Gulf Air and Lufthansa sign US$138 Million Maintenance Deal

Gulf Air and Lufthansa have signed an BD52 million (US$138 million) contract for the provision of inventory and component maintenance services over a five-year period.

The Total Component Support TCS® agreement, which follows the sale in 2004 of most of Gulf Air’s stock of rotable components, covers component provisioning from specification, initial provisioning, home-base allocation to repair and overhaul, logistics, troubleshooting and engineering services.

Outlining the reasons for the airline’s divergence from past practice, Mr. Hogan, Gulf Air’s President and Chief Executive, said, “Aligning ourselves with Lufthansa Technik, which is recognized as the world leader in this area, has several important operational benefits, the most important being that as a turnkey solution it reduces business complexity, allowing us to focus on the customer.”

Chairman of the Executive Board Lufthansa Technik, August W. Henningsen added, “As a well considered airline within the Middle East, Gulf Air is not only relying on our complete portfolio of MRO services for components, but will take advantage of our assistance throughout their network, also in cooperation with GAMCO. With its modern fleet of Boeing and Airbus aircraft Gulf Air will be an important customer to count on our services to ensure highest reliability and efficiency.”

“By tapping into Lufthansa Technik’s vast resources, we will also achieve economies of scale we could not possibly attain independently. Apart from obvious cost savings, this means improved component availability, which minimises downtime and schedule disruptions that can impact our operations and compromise our service to customers. And in the longer term, we will be able build the robustness and flexibility against schedule disruptions,” Mr. Hogan said.

On the financial side, there are number of clear benefits for the airline, which is set to release its 2004 financial figures in the coming weeks. “The sale of our rotable stock has released capital for use in the active, core elements of our business. Because the entire maintenance function is outsourced, we have no exposure to asset residual value, no capital investment and no expenditure on interest. It also means that we minimise the financial risks associated with stock holding, and more especially those that potentially arise when aircraft exit the fleet,” he said. 

Figures predicated in the business study conducted in 2004 suggest that, in addition to achieving significantly improved technical service levels, Gulf Air could well realise savings in the region of BD8 million (US$21 million) over the next five years by adopting this strategy.

In conclusion Mr. Hogan said: “The sale of our rotables is not part of a slash and burn programme. This contract is heavily supported by a strong business case. However, more importantly, if you look at our three-year restructuring programme, you will see a parallel and very significant investment in the customer-focused areas of our business, namely the Gulf Air brand, our products and services and our IT infrastructure.”

“In the long-term we are building for sustainable corporate change that will result in a transformed airline that can compete in the global aviation market on a commercially viable basis.”

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