A Viasat installation for IFC on an A321neo by Lufthansa Technik. LHT.

Lufthansa Technik talks IFC industry disruption, MRO crunch

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Lufthansa Technik (LHT) has long supported airlines’ ambitions to bring inflight connectivity to their passengers. Whether installing Inmarsat (now Viasat) classic GX Ka-band satcom kit on Lufthansa Group’s short-haul fleet, fitting Panasonic Avionics Ku to Lufthansa and Emirates widebodies, executing supplemental type certificates for Viasat-specific Ka IFC on Boeing 777 and Airbus A320 twinjets or actively validating EASA STCs in China, the maintenance, repair and overhaul powerhouse has its fingers firmly in the pie.

During a sit-down with Lufthansa Technik’s head of products and program, special engineering services, Lukas Bucher, at the Aircraft Interiors Expo in Hamburg, RGN asked how LHT sees the IFC landscape evolving. Let’s start with the interesting revelation that LHT has in fact given some thought to entering the IFC market directly.

“Would I love to have a setup? Yes,” admitted Bucher. But he quickly added that “under the given circumstances and the ways others are currently behaving in industry … I think no.”

Those “circumstances” entail several disruptive forces, he noted, including but not limited to: industry consolation “with top level companies joining up” in some instances to safeguard their existence; the introduction of LEO service and how bandwidth availability is “growing massively” and with it the “fear that the potential to generate revenues per megabyte” will in time be more difficult for satellite operators; and indeed the fact that some players are exiting the market, creating some uncertainty.

Should Lufthansa Technik see fit to toss its hat more firmly into the IFC ring, a far more likely approach would see it do so via AERQ, the firm’s joint venture with LG Electronics which is currently working to bring an open IT solution, together with embedded displays, to airlines.

“Should we have a connectivity offering as a Lufthansa Technik. At this point? Certainly no,” said Bucher. “With our joint venture with AERQ, would there potentially be … well philosophically different approaches to IFC” — as AERQ currently has in IFE — “well, maybe. But is that anything that is ready to be spoken about now? No.”

A seat triple with large IFE screens embedded into the seatbacks. The word AERENA can be seen in the distance as part of AERQ's stand at the Aircraft Interiors Expo.

In early 2024, AERQ’s in-seat displays will fly — as part of its AERENA open IT platform — on an Airbus A320 operated by leisure carrier Eurowings Discover. Whilst Lufthansa Technik has mulled a philosophically different IFC approach via AERQ, it’s not ready to discuss it. Image: Mary Kirby

Bucher expects to see more rip-and-replace projects in aviation, whereby legacy inflight connectivity systems are replaced with nextgen hardware, but he suggests that the lion’s share of those activities are mostly happening on “a very specific sub-fleet” and “even parts of sub-fleets” and that “a decision in one case might go left, in another case, right”.

Airlines, he noted, are being cautious about their IFC decision-making, with some feeling burned by past or even current relationships.

[N]ow with all those new announcements with new combinations of hardware with services, and the way to receive them through what channel, I’m not sure that that will instantly render orders or decision-taking, but that there will be some that say, ‘Okay, we’ll wait and see. Well, we want to look at it a bit more in detail before we do take a decision.’

Because I guess … with respect to connectivity just about any airline out there had been tied into contracts for a long duration. And some of the airlines towards the end, or the second half of their contracts, are not going to be that happy about the service they received. But they’re stuck or they’re still in there, whether it’s contractual reasons; sometimes it’s technical and physical reasons that it’s hard to get the installation on an aircraft and a new one on there; or third, there are restrictions with respect to intellectual property, access to IP. So only if somebody would be able to clear those three layers of ties of interlinkage, I think that’s when they are able to do [the] move.

I believe airlines will be more wisely deciding, because they’re no longer looking only for the cheapest deal which you know, certainly would be nice to have, but they would also be looking for a deal that returns …the freedom for them to take decisions in the future for whatever they have done.

Lufthansa Technik will likely play a role in aiding airlines as they seek to equip their aircraft with nextgen IFC, including hybrid LEO/GEO solutions. But having hardware at the ready is not enough. Bucher warned that there’s not an MRO in the world right now that isn’t loaded up with work, which could prove a choke point for IFC retrofits.

Indeed, according to LHT, demand for the first half of 2023 has not only increased in specific areas, but for almost all of its products. And since last summer, employees in its Aircraft Component Services segment have been experiencing a steady increase in repair business. Now LEAP-1B engines can also be processed at LHT’s Hamburg site, positioning the firm to support the Boeing 737 MAX engine which is expected to account for the largest market volume in the future, it said in a 1H earnings update.

In short, LHT and indeed other busy MROs around the world must decide which work takes priority for hangar space.

“If you look at the hourly rates that any Part 145 repair station is charging at the moment, they are always not on the way down; they’re definitely on the way up. With all the catch-up that all the airlines have to do for any type of MRO [post Covid], there is really a fight for capacity for hangar space,” Bucher told RGN. “And trying to get all the connectivity work squeezed into that, I believe many airlines will find that as a challenge.”


MRO crunch

LHT understands the constraints all too well; as an MRO giant, it must consider how much revenue can be generated in a facility “per day, per bay or per month, per bay. If you look at the work, the hours you’re able to put into connectivity installs, compared to base maintenance activities, it’s a small fraction of that.”

This MRO crunch might add more appeal to linefit IFC solutions in some instances, said Bucher, but airframers are also grossly delayed with deliveries as well, with supply chain constraints clearly “one aspect of the problem”.

“If you look at it the other way around,” he continued, “are they really able to deliver the aircraft?”

RGN asked about Lufthansa Group’s IFC plans. For instance, will the European short-haul fleet, which is largely fitted with classic GX, be retrofitted with the ThinKom Solutions VICTS-based terminal, supporting nextgen GX? After a pause, Bucher said with an amused tone: “I guess, no comment.”

Interestingly, Bucher reckons that, based on his own experiences, the low-latency, hybrid air-to-ground (ATG)/S-band European Aviation Network, now run by Inmarsat’s new owner, Viasat, and Deutsche Telekom is “better” than GEO satcom.

But the real question for any ATG network, “whether it’s EAN, or what SkyFive is working in various corners of the world”, he said, is whether passengers will accept over-water coverage gaps like early users of Gogo in the United States seemed willing to do.

The Lufthansa Technik executive highlighted the costs associated with EAN licensing, noting that in the early days, when licensing approvals were sought for the then 26 EU countries “the annual or one-off cost per the individual countries were very, very, very, very little money” but that this has migrated “to very big money. So I do believe that that is a quite complex situation. And I’m not sure what’s going to happen.”

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Featured image credited to Juergen Mai/Lufthansa Technik AG