THE parent group of Lufthansa Shannon has reported a drop in profits, which it largely attributes to challenges presented by Covid-19.
One of the Shannon operations returned a profit, however, and government subsidies were instrumental in keeping the business going.
Lufthansa Technik Airmotive Ireland Holdings Limited (of which Lufthansa Technik Turbine Shannon Limited and Lufthansa Technik Shannon Limited are part) 2020 accounts, stated that it remained profitable in 2020, but the amount was down on 2019.
“The group reported a profit for the financial year amounting to US$33.9 million (2019: US$56.8 million) and net assets at the end of the financial year of US$602.4 million (2019: US$565.3 million).”
It added that there had been a reduction in turnover of 13% (2019: increase of 3%) and a sharp decline in profit before interest and tax on the previous year to US$41.2 million (2019: slight increase to US$66.4 million).
Lufthansa Technik Shannon specialises in the overhaul of aircraft, and this sector was hit badly.
“Turnover for 2020 from the Aircraft Overhaul segment decreased by 31% on 2019.
“The sold man-hours were significantly affected by the impact that the Covid-19 pandemic has had on the aviation industry and production levels are expected to continue to be affected for a number of years to come.
“However, notwithstanding this fact, this segment operates on a cost-plus agreement with Lufthansa Technik and thus earns revenue based on costs incurred plus a margin.
“The segment generated a profit in the current year assisted by the cost plus pricing agreement, cost cutting measures and receipts from the Irish Government under the Wage Subsidy Support Schemes.
Lufthansa Technik Turbine Shannon specialises in component repair, which also had a very poor year.
“Turnover for 2020 from the Engine Component Repair segment decreased by 41% on 2019. Turnover from the engine component repair business fell by 49%, wholly driven by the impact of the Covid-19 pandemic. This decline was partially offset by an increase in turnover from administration and technical support services.”
It added that, “Cost cutting measures and receipts from the Irish Government under the Wage Subsidy Support Schemes helped sustain the business during 2020 but the segment still returned a loss for the year due to the scale of the downturn.
“Despite this, the segment continues to focus on introducing new engine parts repairs and increasing its capabilities on current engine parts repair.”
Overall in the company, a significant reduction in turnover in the two Overhaul segments resulting from the Covid-19 pandemic, is partially offset by an increase in turnover in the Leasing segment.
“Additional to the affect of the downturn in business, profit before interest and tax includes a number of large one off effects mostly attributable to the impact of the Covid-19 pandemic on the Group,” the report states.
“These include a significant net impairment loss of US$34.7million arising in respect of a small number of aircraft engines and rotable aircraft related components, most notably spare assets for the A380 aircraft, receipts from the Government Covid-19 Wage Subsidy Support Schemes of US$10.6 million and profits from redelivery and sale of lease assets of US$17.6 million.”
Covid-19 had a serious impact throughout the year.
“As the figures indicate, the operations of the group have been significantly affected as a result of the impact that the Covid-19 pandemic has had on the aviation industry and operations are expected to be impacted for a number of years to come.
“The outbreak of Covid-19 has led to adverse consequences for the group including, but not limited to, business continuity interruptions, ability to serve customers, disruption of development activities, unfavourable market conditions, asset impairments and health and safety of employees.
“Each group company has been following established business continuity and disaster recovery plans since the outbreak began, to monitor and mitigate the risks posed to employees and to the businesses, however no such plan can eliminate the risks associated with the pandemic. “Recognising the reduced level of activity, group companies have been forced to implement a series of cost cutting measures to contain the cost base, including reduced working hours, reduced pay and reduced and postponed investments.
“The group has also availed of Government Support Schemes put in place for businesses during the pandemic, where appropriate.”
Regarding the decision to sell Lufthansa Technik Shannon Limited it says, “Various options
were considered under the strategic review, the priority being retention of jobs and the experience of the LTSL workforce.”
Owen Ryan has been a journalist with the Clare Champion since 2007, having previously worked for a number of other regional titles in Limerick, Galway and Cork.