Lufthansa Technik is the chief provider of repair, overhaul, and maintenance of an aircraft, its major components, and engine as well. The company has state-of-art repair methods and tailored maintenance programs. Therefore, the responsibility of Lufthansa Technik is to ensure the availability and unbroken reliability of the customer’s fleets (Ing, 2016). Since it is an internationally licensed maintenance, development, and production company, Lufthansa Technik has seven business units, which include original equipment innovation, engine services, overhaul, maintenance services, component services, landing gear services, and VIP services. These units have been serving more than 800 customers across the world. The company also operates maintenance stations that have the capabilities of performing checks on customer aircraft in more than 60 airports in Germany and across the world (Kenville et al., 2017).
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The largest maintenance hub for Lufthansa Technik is Frankfurt Airport. This is the place where the company has three large hangers and capable staff. Lufthansa Technik also runs several maintenance stations in Berlin, Munich, and other 13 airports in Germany. The company also has a mobile maintenance service known as the Airline Support Teams, which consist of highly qualified mechanics and mechanics (Guhl, 2015). The technical maintenance services that are offered by the airline ensure punctual, safe, and cost-effective operations of airlines. For that reason, this paper will analyze maintenance strategies, MRO maintenance, marketing strategies, maintenance costs, and relevant financial assessments concerning Lufthansa Technik.
This section includes the analysis of the maintenance strategies implemented by Lufthansa Technik, maintenance levels, and factors influencing the maintenance strategies.
Nowadays, outsourcing has become a worldwide practice and the factors that influence it ranges from the capital, cutting cost on a legacy carrier, inadequate capital, and any other factor that can influence the level of required expertise (Crosetto, 2005). The shed space that is required to shelter an airplane that was practically dissembled is also a significant factor that might cause Lufthansa Technik to outsource for one. By outsourcing for services does not mean that Lufthansa Technik cannot handle the job, but it is an issue of time and availability factor. Depending on the number of customers in line, most of the airlines want their aircraft to be maintained on time and as per their schedules (Taneja, 2017).
Moreover, an aircraft has several million individual parts that require proper maintenance to keep them in the required mechanical conditions. Therefore, the elaborate system of maintenance work involved in the repair and maintenance of these parts will force Lufthansa Technik to outsource experts who can work with the schedule (Afsarmanesh, 2012). However, Lufthansa Technik is capable of taking control of important maintenance and overhaul works for its global companies (lufthansa-technik.com). When it comes to maintenance, some process can be completed in-house by the company. Furthermore, maintenance checks are short enough to allow aircraft to remain available for services.
On the other hand, an overhaul is a little bit extensive, and the aircraft will be required to be out on service temporarily. Still, completion of the overhaul process will depend on the demand of customers and this where the issue of outsourcing comes in. The pre-flight check maintenance precedes any other kinds of maintenance, and it requires the aircraft to be inspected by the mechanics and cockpit crew in case of any leaks and visible external damage.
One common type of maintenance that is common in the hierarchy of small maintenance services is the ramp check. This is the type of maintenance where the mechanics check the functionality of every component of the aircraft, including tires, brakes, and the hydraulic fluids (Kolb, 2008). This level of maintenance is done in-house, and it does not require outsourcing of experts. A visual inspection is also part of ramp check, and such kind of checks that are carried out on a daily basis requires time between 6 and 35 working hours.
2.2 Comparing the characteristics of the In-house and Outsourcing Maintenance Strategies
For an airline maintenance company to choose from in-house or decide to go for outsourcing of skills or equipment, it must compare the relevant factors involved in the maintenance job to be successful. The comparison of the factors involved when going for in-house or outsourcing maintenance process is illustrated in the table below.
Lufthansa Technik provides airlines with excellent maintenance planning, shops for maintenance execution, and management techniques for properly operating an aircraft. The management technique offered by Lufthansa integrates several maintenance activities that can consolidate and centralize asset management tool. Unlike other maintenance providers, Lufthansa Technik encourages that every aspect of airline maintenance is captured, whether in advanced real-time or overview of a specific fleet of assets that require maintenance. Moreover, aircraft maintenance consists of four levels, which are operation level, intermediate level, depot level maintenance, and landing gear services.
