Annual Report 2019 KEY FIGURES Lufthansa Technik Group at a glance ANNUAL REPORT 2019 I 3 Revenue 6,920,794 6,104,971 2019 2018 (all figures in thousands of euros) 2019 2018* Sales revenue 6,920,794 6,104,971 Adjusted EBIT 492,636 445,827 EBT 450,051 412,449 Investments 312,842 243,989 Amortization on fixed assets 206,955 126,463 Balance sheet total 7,547,954 6,509,531 Employees (annual average) 25,872 23,833 Personnel expenditure 1,671,342 1,551,723 * previous year’s figures adjusted restated due to allocation of LHIND Group DLH to Lufthansa Technik FOREWORD FROM THE EXECUTIVE BOARD Soeren Stark (Technical Operations, Logistics and IT), Constanze Hufenbecher (Finance, Corporate Services and VIP), Dr. Johannes Bussmann (Chairman of the Executive Board), Antonio Schulthess (HR and Technical Services) ANNUAL REPORT 2019 I 5 Dear Ladies and Gentlemen, This is a very special year for our company: The overall competitive environment is also changing, as Lufthansa Technik AG turns 25, and looking back at the manufacturers of aircraft, engines and equipment aggres- 2019 financial year is also a look back at a quarter of a sively force their way into the attractive MRO market. Added century as an independent company: to this are demographic challenges and the lack of qualified specialists on the labor market. Moreover, climate policy Over the past 25 years we have transformed Lufthansa’s measures in Europe will further increase the already massive technical operations into Lufthansa Technik, the world market competitive pressure in the airline industry. leader in our industry for maintenance, repair and overhaul (MRO). Today we support more than 5,000 aircraft from over With a view to securing future business volume for many 800 airlines, and have increased sales by approximately 60 % years to come, especially in growth markets, we have invested in the past five years alone. heavily in new technologies and locations around the world in recent years, and have entered into partnerships with major At the same time, the current year also shows us how volatile engine and component manufacturers. We also invest heavily and vulnerable our industry is: the crisis triggered by the in the training and qualification of new employees. corona virus is hitting air traffic in particular. Travel restric- tions, the cancellation of trade fairs, conferences, business We have particularly focused on the digitization of the indus- and private trips are causing many airlines to cancel flight try. The vast quantities of aircraft data transmitted in real time connections and ground aircraft. This will also have an impact and new possibilities for analysis open up completely new on the MRO industry. avenues for technical fleet operation. And the successes we enjoyed in the past year in particular have strengthened our Even though we cannot yet foresee the effects this crisis may resolve to continuously move our business into the digital age have on our company, on the basis of past experience we together with our customers. anticipate that the industry will recover relatively quickly from this exogenous shock. For this reason, we remain optimistic The company’s success in 2019 is largely due to the skills and about the longer term: we expect the market to continue to dedication of our employees. We would like to thank every grow at an average annual rate of 7 % up to 2029 (by region, one of them for their hard work and commitment. And, of primarily in Asia, and by sector, particularly in the engine course, we would also like to thank our customers for their segment). cooperation and trust. To be in a position to make the most of this potential, we have already made preparations for key technological, eco- nomic and social shifts: New technologies with new materials, manu facturing and repair methods require substantial invest- ment in know-how, expertise, skills and new business models. This increases the pressure for consolidation in our industry, especially for those who have not responded to it in good time. MAINTENANCE AND BEYOND We are the leading provider of aircraft maintenance, repair, overhaul and modification services for civil aircraft, from commercial to VIP and special mission aircraft. As the holder of inter- national licenses for maintenance, design and production, we provide tailored maintenance programs, modifications, completions and conversions as well as innovative cabin products, material pooling and engine services. We even offer digital fleet support. LUFTHANSA TECHNIK AT A GLANCE 5,000+ 850+ 26,000 1995 aircraft under customers employees founded as exclusive contract worldwide worldwide independent company ANNUAL REPORT 2019 I 7 A WORLD OF SERVICES FOR YOU Aircraft on Ground Airline Support Teams I AOG Materials Desk Maintain Aircraft I Engines I Components I Composite Structures I Landing Gear Optimize Innovation & Digitalization I Engineering I Modifications I Inflight Entertainment & Connectivity Specialize VIP I Special Mission I Military I Leasing & Trading Digitalize AVIATAR: The Digital Operations Suite I AVIATION DataHub I manage/m® Special Services Logistics I Technical Training I Ground Support Equipment TRIPLE COMPETENCE We are certified around the globe as a maintenance (Part 145), design (Part 21 / J) and production (Part 21 / G) organization. Maintenance Design Product Lufthansa Technik has been Holding Design Organisation As holder of production approvals, approved as a maintenance Approvals (DOA) allows Lufthansa Lufthansa Technik is authorized organization by the authorities Technik to perform, for example, to manufacture components for of the EU and more than modifications or repairs on aircraft aircraft construction. 