Lufthansa today announced that in the course of realigning the Group’s IT activities, it will be entering into a long-term IT partnership shortly. According to the terms to be agreed, Lufthansa will outsource all of the Group’s IT infrastructure services to IBM. The IT group is also expected to take over the Infrastructure division of the current Lufthansa Systems AG. The outsourcing agreement is to have a term of 7 years. It will enable Lufthansa to benefit from a permanent reduction of IT infrastructure costs by average approximately 70 million EUR annually. An offer to this effect has been submitted and is now subject to final negotiations.
In connection with this transaction, Lufthansa will incur 240 million EUR in one-time charges due to restructuring and effects from the purchase price in the financial year 2014. 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.
The plan is to split Lufthansa Systems into three companies and to sell the Infrastructure division as part of the outsourcing process. The Airline Solutions and Industry Solutions divisions of the Lufthansa IT subsidiary are to operate as independent companies in their respective markets in the future. The agreements will be subject to the approval of the Lufthansa Supervisory Board and the antitrust authorities. Execution will also require the timely and successful conclusion of the social compensation plan and the reconciliation of interests.
“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” said Simone Menne, Member of the Executive Board and CFO at Deutsche Lufthansa AG and Chairperson of the Supervisory Board of Lufthansa Systems AG. “This will also give the employees of the Infrastructure division clear job prospects and enable them to participate in future technological developments,” Menne continued.
IBM is one of the world’s leading IT companies. Among the key reasons for Lufthansa’s decision are IBM’s outstanding technology expertise and global presence. The size of its IT partner will enable Lufthansa to benefit from considerable economies of scale, the variety of experience in the operative business as well as strength of innovation. At the same time, the standardization of IT services within the Group will result in cost advantages. Through this partnership, Lufthansa will secure the expertise and experience of the Infrastructure division for the Lufthansa Group and the approximately 450 customers of the current Lufthansa Systems AG.
According on the current status of the negotiations, the new partner is expected to take on all approximately 1,400 employees of the Infrastructure division. The Kelsterbach and Budapest sites are to be retained. Clear commitments have also been made regarding the preservation of the jobs at the other sites.
The split-up of Lufthansa Systems and formal launch of the new companies are due to take place in the first quarter of 2015. The completion of the Infrastructure sale is planned for March 31, 2015. To ensure undisrupted, high-quality services for Lufthansa and all external customers during the split-up of Lufthansa Systems, all divisions are working on establishing Day 1 Readiness for 2015. These preparations are entirely on schedule.