Lufthansa keeps options open on future of LSG Sky Chefs

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Lufthansa plans to grow the business of its catering arm LSG Sky Chefs as a wholly owned subsidiary, but does not rule out a potential sale of the division in the long term.

After trying to sell at least a share in LSG to an external investor, the Germany carrier in May revealed that it had halted the partner search and decided to expand the business as an in-house unit instead.

Christoph Franz, chief executive of Lufthansa Group, tells Flightglobal Pro's sister publication Airline Business that LSG will not be sold "within the next years, because we see very attractive development opportunities" for the unit.

"We want to support and encourage the management [of LSG] to proceed on this attractive path ahead and realise those opportunities," he says. "This we can achieve very well within the Lufthansa group."

LSG generated pre-tax earnings of €97 million ($126 million) after sales worth around €2.5 billion in 2012. But the unit has restructured its German operations and is aiming to raise its operational result to €160m by 2015 through cost cuts and improved sales under Lufthansa's "Score" efficiency programme by 2015.

Franz says that having non-core activities - such as catering and maintenance - in-house creates "substantial synergies" for the airline group. LSG and Lufthansa Technik have not only compensated for losses made by the airline operations in 2012, but also helped to diversify business risks, he says.

However, he adds that the group philosophy does not exclude the potential sale of individual subsidiaries at some point: "Whether we will always do this [keeping support units in-house], with all business activities, the future will tell."

Lufthansa has sold divisions in the past, such as its former leisure carrier Condor or ground handling arm GlobeGround. Such a deal could become feasible if, for example, a whole industry has developed for the respective business activity.

"It is also the case that if a very attractive offer is made [to sell a division], then you have got to look at it," he says. "This is what we have always done."