When Lufthansa Technik was spun out of Lufthansa as an independent but wholly-owned business back in 1995, the aim was twofold. On the one hand the goal was to provide the business with an incentive and a clear mission to extend its third-party client base. On the other, management recognised that if they could succeed in growing their third-party customer base in a highly competitive market, this would prove that its’ services provided value for money. As Walter Heerdt, Senior Vice President, Marketing, at Lufthansa Technik explains, it is very difficult for the technical department inside a major commercial airline to prove that its services are in fact competitive and that the parent is getting a good deal.
It is also constricting for the technical department itself, since it has to amass a range of skills to service the full range of needs of a commercial fleet and it is natural for it to want to develop and build on those skills beyond the needs of its home fleet. The required range of skill sets demanded of such a department extend from bringing new aircraft into service to providing a complete range of maintenance and other specialist services for the fleet. When you analyse the skills entailed, there is enough specialist knowledge there to support several identifiably different clusters of services, but none of these are likely to realise its full potential until and unless the department concerned is spun into a proper business in its own right.
As its history since the spin-off shows, Lufthansa Technik has more than proved its case. It now has six business units, comprising maintenance, overhaul, component services, engine services, VIP services and landing gear services. It looks after some 2,100 jets for around 750 customers worldwide, including the Lufthansa fleet. “The major point here is that being successful in the aviation market shows that you are competitive. Now, both our external customers and our parent company can see that what we are doing matches or exceeds the best in the market in terms of price, turnaround time and quality. This gives the customer a high level of comfort and security since they know that this is a very competitive business and being successful in it is proof that your processes and skills are up there with the best,” Heerdt says.
The Lufthansa Technik unit of interest to Executive & VIP Aviation readers will of course be the VIP unit, but as Heerdt notes, the company’s business jets arm gains a great deal from being able to draw on the combined skills and experience of the other five specialist divisions. The main base for the VIP & Executive Jet Solutions business unit is in Hamburg and covers both completions and a range of maintenance and technical services. The unit sets out to be an all-in-one supplier for technical inspections, cabin upgrades, conversions, maintenance, overhaul and painting. The business jets completions business is one half of the story with the full range of maintenance, support and overhaul services being the other.
A key point for anyone in the completions business to grasp is that the whole airline business is inevitably a cyclical affair
Walter Heerdt, Senior Vice President, Marketing
As Heerdt explains, the industry in general and Lufthansa Technik in particular, has benefited from something of a boom in completions orders over the last five years, with demand in the large jet category staying relatively strong through the downturn. Moreover, the delays by Boeing in bringing the 747-8I to market (deliveries started in 2012) meant that once the plane arrived, completion shops found themselves facing something of a glut of orders and this stimulated demand through the whole of 2012.
Lufthansa Technik’s completions division has produced tailored interior solutions for a wide range of aircraft, including Challengers, Boeing Business Jets (BBJs) and the Airbus Corporate Jetliner (ACJ) families, as well as doing completions for Boeing 747s and the Airbus A330/340 series. The company is also prepared to work on the A380 if this is wished by a customer in the future.
“A key point for anyone in the completions business to grasp is that the whole airline business is inevitably a cyclical affair, since its fortunes are inextricably tied to the global economy, and this is as true of VIP completions as it is of any other part of the business. We have always been very careful in the peak times not to overextend our capacity. We want growth, but steady growth,” Heerdt says.
As part of that “steady growth”, Lufthansa Technik has ramped up its Hamburg base so that it can now handle three wide-body jet completions and a narrow-body completion simultaneously. “Right now we have two 747-8s and one 767-400, and the narrow-body we are working on is a BBJ,” Heerdt comments. The company has another business jet completions and servicing centre in Tulsa, Oklahoma, and that too, is doing well. Plus there is a specialist Bombardier centre, Lufthansa Bombardier Aviation Services, in Berlin. LBAS, a Lufthansa Technik joint venture with Bombardier Aerospace Group and ExecuJet Aviation Group, is specialised in the maintenance, repair and overhaul of Bombardier Learjet, Challenger and Global business jets.
Heerdt believes that too many companies have moved into the completions space over the last few years, encouraged by the scale of the business that can be won here. “When I look back to 2003 and 2004, it was clear back then that there was substantial overcapacity in the industry and not enough projects to go around. But then we had a number of new aircraft types coming onto the market or about to appear, and there were more Airbus A330s being bought by corporates and governments, and requiring very substantial completion projects, so we saw the market return to growth, aided by the surge around the arrival of the 787s. However, I think the market for completions will now normalise and we certainly do not see the current peak in activity levels continuing. When that normalisation happens it will be interesting to see if the market is once again over-supplied,” he comments.
