Lufthansa closes in on outsourcing deal with IBM

The German airline says the sale of its IT infrastructure division is coming to a close, and a new partnership with IBM is on the horizon.

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Lufthansa says it is close to finalizing the sale of its IT infrastructure division, as well as completing an outsourcing deal with IBM.

The German airline said in a statement that the sale of Lufthansa's IT infrastructure business is expected to reduce IT costs by approximately 70 million euros a year. Instead, IT requirements will be outsourced to IBM, which will take over Lufthansa Systems AG.

The outsourcing agreement is originally set for a term of seven years. However, the outsource project will result in a 240 million euro ($306 million) pre-tax charge in 2014. Lufthansa said:

This impact will not be recognized in the operating result, which is relevant for the financial guidance, but in the IFRS net result of the Lufthansa Group and the HGB (local GAAP) result of Deutsche Lufthansa AG.

Lufthansa Systems, a creator of virtualized workspace models, will be split into three parts — Infrastructure, Airline Solutions, and Industry solutions. While the Infrastructure division is to be sold, the Airline Solutions and Industry Solutions will remain with the airline and operate as independent companies in their respective markets.

Simone Menne, CFO at Deutsche Lufthansa AG said in prepared remarks:

The cooperation with a global and successful IT group like IBM will strengthen the competitiveness of the Group companies and the Lufthansa Group as a whole. It will directly improve our cost base and allows access to the latest IT technologies which we will use to continue digitizing our business processes in order to increase efficiency and customer focus.

This will also give the employees of the Infrastructure division clear job prospects and enable them to participate in future technological developments.

The sale of the IT infrastructure division is expected to close at the end of the first quarter of next year, and the formal split of Lufthansa Systems AG will also take place in Q1.

In February, the airline introduced mobile connectivity on some of its flights, and the full 100-strong fleet is expected to permit customers to make calls during their flight by the end of 2014.

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