Lufthansa Consulting Helps Iraq in Emerging-Market Push

Deutsche Lufthansa AG’s advisory unit is pursuing at least 10 percent annual sales growth as clients such as Iraq, which is reviving its airline, tap into the German carrier’s experience in safety and infrastructure.

Lufthansa Consulting is helping reorganize regional routes at its parent, Europe’s second-largest carrier, while advising customers in emerging markets including Russia, Brazil and the Republic of Congo on setting up airlines or selling state-owned airports. Project growth may let the unit double its workforce in the medium to long term from about 100 employees now, said Andreas Jahnke, the head of the division.

“There are lots of opportunities for us helping clients set up a new business or helping an established airline to deal with the new market realities -- for example, increasing competition from low-cost airlines,” Jahnke said in an interview at Frankfurt airport, where Lufthansa has its main hub. “We are amazed by how many new airlines still pop up.”

Middle Eastern, Latin American and African markets propelled a 5.3 percent jump in global passenger traffic last year, according to the International Air Transport Association. Plane manufacturer Airbus SAS is forecasting that in the next two decades, more than half of growth in traffic, measured as the number of passengers multiplied by distance flown, will be generated by emerging economies.

Airport Projects

The unit has a memorandum of understanding to help re-establish state-owned Iraqi Airways’ international operations now that the nation’s security situation has stabilized, Jahnke said. Lufthansa Consulting also has an initial agreement to help Mosul airport in the north of the country develop catering, plane maintenance and marketing, expanding on projects with ground handling there and at Baghdad and Basra airports.

The Republic of Congo’s 18-month-old Equatorial Congo Airlines was developed in conjunction with Lufthansa Consulting, which also managed the state’s sale of its three main airports, Jahnke said. Other projects have included helping Saudi Arabian Airlines set up a customer-loyalty program and enter a global alliance as well as airport sales or reorganizations in Moscow and Sao Paulo and across Greece.

“Security levels and procedures vary greatly, depending on where in the world you are,” Jahnke said. “The Lufthansa brand is a quality seal that helps open doors for us worldwide.”

Revenue Contribution

Lufthansa Consulting, whose competitors include Seabury Group, ICF SH&E and units of IATA and Air France-KLM Group, generated 16.3 million euros ($22 million) in revenue in 2011, less than 0.1 percent of the Cologne-based parent company’s 28.7 billion euros. That compares with 4 million euros in consulting revenue at Paris-based Air France, Europe’s biggest airline by traffic, which posted 24.4 billion euros in sales in 2011.

The German carrier has a year-old reorganization program, dubbed Score, with a target of adding 1.5 billion euros to operating profit by 2015 through reduced spending and increased revenue. Among the consulting unit’s other work for Score, it’s helping plan Lufthansa’s shift of European routes not linked to its Frankfurt and Munich hubs into the Germanwings low-cost brand, Jahnke said.

Work for Lufthansa may eventually increase to about half of the consulting division’s business from about one-quarter today, he said.

The unit’s offering includes services to oil companies and offshore wind park operators with large helicopter fleets amid a move into other industries, emulating the way sports-car maker Porsche SE provides advice on factory design to manufacturers outside automotive producers, Jahnke said.

“Safety and risk management are key success factors for companies beyond our sectors,” Jahnke said. “Here we can build on our expertise, similarly to Porsche Consulting, who are marketing their know-how in the area of lean-production methods beyond the automotive industry.”

Before it's here, it's on the Bloomberg Terminal.