Operational Level: this kind of maintenance level is also known as O-level, and it is usually performed by in-flight personnel because it focuses on scheduled inspections and servicing of the aircraft through a simple repair on the disparities noted during flights. The operational level can result in maintenance planning that can help with the rationalization of future maintenance actions. It requires documentation of inputs and process involved so that quality and assurance personnel will no actions to be taken whenever an aircraft is brought in for maintenance.
Intermediate Level: this approach to maintenance is also known as I-level maintenance, and it is generally involved with extensive maintenance works. It also involves the inspection of various components that might result in the overhaul of the whole system.
Depot level maintenance: this kind of maintenance involves a wider range of repair and modifications of major components of aircraft. According to the management of Lufthansa Technik is also known as overhaul maintenance. This is the type of the maintenance level that has the most intensive labor requirements. Therefore, it requires special qualification in the side of the authority at Lufthansa Technik. The design process involving overhaul maintenance requires the participation of managers, follow-up activities, and execution of already planned maintenance projects. With overhaul maintenance, mechanics at Lufthansa are encouraged to have clear and specific instructions when completing the tasks that are assigned to them. Logistics is also another important factor that has been influencing process involved in overhaul maintenance. The logistics aspect is integrated with the distribution of materials, stocking, and maintenance inventory.
Landing gears services are part of the fourth level of maintenance at Lufthansa Technic. They can also be either part of the A-level check or C-level check maintenance. Moreover, the landing gear is a robust and vital component of an aircraft and does not allow in-built redundancy. Therefore, to ensure that there is no any factor that can cause bad landing, high strength materials should be employed in the construction of technically sophisticated assembly.
Other levels of the maintenance of aircraft include Line Maintenance, A-Check, Heavy Maintenance, C-Check, and D-Check Maintenance.
Line Maintenance: this level of maintenance involves the maintenance of things like fluid levels (oil and hydraulics), brakes, and wheels. It also includes any running repairs that the aircraft will need. These kinds of repairs are usually communicated through the number of airline sensors that are onboard. For that reason, most of the aircraft are recommended to receive about twelve hours of maintenance every week. This is a common formula that happens around the world and the clock.
The A Check: this type of maintenance is normally carried out after every 8 to 10 weeks, whereby key systems like hydraulics of the control surfaces are lubricated. The process also involves a detailed inspection of the emergency equipment such as inflatable sides. Typically, the A-Check maintenance can take between 6 and 24 hours.
Heavy Maintenance: this type of maintenance normally happened every eighteen months to six years. It depends on the age and type of the aircraft to be maintained.
The C-Check: This stage of maintenance usually happens between eighteen months and two years depending on the design and age of the aircraft. This is the stage of repair where the upgrade of the various components of the aircraft such as the interior cabinet can be upgraded.
The D-Check: The D-Check maintenance approach is also known as C8 or C4 depending on the age and type of the aircraft. This type of check is usually carried out after every six years, and the whole structure of the airplane is dismantled and then assembled back together. During the D-Check maintenance process everything in the cabin, including overhead bins, toilets, galleys, and seats are taken out so that the engineers and the mechanics can inspect the metal skin of the aircraft.
The levels of Airline maintenance can be summarized in a simple organizational maintenance chart. The chart is illustrated in the figure shown below.
According to the proposed chart shown above, the structure of the maintenance department is determined by the number of shifts because in many cases the common type of maintenance approach is operational. Therefore, every plane must be check before and every shift. However, when it comes to a situation that will result in an overhaul a different approach must be taken.
Factors that are influencing the maintenance of airlines can either be political, economic, or technological. These are the same issues that can affect the SWOT performance of airlines like Lufthansa Technik.
Political Factors and Economic Factors
The political factors that can influence the performance of the Lufthansa Technik may include government policies, certification, and regulations that are widely related to tax policy and competition. On the other hand, economic factors are associated with the support of the airline industry growth. Therefore, with the increasing economic growth employment opportunities are also increasing, meaning that Lufthansa Technik will be in a good position to absorb more skilled workers, including engineers and mechanics.
The role of Technology in the maintenance of aircraft
Advanced technology in this era has drastically improved airlines’ operational efficiency. Regarding reducing costs, airlines have been at the forefront of improved operations by implementing advanced aircraft engine technology, computer solutions and mobile technology (Zhang et al., 2010). According to multiple recent reports across media servers, this technology has created better connectivity, comfort and enhanced passengers’ travel experiences.