40 other countries. for which Lufthansa Technik does not hold a type certificate. th Hamburg Every 5 38 commercial aircraft in the is our headquarters subsidiaries and world is served by us affiliates worldwide STATUS REPORT LUFTHANSA TECHNIK LUFTHANSA TECHNIK Lufthansa Technik is the world’s leading provider of maintenance, repair and overhaul services for commercial aircraft. Focus on innovations and digital products. Active promotion of international growth. Earnings up on previous year. ANNUAL REPORT 2019 I 9 Business activities Business and operational development Lufthansa Technik is the world’s leading MRO provider Focus remains on innovations and digital products Lufthansa Technik is the world’s leading manufacturer- In 2019, Lufthansa Technik continued the development of independent provider of maintenance, repair and overhaul AVIATAR, its proprietary, independent and integrated soft- (MRO) services for civilian commercially operated aircraft. The ware platform. AVIATAR helps customers manage complex Lufthansa Technik Group consists of 38 companies worldwide fleet operations in real time and assists in error prediction for that offer aeronautical services. The company has direct and individual components, thus supporting the digital trans- indirect interests in 68 companies. Lufthansa Technik AG formation in aviation. More than 30 different modules are provides services to more than 850 customers worldwide, already available for the diverse needs of the aviation industry. including airlines, manufacturers, aircraft leasing companies and VIP jet operators. Companies within the Group account The company also specializes in additive manufacturing, for about one third of its business, and external customers for the Internet of Things, and automation. The RoCCET project about two thirds. (Robot Controlled Cockpit Electronics Testing), for example, developed the world’s first robot for the fully automatic The range of services offered by Lufthansa Technik includes testing of cockpit controls. the eight business segments of aircraft maintenance, aircraft overhaul, engine maintenance, component maintenance, aircraft systems, the development and manufacture of cabin products, the creation of digital products, and the outfitting and support of VIP aircraft. The range of products and ser- vices offered extends to differently structured products and product combinations, from the repair of individual appliances to consulting services and the fully integrated supply of entire fleets. KEY FIGURES LUFTHANSA TECHNIK 2019 2018 change (%) Revenue € m 6,921 6,105 13 of which with Lufthansa Group companies € m 2,543 2,178 17 Adjusted EBITDA € m 700 572 22 Adjusted EBIT € m 493 446 11 EBIT € m 502 445 13 Adjusted EBIT-Marge % 7.1 7.3 –0.2 P Adjusted ROCE % 6.8 7.4 –0.6 P EACC € m 148 144 3 Investments € m 313 244 28 Employees at 31 December No. 26,650 24,594 8 Employees – annual average No. 25,872 23,833 9 Fully consolidated companies No. 25 22 14 STATUS REPORT LUFTHANSA TECHNIK Lufthansa Technik continues to drive international growth In 2019, XEOS, a joint venture with GE Aviation for the maintenance, repair and overhaul of GEnx-2B and GE9X engines, was opened in Poland. In addition, EME Aero, a joint venture with MTU Aero Engines, commenced operations in 2019. The location in Jasionka, 5,018 Poland, is one of the largest and most modern MRO service centers for the PW1000 G GTF engine family. Also in the engine sector, the purchase of a plot of land marked the start of the establishment of aircraft under Lufthansa Technik Miskolc (Hungary). Starting in 2022, engine parts are to be repaired and overhauled there. exclusive contract AERQ, a joint venture with LG Electronics, was founded in April 2019 with the aim of developing new products for the digitization of aircraft cabins and entering the market as a manufacturer of innovative aircraft components. Important contracts extended and new ones concluded In 2019, the number of aircraft supported under exclusive contract was 5,018. 25 new customers were acquired in the 2019 financial year, and 625 contracts with a contractual volume of 4.1 billion 625 euros were concluded for 2019 and the following years. Among others, this included a fully comprehensive ten-year contract for the supply of components to the A320 fleet of Asiana Airlines. new contracts with 25 new customers Global capacities expanded to meet demand In order to meet the growing demand for MRO services, Lufthansa Technik is continuously expanding its worldwide capacities and product portfolio.