Think about it, and the timing makes sense. During the summer tourism peak, the airlines need their planes in the air as much as possible, which means holding off on hangar maintenance time. That pressure to be airborne is relieved in Europe as summer slips into fall.
That’s not to say Lufthansa Technik Budapest has been idle; there are always aircraft in the hangars. Certain parts must be inspected once they hit a given number of air miles. Airline safety being what it is, there is little wriggle room here.
“The airlines book their inspection and overhaul slots a long time ahead, and we clearly see how our intake of aircraft is seasonal,” explains Thoralf Wagner, CEO of LHT Budapest. “The winter months are fully sold out, and what I call the ‘shoulder months,’ May, June, and September, are used to a certain extent by the airlines, but peak summer, July and August, are rarely required by them.”
The direction of travel is, therefore, clearly established, and part of Wagner’s job is to try and smooth out some of that fluctuation. Even so, the 2024 trend is more marked.
“What we have seen this year, especially, is that this seasonality was quite strong,” Wagner says. The reason is apparent: “There is a shortage of aircraft in the worldwide fleet.”
Boeing is still recovering from the grounding of the 737 Max between March 2019 and December 2020. On top of that, its 33,000 unionized employees have just downed tools for the first time since 2008, leading Ryanair Group CEO Michael O’Leary to warn that a prolonged strike could delay the expected aircraft delivery schedule.
Meanwhile, Airbus has its own problems, though not of its own making, with more than 1,000 Pratt & Whitney engines needing to be removed from aircraft and inspected. There is, however, a business upside to this for LHT. Like cars, older aircraft require more maintenance than newer planes, meaning that as the global fleet ages, it must spend more time in hangars like those at Budapest.
That seasonality aside, the economy is clearly in a better position today than when Wagner first arrived in July 2021. The inflationary situation has improved significantly, meaning wage pressure has decreased.
“It’s much more stable. It’s more plannable. And that’s super important for us,” says Wagner. Apart from anything else, it means greater attention can be devoted to managing the cost implications of higher salaries and rising service charges. Productivity increases will be the order of the day.
“How can we do things differently instead of only optimizing? It’s more about innovation; therefore, you also need some research and development. That’s the main topic, and not only for next season but for the next few years,” Wagner says.
LHT’s various aircraft overhaul centers (Hungary, Bulgaria and Malta in Europe) discuss processes that could be improved and decide who would be best placed to trial them. The production steering system is one example that is undergoing review in Hungary.
“The Budapest facility has the longest history; we are now over 20 years old. With this history comes a level of experience, and that is sometimes really beneficial; if you have people who have seen a lot, they can judge new developments and say, ‘This is worth following,’ or, ‘This looked good in theory, but in practice, it won’t work.’” It would be wrong, however, to imply that LHT has only just woken up to this.
“We have an operational excellence department. It’s their continuous job to look for small things we could easily change, and also bigger projects like paperless maintenance.”
As you would expect, aircraft maintenance is highly regulated. Every job comes with a paper checklist, which the technicians must complete and sign off on with their personal stamp. Steps are precisely detailed, including who has the technical authority to do or approve the work, which tools should be used and so on. That paper is scanned and sent to the Cloud, but the physical document must also be kept for some years. LHT wants to digitize the whole process by replacing paper with an iPad or tablet.
“We already had a trial project here, so we are still learning from all of that, but this should be introduced within the next year,” Wagner estimates.
While productivity increases can help control costs, there is also a plan to grow the business across the Lufthansa Technik Group. The target is for LHT to reach EUR 10 billion in revenue and more than EUR 1 bln in profit by 2030. Currently, the figures stand at around EUR 6.5 bln and EUR 630 mln, respectively.
“We have clear targets now for our segment, for maintenance, for aircraft overhaul. We are looking at how we can increase our capacities within Europe. And Budapest is one of the possible locations for that. Therefore, we have a project ongoing here to look into how we could increase capacities and what the business case would look like,” Wagner says. Given that the Hungarian operation is already booked for the next few winters, growth would require both more staff and more hangar space.
“We are discussing that internally and with some stakeholders; we definitely see Budapest as one possible location in Europe to grow. From LHT’s point of view, a strong focus will be to keep our market-leading position in Europe, but also to grow, especially in the regions, the Americas and Asia, and in the defense area. We have created a new brand, Lufthansa Technik Defense, because this is an area where we see a lot of demand for technical expertise.” LHT Budapest is already involved in that in a small way, educating mechanics for the German Navy.
“The navy has bought an aircraft called the P-8a Poseiden, which operates on the same platform as the Boeing 737NG and is used by the German Navy to patrol the coast. We are a 737 excellence center; therefore, we are currently educating the mechanics here in Budapest,” Wagner explains.
This article was first published in the Budapest Business Journal print issue of October 4, 2024.
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