,000
400,000
450,000
500,000
Jan Feb Mrz Apr Mai Jun Jul Aug Sep Okt Nov Dez
2007 2008 2009
Lufthansa Group29
Crisis has effects on LHT business segments’ MRO-demand
• Phase-out, parking of customers’ fleets and Fh-reductions are reducing workload in our worldwide segments of:- maintenance- engines- components
• Customers’ efforts to minimize cash-out reduces workload significantly:- airframe related components:
on condition maintained reversers postponed- overhaul airframe and landing gear: layovers
have been cancelled because of reduced fleets
• Still high demand for widebody completions but economical turbulences have reached business segment, too
Lufthansa Group30
LHT forecast instruments: monthly induction „fever curve“(100% = budget)
Revenue 2008 I. Qtr. 09 II. Qtr. 09 III. Qtr. 09 IV. Qtr. 09 FC 2009New contracts
Revenue generated current year103.8% 82.5% 115.8% 100.0% 100.0% 92.9%
Product DivisionEngines Services(Engines in shop)
95.9% 96.5% 92.9% 95.4% 95.2%
Component Services(Units in shop)
103.5% 99.7% 102.2% 102.9% 102.1%
Landing Gear(Landing Gear Legs in shop)
99.0% 82.5% 100.5% 111.1% 98.3%
Airframe Related Components(Reverser in shop)
85.1% 86.9% 75.4% 92.2% 84.9%
Aircraft Overhaul(Man hours: actual vs. plan)
97.4% 106.0% 79.0% 75.0% 88.0% 87.0%
Maintenance(Fleet development Lufthansa)
99.0% 97.7% 98.0% 96.8% 97.7% 97.5%
Long term perspectiveNew contracts
Revenue of whole term152.4% 160.8% 54.6% 92.3% 92.3% 100.0%
Revenue 2008 I. Qtr. 09 II. Qtr. 09 III. Qtr. 09 IV. Qtr. 09 FC 2009New contracts
Revenue generated current year103.8% 82.5% 115.8% 100.0% 100.0% 92.9%
Product DivisionEngines Services(Engines in shop)
95.9% 96.5% 92.9% 95.4% 95.2%
Component Services(Units in shop)
103.5% 99.7% 102.2% 102.9% 102.1%
Landing Gear(Landing Gear Legs in shop)
99.0% 82.5% 100.5% 111.1% 98.3%
Airframe Related Components(Reverser in shop)
85.1% 86.9% 75.4% 92.2% 84.9%
Aircraft Overhaul(Man hours: actual vs. plan)
97.4% 106.0% 79.0% 75.0% 88.0% 87.0%
Maintenance(Fleet development Lufthansa)
99.0% 97.7% 98.0% 96.8% 97.7% 97.5%
Long term perspectiveNew contracts
Revenue of whole term152.4% 160.8% 54.6% 92.3% 92.3% 100.0%
Lufthansa Group31
LHT forecast instruments: supply and demand of man hours in each Product Division for the next 3 months
120
145
170
195
Jun 09 Jul 09 Aug 09
in T
Ah
Demand
Supply
Demand
Supply
ENGINES
- 7.6 - 12.3 - 14.6
625
675
725
Jun 09 Jul 09 Aug 09
in T
Ah
Demand
Supply
Demand
Supply
LHT
- 7.3 - 11.2- 13.5
120
125
130
135
Jun 09 Jul 09 Aug 09
in T
Ah
Demand
Supply
COMPONENTS
60
80
100
Jun 09 Jul 09 Aug 09
in T
Ah
Demand
Supply
Demand
Supply
OVERHAUL
+ 1.1
+ 0.0- 1.3
50
60
70
80
Jun 09 Jul 09 Aug 09
in T
Ah
Demand
Supply
Demand
Supply
VIP
+ 2.7 + 2.0+ 1.3
200
220
240
Jun 09 Jul 09 Aug 09
in T
Ah
Demand
Supply
Demand
Supply
MAINTENANCE
- 0.3- 0.3 - 0.5
-0.8 - 0.6 - 0.8
Lufthansa Group32
Outlook 2009: measures safeguarding profit and liquidity –“accelerating and braking at the same time”
• Engagement of new staff only for business units and companies with revenue and profit forecast in line with budget (quarterly tranches)
• Fresh engagements only with limited duration(2 years)
• Pyramid of measures for personnel flexibility prepared in all business units
• Investments: approval only for 78% of planned projects for 2009
• Consistent revenue and liquidity management
Lufthansa Group33
Capacity development in close loop to business development:Moderate decrease compared to budget – external recruitment only as an exception
As of March 2009
-- budget
-- approved
-- actual
