Lufthansa Technik PHL stops regularization of workers, puts on hold construction of $40-M new hangar

As most commercial aircraft are grounded due to travel restrictions and dwindling passenger demand amid the (COVID-19) pandemic, Lufthansa Technik Philippines Inc. (LTP) is struggling to keep afloat and was forced to let go of a few probationary workers and halt its multimillion-dollar expansion plan.

LTP president and CEO Elmar Lutter told GMA News Online that the company’s revenues are already down by 40%, “but it could get still worse than that due to further cancellations.

“Plus payments come in late so that cash reserves are quickly diminishing,” Lutter said.

A joint venture between Germany’s Lufthansa Technik AG and THE Lucio Tan-led MacroAsia Corp., LTP provides aircraft maintenance, repair and overhaul (MRO) services to both local and international carriers. In short, the company’s business depends highly on the airline industry.

With fewer flights and many aircraft stalled despite the gradual resumption of air travel, the aviation sector and its allied sectors, such as the MRO, are financially bleeding.

“We are still trying to avoid retrenchment. We have 3,300 people and we are heavily affected by the downturn of air transport,” Lutter said.

“If our customers don’t start flying again soon, retrenchment might be inevitable.”

For now, the LTP chief executive said,  “We have stopped to regularize employees in probation. Affected are 23 people in June.”

In a separate emailed message, LTP said it offers the "LTP Salute program" for probationary employees who were not regularized.

The program includes expedited clearance process for them to get their last pay at the soonest possible time; workshops to help them determine other sources of income, find a new job; online learning for those who did well during probationary period to help them keep updated and on track so that re-entry into the system will be smooth; and, re-entry system where the company can provide shorter probationary period and other benefits to those who will rejoin LTP.

“Note that participation in the LTP Salute program is completely voluntary. It is not an extension of employment but a program to aid those who will be separated from LTP,” it said.

The company is also putting on hold the construction of its $40-million hangar expansion project in Villamor Airbase, Pasay City.

LTP broke ground for the new Hangar 1A in November last year. The project is seen to create at least 275 jobs for Filipino workers who are experts in aircraft maintenance, repair, and overhauling. 

“Construction of Hangar 1A is on hold. Original completion was October 2020,” Lutter said.

“That will move to mid 2021 and only if conditions improve later this year,” he added.

The new is expected to expand the company’s service capacity by 20% and potentially add 10% to revenue.

Established in 2000, the LTP joint venture’s equity structure consists of 51% Hamburg-based Lufthansa Technik and 49% MacroAsia.

LTP employs 3,300 Filipinos across its key sites nationwide—Clark, Cebu, Davao, Kalibo, and Puerto Princesa.

The construction of Hangar 1A is LTP’s 10th bay in Manila. It provides base and line services to various aircraft, including Airbus A320, A330, A350, A380, and Boeing B777.

The International Air Transport Association (IATA) projects the Philippine aviation industry to lose $4.481 billion in revenues this year due to the COVID-19 crisis, which could lead to around 500,000 job losses in the sector.

Recently, Cebu Pacific’s ground handling service provider 1Aviation announced a mass layoff of over 1,000 employees.

The company has earlier let go of 400 probationary employees.

AirAsia Philippines also announced a reduction of its 2,200-strong workforce by 12%, translating to roughly 260 workers being laid off.

In March, Cebu Pacific laid off over 150 newly-hired flight attendants, while Philippine Airlines implemented a retrenchment of about 300 ground-based workers in February.

The Air Carriers Association of the Philippines (ACAP), composed of the country’s leading airlines, called for government intervention such as long term credit facility, working capital credit lines, credit guarantee arrangements, and temporary relief from navigational and airport charges as local carriers face liquidity problems due to worldwide air travel restrictions and reduced passenger demand in time of pandemic. --KBK/LDF, GMA News