Figure 1: Illustration of the Improved efficiency of new generation airplanes (Zhang et al., 2010)
Use of Technology to reduce fuel Cost
Fuel commonly termed as the market’s “black gold” is one of the major cost components of an airline and according to different sources, it contributes to over 30% of the total operating cost posing a great deficient on profits earned. According to Lufthansa, an aircraft an aircraft maintaining company, probably among the largest, says advanced aircraft technology provides the following benefits:-
Lufthansa newly developed aircraft reduce fuel consumption on over double-digits rates as compared to older models.
Noise being a major pollutant in many urban areas today can be an elusive factor in airline development. Technology developed to increase fuel efficiency can also reduce noise by 30% thereby improved range and payload. Profit is the essential factor in promising markets and sustaining any business. Some of the new Lufthansa’s airlines to be introduced to the market provide the suppleness to add more economy class seats. This, in turn, benefits investors by increasing the payload.
SWOT Analysis of Lufthansa Technik
SWOT analysis means the evaluation of strength, weakness, and opportunities of Lufthansa Technik. A summary of such kind of analysis is presented in the table shown below:
It is the leading aviation industry across the world
Strong financial stability and performance.
Sustainable security programs that can drive strategic growth.
Adaptation of employees is a challenge to the business evolution.
Employees’ disputes and strikes can impact the daily business operations of the organization.
The growing point of reaching traffic in Europe.
Business digitization and innovation to drive growth and efficiency as well.
Volatility in the prices of oil.
Witnessing the ever-changing dynamic market.
Stiff competition from the low costs of airlines.
As one of the leading airline groups across the world, Lufthansa Technik has a combination of aviation business segment, including SWISS, Austrian Airlines, Lufthansa Passenger Airline, and Euro-wings. Concerning Logistic, Lufthansa Technik is the leading cargo airline across Europe. It is also an independent provider of an overhaul, maintenance, and repair services for commercial aircraft. Therefore, the unique combination of Lufthansa’ strengths gives it a competitive advantage above other airlines in the same market.
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However, Lufthansa Technique is currently known of staff disputes and strikes over payment issues. For instance, a pilot working with Lufthansa Airline earns 30% more than the average pilot working in any other airline. Therefore, this further wage hikes could interfere with the operating margins of the company. Furthermore, each day strike can cause the airline a loss that is equivalent to 10 million pounds. Lufthansa is also facing stiff competition from other airlines in the Middle East, which offers low airline costs. These companies are tied to the local market because the quality of customer’s experience is normally neglected by no-frills airlines.
Lufthansa Technik offers its MRO maintenance services around the clock. The company is capable of performing maintenance checks on customer aircraft in more than 60 airports in Germany and across the world. As mentioned before, the Lufthansa Technik hub has a mobile maintenance service, which is available around the clock (Jefferson et al., 2018). The service group is known as AST (Airline Support Team), and it is unique in such a way that it can perform both marketing and maintenance services. The team has highly qualified mechanics and engineers who repair damage engines and components of the airframe anywhere across the world – within a few hours the team will ensure that the disruption of the client’s flying operation is reduced.
The technical maintenance aspect that is offered by Lufthansa Technik plays an essential role in ensuring punctual, cost-effective, and safe flight operations of an airline. Furthermore, the loss of an aircraft because it is unserviceable is expensive concerning customer trust and monetary loss. There is the aspect of the image loss and revenue loss, especially when passengers get annoyed because of delays and trip cancellations.
Figure 3: illustration of the MRO performance of Lufthansa Technik (qantasnewsroom.com.au).
Figure 4: illustration of MRO Airline Systems will soon replace other maintenance approaches (qantasnewsroom.com.au).
