Lufthansa breaks up IT division

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Lufthansa is outsourcing its IT infrastructure activities as part of a long-planned restructuring of the group’s IT division.

The German carrier will split up its wholly-owned Lufthansa Systems subsidiary into three separate units – airline solutions, industry solutions and infrastructure – with the latter being sold to an international IT provider.

Preliminary talks have been held with four potential investors and a formal invitation for tenders is due to follow “soon”, Lufthansa Systems says. The sale is to be completed by year-end.

Infrastructure activities generate about 40% of Lufthansa Systems’ revenues, which totalled €640 million ($877 million) in 2013. But the segment delivered only a quarter of the operational profit, which stood at €36 million last year.

That ratio is expected to deteriorate over the next few years, as the infrastructure unit needs investments to further develop its services and grow its business, says Lufthansa Systems. The planned sale to a major international IT specialist would provide the necessary scale for the investment, it adds.

At 1,400 staff members, the infrastructure unit employs a third of Lufthansa Systems’ workforce. Some 1,000 staff members are employed in Germany – mainly at a data processing facility near Frankfurt airport and service centre in Flensburg on the border to Denmark – with the remainder working in international locations, such as support centres in Budapest and Buenos Aires.

Lufthansa Systems says it aims to sell the unit together with a “long-term” partnership contract, which should support existing “locations and jobs”, especially the facilities in Frankfurt and Budapest. Talks with employees and unions are under way.

Meanwhile, the remainder of the IT division is to be split up into two separate units to serve customers in the airline industry and other sectors. Both will be organised as independent Lufthansa subsidiaries, with the existing Lufthansa Systems entity and name likely to be dissolved, the group says.

Airline Solutions and Industry Solutions will focus on growing their third-party business, which stands at 70% and 60% of their respective custom. Today, Lufthansa Systems is serving around 300 international airlines and 150 companies from other sectors.

In 2011, Lufthansa held detailed discussions with investors about selling a share in the entire IT division. The airline thus wanted to gain access to low-cost IT facilities outside Germany and a global sales network to sell its software products and services. But the partner talks were eventually called off, because the IT landscape within the group was “too complex”, the airline said in early 2012.