Lufthansa’s Irish subsidiary reports 18% fall in profits

PRE-TAX profits at the Irish-based Lufthansa owned aircraft overhaul and leasing group last year dropped by 18%, to $23 million (€17.6m), figures show.

In accounts filed by the German-owned Lufthansa Technik Airmotive Holdings with the Companies Registration Office, the directors stated: “While three of the four business segments produced a profit, the results were substantially down on expectations.”

The figures show group revenues dropped by 8%, from $356.6m to $327.2m, with operating profits dropping 3%, from $33.2m to $32.18m.

The numbers employed by the group in Ireland last year increased by four, to 1,340, with the group’s employment costs dropping by 8%, from $101m to $92.6m.

The accounts show the firm had accumulated profits of $136.6m at the end of December.

According to the directors’ report, the engine overhaul segment was very badly hit by the recession, with revenues down 14.5% and profit down 76.3% compared to 2008.

The directors stated that the V2500 engine type was introduced during the year. “However, due to an industrial dispute in the early part of the year, it was introduced too late to have a significant effect on the results for the year,” they said.

The directors added that the aircraft overhaul segment “fared a little better than the engine overhaul segment. While its revenue fell by 3.7%, its profit increased by 10.7%. The lean transformation has allowed this segment to reduce its unit cost of production and thereby increase profitability”.

The directors stated its engine component repair segment “continued to struggle in 2009. While revenue was only 1% lower than 2008, the segment produced a loss for the year, compared to a small profit in 2008. The company was successful in negotiating a number of labour cost reductions with its workforce, which came into effect in 2010”.

The directors stated that the engine and aircraft component leasing segment “continued to grow in 2009 and contributed the bulk of the group’s profits in 2009. The company’s capital investment in engines and aircraft related components in 2009 amounted to $100m and revenue and profits grew by 20%”.

The directors stated that the next few years will be challenging for the Lufthansa companies worldwide. And to address the structural market shifts of a declining number of business travellers, lower average yields and a new competitive environment of “no-frill” airlines, the parent company, Deutsche Lufthansa has introduced a programme to reduce the airline’s cost base by €1 billion by the end of 2011.

The directors stated: “The subsidiaries of Lufthansa Technik Airmotive Ireland Holdings, like their sister companies worldwide, will contribute to this programme. Local initiatives were identified in the last quarter of 20098 to achieve this target.”

The accounts show that the Irish-based group’s net pension liability increased by $3.8m to $30.4m.

The company’s cost of sales dropped by 10%, from $289m to $258m, while the company’s operating expenses increased by 7% from $34.3m to $36.9m.

A breakdown of the company’s employees shows that 998 are engaged in production, 319 in administration, and 23 in sales.

The accounts show that a cost of $22m was incurred in depreciation, while the company’s interest payable increased from $5.6m. The company did not pay a dividend last year.