4th slice3rd slice2nd slice1st slice+114 BM
LHT AG
10,680
10,780
10,880
10,980
11,080
11,180
11,280
Dec 08 Jan 09 Feb 09 Mar 09 Apr 09 May 09 Jun 09 Jul 09 Aug 09 Sep 09 Oct 09 Nov 09 Dec 09 Dec 10
Lufthansa Group34
Compared to previous crises LHT has significantly increased flexibility potential
379
786
9,657
10,822
possible reduction
of capacitywithout layoffs
build-up of negative time
credits
reduction oftime credits
reduced capacity
"permanent effect"
intermit/cancel40h/week
temporaryemployment
184
893
additionalcapacity
249
Total capacityper 01.06.09
12,148
-10%
-11%
Within 3 monthsgradually
Reaction time:
- immediate - Within 3 months
permanent one time
Effect:
Lufthansa Group35
% = Percentage active A/C in 2009 to max. population(Basic data: AM Feb 2009, AeroStrategy)
100% 100% 50% 0%0% 50%
767
A320Fam
CRJ
We are well-positioned with our modern product portfolio…
A330
A340-2/300
737NG
ERJ
777
MD80/90
Avro
MD11
737-35
A300A306
A310
747-13
737-12
727
DC8
DC9
DC10
707
L1011
- Types in LHT-Portfolio
- Not covered in LHT-Portfolio
- Volume = number of active Aircraft in 2009
2009
A340-5/600
A380
747-4
ARJSuperjet
757
F100
2010: 7872011: 747-8 2013: MRJ, CSeries, A3502016: newB737NG2018: newA320Fam
Q400
Lufthansa Group36
… and we are investing in our future - in spite of the crisis…
• New products and capabilities- A380- Embraer 190 and Q 400- B747-8
• Modern machinery and equipment- engine overhaul center- new test stand for IDG- new ARC facility
• Innovation- new cabin innovation center with test laboratories- new repair procedures
• In our processes and employees- LHT Lean Academy- “More Leadership” training for foremen and lower
management
Lufthansa Group37
… striving for cost and industry leadership!
• More productivity through more flexibility in resource management
• More efficiency by reducing waste in time consumption → TAT(lean management)
• Economies of scale (production and assets) due to growth
• Innovation in repair procedures, products …..
Upgradeto Industry Leadership
Upgradeto Industry Leadership
Cost leadership is a part of competitive strategy and industry leadership!
Lufthansa Group38
Therefore, we feel well prepared:stable during the crisis and run up very fast afterwards!
Icy Winter Spring
Lufthansa Group39
Thank you for following theMRO-industry development so deeply …
Lufthansa Group40
Information published in this presentation with regard to the future development of the Lufthansa Group and its subsidiaries consists purely of forecasts and assessments and not of definitive historical facts. These forward-looking
statements are based on all discernible information, facts and expectations available at the time. They can, therefore, only claim validity up to the date of their publication. Since forward-looking statements are by their very nature subject to
uncertainties and imponderable risk factors – such as changes in underlying economic conditions – and rest on assumptions that may not or divergently occur, it is possible that the Group's actual results and development may differ materially
from those implied by the forecasts. Lufthansa makes a point of checking and updating the information it publishes. It cannot, however, assume any obligation to adapt forward-looking statements to accommodate events or developments that
may occur at some later date. It neither expressly nor conclusively accepts liability, nor gives any guarantee, for the actuality, accuracy and completeness of this data
and information.
Disclaimer in respect of forward-looking statements