In Lufthansa Technik, Aircraft MRO has four offerings, which include line maintenance, engine maintenance, heavy maintenance, and component maintenance. Line maintenance involves the diagnosis and corrections of troubles on the aircraft. This segment of MRO is labor intensive because of the frequent checks and repairs. Even with only 15% of the line maintenance is currently outsource at Lufthansa Technik, the company expects that the service to grow from $8 billion to more than $11 billion by the end of 2018. Components maintenance involves the repair of components such as brakes, wheels, and interior parts. This segment is also expected to prosper by 70%. That is from $8 billion to $11 billion (Siemens Corporation, 2005). Engine Maintenance involves dismantling, inspecting, testing, and assembling of the components of an aircraft engine. It is the largest segment of Aircraft MRO at Lufthansa Technik. It contributes to about 35% maintenance expenditure. This segment is expected to increase from $17 billion to $26 billion (WCTR Society, 2007). The segment of heavy maintenance involves the repair of landing gear, structural modification, and regular calendar checks. The segment is also expected to increase from $9 billion to $13 billion.
Strategy and Costs
Various factors contribute to the increased change in air transportation such as market integration, technological development, and intense competition. Heizer and Render (2014) say in usual cases, the forces of market shape the operation and development of scheduled passenger air services unlike recently where Government policy has been noticed to be a large player in almost all markets. According to Jefferson et al (2018), deregulation is an accomplished fact, and in this age, the challenge in reference is on how to accommodate rising traffic where technically and politically, expansion of infrastructure is difficult.
As mentioned by Guhl (2015), the plan chosen to bring a desired future will require good resources. This defines the basis of the company’s objectives through in-detail strategy means on how to get objectives achievable. When creating beneficial strategies organizations are required to consider few factors: the external environment, internal environment, and value addition. According to Tanej (2017), there are kinds of competitive advantage: agility, cost, and differentiation.
Agility refers to the ability in which the companies move quickly and easily in response to market demands. The cost advantage here refers to techniques required to reduce production costs and therefore, making it possible to offer affordable products without incurring loss. Regarding differentiation, the organization must bank on producing quality products that can beat competition in the market (Heizer & Render, 2014).
The proceeds of an airline cost structure include operating and non-operating concern. Furthermore, operating factors can either be direct or indirect. Concerning direct costs, a person should include entire costs depending on the type of airplane. Direct costs might include depreciation and maintenance cost (Aviation Economics, 2004). On the other hand, indirect costs do not depend on the operation of the plane directly. Cost being a derivative, it can be caused by other factors popularly referred to as ‘determinants of costs’ such as market share and average unit cost. However, it is pointed out that there are relevant factors that must be considered. These factors include economy scale, location, and standard capacity (Holloway 2017).
Table 3: A table illustrating the cost of materials and services about the balance sheet of Lufthansa Technik (investor-relations.lufthansagroup.com)
According to the table shown above, the cost of aircraft fuel and lubricants was 4885 million pounds in 2016 and 5232 million pounds in 2017. Similarly, the cost of raw materials and other consumable supplies was 2896 million pounds in 2016 and 3095 million pounds in 2017. This implies that an increase in the cost of services and raw materials can positively or negatively influence the maintenance process of an aircraft, including the levels and segments of MRO.
In conclusion, it is clear that most of the maintenance processes that are offered by Lufthansa Technik are specific. The maintenance methods offered by the company are characterized by job shop productions, which require detailed knowledge. Therefore, it is exemplary for the management of Lufthansa Technik to analyze the innovation involved in people management and processes that require improvements.
The four segments that are offered by Lufthansa Aircraft MRO have different variations to be considered different business entities. For that reason, each segment requires different sets of services and skills. The management of Lufthansa Technik should know that a small number of independent maintenance firms specialized in all of the four segments of MRO. Furthermore, low-cost carriers are leading the line in outsourcing MRO, which have become a global issue.
The growth in outsourcing has also created fertile ground for MRO businesses, whereby the old and new companies are expected to play larger roles. In that case, it is essential that Lufthansa Technik invest enormously in the four entities of the aircraft maintenance business. These entities include spare-parts, service suppliers, airlines, and aircraft engine manufacturing. However, the challenge comes in when an independent supplier cannot a wide-breadth of services at a lower price.
The management of Lufthansa should be in a good position of understanding that the current role of airlines in maintenance is changing. Most of the airlines are outsourcing maintenance activities, and the leaders of this trend are the low-cost carriers. For that reason, Lufthansa Technik should see MRO offerings as a business opportunity and sets the operation of MRO on a commercial basis. Furthermore, Lufthansa Company will be operating as a separate profit center within the same airline business. The strengths of the MRO airlines include having a good understanding of the needs of customers and the ability to offer the required services as soon as possible.
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