Dubai: Lufthansa Technik — one of the world's largest maintenance, repair and overhaul providers — is seeing a significant portion of its revenues being generated from the Middle East.
As the region's corporate and VIP market takes delivery of more aircraft, fit-out companies such as Lufthansa Technik are putting in that extra effort to win over new business, while maintaining their own momentum.
Last year, the company said it invested €124 million (Dh597 million) by adding a new engine overhaul facility in Hamburg among others.
With 670 customers and 2,000 aircraft under contract globally, it services 1,200 aircraft engines a year.
Its order book has stabilised at €2.8 billion in 2008 and 2009.
Part of Deutsche Lufthansa Group, last year it drew in €5.5 billion in revenues, thus owning a 12 per cent global market share.
Walter Heerdt, senior vice-president of marketing and sales for Lufthansa Technik, speaks to Gulf News about the focus on the VIP and corporate jet and its capacity for growth.
GULF NEWS: What is the project backlog from this region and how do you see it evolving?
WALTER HEERDT: At the time we are working on two wide-body aircraft out of Germany, but not from the region.
We will be starting on an Airbus A318 very soon, which is coming out of the region.
We have signed a number of commitment letters from the region, which included four Boeing 747-8 and a 767, and we are sure that further aircraft on the wide-body and narrow-body will follow because this is traditionally a strong market in the Middle East.
In China, the market for corporate and VIP jets is also emerging, but at the time being we see it more on the narrow-body side.
How big a part is the Middle East market playing for the company?
When I'm looking into the VIP world and corporate jets, at the time being, 50 per cent of our business is coming from the Middle East.
Is that recent and do you see it changing?
We have been working in this region for 25 years.
We have long and faithful customers out of the region.
Right now what we are seeing here is the speed at which deliveries of new aircraft types are taking place, like the 747-8, and soon the 787 and later on the A350. Customers who ordered these on top of the aircraft they already have are taking deliveries and creating a peak.
In the long-term, I think the market here will be very bullish and stable.
Do you have further plans for increasing capacity in your factories?
We recently increased our capacity to three wide-bodies in Hamburg, on top of one narrow-body.
We have increased capabilities in Tulsa, Oklahoma, for up to three A318s in parallel.
We have now Lufthansa Switzerland, which is a facility for maintenance on narrow-bodies and is now seeing increased capacity.
In the long-term, I think this will not stay the same, but we will expand our network and this might also mean expansion in terms of capacity.
As the importance of this region grows, are you looking at investing in facilities here?
Within this region we haven't any capacity built up so far, but we have a MoU with Oman to build a maintenance facility there.
The contract is still not signed.
We have another agreement with National Air Services of Saudi Arabia.
We are open for business opportunities according to the common rules of both partners.
At the end of the day it has to be businesses plan that works out.
If such an opportunity will arise, we will certainly take it.
Would you say that you're read to fit-out an A380 now?
In the VIP market, there is only one for the time being, which is going to be delivered sometime in 2011.
With the commitments we already have, especially with the 747-8 and 787 later, we can only offer a slot for the A380 from 2014.
That would mean we could physically work on the aircraft.
Of course when you start such a broad project, you would have to go through a very detailed design and specification phase; all that might require another two years.
So if a contract is signed sometime in 2011 or 2012, at the end of the day that might not even fit.
We are set for it, we have facilities, we could even do it now.
But the point is, the aircraft is not ready now and, secondly, we already have committed slots.
On the other hand, we have four A380s flying with our parent company. So if a customer has an A380, we can even keep it flying.
Do you see the current A380 Trent engine issues affecting your work in terms of driving up demand?
No. From the Lufthansa side, the problem is under control.
As we have seen with other technical issues, there will be a cure.
There is already one modification on the new Trent engines in the market.
We are doing repetitive inspection on Lufthansa's aircraft.
What we have seen so far from the airline side there was no effect on operations.
Where do you see most of the business potential?
Fit-out is something you do only once, but maintenance you have to do always. The more aircraft coming into the market, the more business potential will there be.
Especially in this business field, we see VIPs are relying on those who do that with other commercial airlines as well.
What is your general outlook for the coming two years?
Once the financial crisis happened, every company had to make its strategy. So did we.
At that time, we thought there would be a dip.
That did not happen to Lufthansa, we actually had our best year in history in terms of revenue and economical results.
We also think this year will be a very good year.
We do not see that the crisis has affected us so much.
But a lot of projects have been postponed from this year to the next.
As it looks now, aviation numbers are looking better; aircraft are back in the air.
The seat load factors are okay.
So the industry will grow. We see a market growth of four per cent a year and this is good news.
I'm very confident that the market for the next two years will develop positively.
