Lufthansa to sell LSG Sky Chefs in cost-cutting plan | Business| Economy and finance news from a German perspective | DW | 04.06.2012
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Lufthansa to sell LSG Sky Chefs in cost-cutting plan

Germany's Lufthansa plans to sell its onboard caterer LSG Sky Chefs in a bid to realign core businesses. After shedding loss-makers, the struggling airline is turning to the sale of profitable subsidiaries for income.

The German national carrier plans to sell profitable subsidiaries such as onboard catering unit LSG Sky Chefs and its IT Services, German newspaper Financial Times Deutschland (FTD) wrote Monday without naming its source.

Lufthansa would aim to sell an initial stake of 49 percent in LSG, "ideally to a strategic partner" in the catering sector, FTD said. The newspaper also noted that the plan was already "far advanced" and was expected to be carried out by 2013 "at the latest."

LSG Sky Chefs is said to be the world's biggest onboard catering service, employing about 30,000 people and generating annual sales of 2.3 billion euros ($2.9 billion).

According to FTD, the sell-off was part of Lufthansa's drive to focus on its core business and shed both profitable and unprofitable units.

Draconian cost-cutting

According to FTD, Lufhansa apparently set its sights on selling profitable units because a sweeping cost-cutting program would not be sufficient to fund future airline expansion "without raising too much debt." Lufthansa Chief Executive Christoph Franz announced that program in May.

Lufthansa wants to purchase 160 new aircraft worth 20 billion euros over the next several years.

However, the company posted a net loss of 397 million euros in the first quarter of 2012, blaming it on fierce competition from low-cost carriers, soaring fuel prices and an airline tax recently introduced in Europe.

Under a restructuring plan, which envisages savings of 1.5 billion euros by 2014, Lufhansa wants to cut some 3,500 administrative jobs mostly in Germany. The plan also calls for the airline to regroup purchasing activities and streamline cooperation with its budget subsidiary, Germanwings.

uhe/srs (AFP, dpa, Reuters)