With so many other business lines, Lufthansa Technik is much better placed than those of its competitors who just do completions, when it comes to weathering any thin patch in the market. “There are years when this or that aspect of our business does not run at that high a level of demand but if you have a multi-faceted business this gives you time to breathe and plan. If you are only in the completions business and things go flat you have to walk through a very deep and dark valley,” he comments.
Heerdt adds that when you look at the way Lufthansa Technik has built up its completions business over the years, it is clear that it has done so with a great deal of care. “We have done our preparations for increasing capacity very thoughtfully, taking care not to tailor our expansion to a peak in the business but to where our analysis shows what could be expected in normal times,” he says. “Building up a completions team for a narrow-body or a wide-body aircraft takes time. These are very highly skilled specialists and they don’t grow on trees. You have to add them slowly and with a great deal of training. We want neither ourselves nor our customers to run into problems so we are very careful in our preparation work and we only offer services when we are in a position to know that we can deliver to the quality standards that our clients expect.”
The company has its own specialist joinery and upholstery workshops at its Hamburg VIP base, with some 500 specialised engineers and technicians dedicated to aircraft completions. “Any completion is a huge project management job, but we have built up a great deal of expertise in project management over the decades. All our services, be it for the overhaul of an aircraft or for landing gear or engine services, are essentially very large project management and logistical operations and our project managers are among the best,” Heerdt points out.
All completions start with detailed discussions with the principal or his or her representatives, during which Lufthansa Technik’s design team will take the owner and/or the representatives through the many choices that are involved in deciding how the aircraft will look and what the interior will consist of. The choice of fabrics, carpets, furniture and lighting, along with seating, special features and layout will all be worked through with the aid of 3D computer modelling. The client can see the impact of different fabrics, colour choices and lighting schemes at the click of a mouse and can ‘walk through’ the cabin interior in 3D to get a very good feel for the impact of the various choices.
“We do a total laser scan of the interior of the airframe when we get the aircraft, so we know its exact dimensions. Then we do the design and the virtual installation of all the items. This allows you to see, for example, where the tolerances are building up to create a real issue for later installation. You can identify and solve installation problems in the virtual space that would require you to remove and refit if you only encountered them in the real world,” he adds.
From the computer modelling Lufthansa Technik’s design team will develop a design book for the principal to peruse. “Sometimes the customers look to us for design ideas, and sometimes they come with some clearly worked up designs of their own. In the latter case we draw on our knowledge, gained from a large number of completions, to help them see the implications of their design. How easy is it, for example, to repair or remove part of the cabin? If you are gluing everything then that is going to create real problems. What are the noise insulation characteristics of the material the customer is thinking about? All these things count,” he says. A business jet is very different from a commercial aeroplane. It is much quieter inside and cutting out noise is one of the things that creates value for the customer, so materials choices and sound insulation matter.
There is, of course, no such thing as an ‘average price’ for the completion work on a jet. “How much a completion costs is all about what you are doing with the plane. Is it going to be VIP from nose to tail or just in the front with something like a standard airline interior in the rear? Is it going to be at an exceptional level of elegance, a flying palace? Or is it to be a sensible corporate design? Do you want everything covered in gold? Rectangular furniture is a lot easier and quicker to build than rounded shapes so everything depends on the customer’s choices. Helping the customer to visualise those choices and to understand the cost implications and even the after-sale implications of those choices is all part of the service,” he says.
Weight is crucial since that will have implications for the aircraft’s range, which makes the choice of materials and knowledge of the latest innovations in materials something of a differentiator among completions shops. “Layout and materials define the price, but they also have an impact on turnaround time and on the re-sale value of the aircraft when it finally goes into the pre-owned market. If the principal wants a highly stylised Chinese design say, that might look fantastic and unique but it might make it a much tougher re-sell later,” Heerdt notes.
Lufthansa Technik goes through three design stages with the client. The first is the design scoping exercise, where a number of options might be worked up for the client to look at. Then there is the design review, where all the options are considered and the client’s choices are firmed up. Once the client has signed off on this, then you have the design freeze. At this point the design drawings are worked up into engineering drawings and the completions project gets underway.
“This allows us to keep a firm grip on the project and it means the client knows when the point has been reached that makes the design final. Managing this part of the project well is key to finishing on time and on budget,” Heerdt says.